How women can build and protect their financial wellness

Padmaja Choudhury   /   July 1, 2022

Financial literacy for women is a must to take care of financial wellness

Most of the time, we use the words financial freedom, financial wellness and financial independence interchangeably. But they are not the same.

Most of us want to be financially independent women. But having a source of income is just one tiny part of being financially independent. In the correct sense, you can call yourself a financially independent woman when you don’t have to pay living expenses for the rest of your life without being dependent on others or without a source of income. While it might be possible to be financially independent at a later stage if you are a woman and want to take care of your financial fitness, we will look into some crucial steps you can take.

Few crucial steps in financial literacy for women

Create a Spending Plan

What’s the first thing that comes to mind when you hear the word ‘diet’? Our minds immediately think of it as restrictions.

The same thing happens when you use the word ‘budget’. Instead of budgeting, having a realistic spending plan can work wonders for your financial wellness.

To create a spending plan, it is essential to accurately assess your expenses, income and the savings you are targeting.

If you cannot figure out your expenses, tracking them through a budgeting app or writing them down can help you understand where you are spending your money.

It is also essential to start saving money for your future needs. If you are unsure how much to save, start with a percentage that makes you comfortable. Can you save 20% of your income? No, how about 10%? The main point is to start.

Savings

Let’s continue with savings. Saving money goes a long way toward guaranteeing financial stability. Traditionally, women have been considered excellent savers.

The term saving is typically used when cash is parked in a traditional savings scheme for the short term that might not be able to beat inflation in the long run. Saving money is essential because it helps build a safety net and accumulate money for future investments.

While the amount of money you would have to save for emergencies would depend on your profession, financial and personal liabilities, saving at least three months of expenses is generally considered a good starting point. 

A separate savings account and liquid fund are ideal options to keep money within an arm’s reach during emergencies. You are typically advised to keep one-third of the emergency expenses in a savings account and the rest in a liquid fund.

To start building your emergency fund, you can automatically transfer money from your salary account to a separate savings account or set up a Systematic Investment Plan in a liquid fund. Moreover, you can make investments whenever you have extra cash in your hand. 

Related article: How to increase your savings

Educate Yourself

If you want to become a financially independent woman, educating yourself about finances should be on the top of your priority list. There are several free courses you can take and learn at your convenience.

These courses would help you understand the various investment options, improving your credit and saving more money.

Enrol yourself in the financial literacy for women program if your employer offers programs and become better equipped to handle your finances. 

If required, you can also opt for paid workshops and coaching to help better take care of your financial wellness.

Allocate money towards your different financial goals

Money is a tool that helps us fulfil our various financial goals, such as buying the dream car, providing quality education to children, and planning our retirement.

Every goal requires a different approach because the time horizon and risk you can take with these goals would vary greatly.  

Hence, it is essential to allocate your money in the right places. If you need money within a few months, you can invest in short-term, low-duration debt or liquid funds.  

Equity mutual funds can be an ideal investment option for long-term goals more than five years away, such as retirement.

Handle credit with care

Credit cards have been an easy way for women to build up their credit history, which has helped attract lenders’ attention. However, it also makes it very easy to spend beyond your means. This can lead to a poor credit score, which is bad news because that score affects all kinds of things, including your ability to get a job.

Some basic rules can help you avoid the financial pitfalls of poor credit. For one thing, you should always pay your bill on time. Even if you don’t think you have a late payment on your record yet, there’s no sense in making it easier for any future delinquencies to be added!

Many people choose to use credit cards for convenience or as an emergency fund—this is not the best choice! The interest rate on purchases would be higher than most banks would offer for savings accounts and low-risk investments. Additionally, when you purchase with a credit card (sparingly!), you should always pay off the balance every month.

Retirement Planning

There are many reasons why you should plan for your retirement. You want to be able to retire and not worry about money, you want to retire and make sure you don’t run out of money when you’re older, or you want the freedom that comes with being able to retire.

Many women are not saving enough, not investing appropriately, or not planning how much they will need to save each month to meet their retirement goals. This is partly because financial literacy is lacking in women.

It is essential to plan for your retirement because it allows you to make the most out of your life by knowing exactly how much money would be needed once you stop working.

Conclusion

For women, the benefits of financial literacy are plentiful. With these tips, we want to help empower you to build your financial confidence, establish a solid understanding of your current financial state and articulate your personal goals for reaching your financial potential.


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