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Like most designated days, International Women’s Day comes once a year and reminds us about all that's important about life in our times. This year, the focus of women’s day will be about attaining financial freedom. And believe it not, this is a problem that a lot of women deal with, even today.
The last decade has been all about women breaking the glass ceiling and achieving greater heights whether at work, home, or at play. Today’s women are champions of business, engineers, doctors, lawyers, sportspersons, and more. Think of any male-dominated field, and sure enough, you will invariably find a woman at the center of things. However, when it comes to personal finances, women still leave crucial decisions to men. For women to truly enjoy individual freedom, attaining financial freedom will play a key role in breaking the next big glass ceiling. This International Women’s day, we’ve come up with our list of tips that will help women truly achieve financial freedom.
You can’t achieve financial freedom without knowing where you are starting from. Looking at how much debt you have or your fixed monthly payments can be an anxiety-inducing experience. But if you want to truly become independent, you will need to acknowledge the numbers that govern your lifestyle. Here are some things you should start with immediately.
· Compile a list of all your debt (Car loan, credit card debt, home loans, etc.). Calculate the aggregate of all your debts. If this is a big number, don’t freak out.
· Compile a list of all your fixed monthly expenses. This too might seem like a nerve-wracking experience, but it’s vital nonetheless.
· Compile a list of all your savings. This includes all your investments. This is also a good time to include your sources of income/s that you might have from work or other investments.
Keeping track of these numbers is important as it will take your dreams of financial freedom and turn them into reality.
Now that you have all your money accounted for, the next step is to set yourself financial goals and lay out a rough plan on how to achieve them. These plans don’t need to be set in stone; you can make course corrections to ensure your budget is on track. Ensure that both short- and long-term goals are accounted for. For example, saving money to study abroad in the next 3 years is a short-term goal, whereas saving for your children’s education 10 years down the line is a long-term goal. Both must be accounted for. As a rule of thumb, try and put at least 20% of your income into savings. When in doubt try the 45/35/20 saving rule. This rule mandates that you set aside 45% of your income on monthly bills and household necessities, 35% gets spent on the things you love to do, and finally, the remaining 20% is set aside to meet your financial goals.
Additional Read: Does your financial plan account for lifestyle inflation?
Debt traps are the number one reason that deprives individuals of their financial independence. If you have debt that can be paid off, ensure that you get rid of it without further delay. Next time to go to the mall or shopping complex think carefully before using your credit card to pay for things you don’t really need. Credit cards generally charge high-interest and missing a payment can land you in serious trouble. Before you begin your journey to financial independence, make sure that you’ve paid off all your debt. The feeling of not owning money at the end of the month is a great one to have.
An emergency fund is essential for unwelcome rainy day/s especially in the context of post-pandemic times. Set-aside at least 6 months of living expenses into this emergency fund. Once you have accumulated enough savings, don’t touch the money come what may (unless it’s for an emergency). A key characteristic of emergency funds is that they can be easily converted to cash (liquid). When choosing investment avenues for your emergency fund, in addition to offering a good return, also ensure that you don’t compromise on liquidity. Your money is useless if you can’t withdraw it when an emergency strikes.
While one may plan for various financial goals in their life, an unforeseen medical emergency out of nowhere can cut a big whole in one’s pocket. This could hamper one’s financial plans if this is not accounted for. Hence, purchasing health insurance is another important step towards financial freedom. It not only saves you from excessive expenditure in a medical emergency, but also gives one peace of mind. Ensure that you compare various health insurance plans before buying one, so that you get one that is the right fit for your needs.
Additional Read: 5 Reasons to Buy Health Insurance if you don’t have one
Another factor that is ignored by many while planning their finances is retirement. Often, people believe that retirement planning can be left for the latter end of their working life. Yet, many don’t realize that starting early has many benefits and the power of compounding ensures that your investments grow over time. Saving early on for retirement can save you from a lot of hassle and stress later on in life and ensure that you enjoy your hard-earned wealth. Hence, it is important to chart out a plan and start investing for the same early in one’s working life.
Knowing which investment avenues to take or whether your financial goals are on the right track can be easier said than done. Taking financial advice from someone you trust can make a big difference on your journey towards financial independence. Afterall, financial independence is not just about having the funds, but also being able to make sound financial decisions in times of trouble. Having a financial planner like Tata Capital Wealth in times of need can save you both time and money.
Women today are waking up to more financial responsibilities than ever before. As women begin to play a vital role in leading major walks of life, it’s a very important responsibility for them to know how to save, invest and secure their financial future. Mastering financial freedom will be the true enabler for individual freedom.
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