There is no better time to take charge of your investments, than now. I’m not saying this because it’s Women’s Day, or that it’s nearly the end of the financial year. What I am referring to is the fact that taking charge of your money should be your priority, now.
Not tomorrow, not next month, not when you hit a milestone age or a major life event. Just like you make time for a workout or socialising with friends and family, chalk out time on your calendar to take charge of your money: inflows, outflows, growth, and protection.
If you’re not taking time to get your finances in order, let’s for a moment discuss what could be stopping you:
? Lack of time – “I am too busy to take time to learn”
? Lack of interest, because managing money is boring
? “Someone else will take care of it for me”
? “It’s too complicated to understand, I’ll do it later”
? Severe discomfort discussing money – it’s a taboo topic, isn’t it?
The list of excuses could go on and on. The reality however is that 9 out of 10 women will have to manage their money independently at some point in their lives. It’s not scary, it’s not hard, and it’s definitely not someone else’s problem. But, enough gyaan. Let’s meet Avantika.
Avantika is 26 and works with a leading ed-tech company. She spent a few years in the aviation industry where incomes were high – and so were the costs of exploring countries around the world. She didn’t end up saving as much as she thought she could.
Now, she’s back in India living with her parents. Her father has been handling her finances and is by nature a risk-averse person. He has ensured her money is invested in “safe” instruments such as bonds, fixed deposits, and recurring deposits.
Recently, Avantika was exposed to the concepts of inflation (the phenomenon that eats into that value of money) and systematic investments (periodic, automated investing like a recurring deposit, but in products that could beat inflation). She also realised that she needed to have a better relationship with money: one that was different from what her father shares with his investments.
Let’s see how she took charge of her money.
1. It took her some reading and learning to understand that investing well was not a function of one’s IQ but one’s emotional intelligence. Managing feelings is a critical factor in making money decisions.
2. There is a ton of information available online, and it can all be overwhelming. However, Avantika sought resources – like the Basis app – that helped her learn concepts in simple, digestible ways.
3. The more Avantika learnt, the more questions she asked her friends, family and colleagues. That learning also helped her have a healthy conversation with her father to have him know that she was in a good place, not just in terms of understanding what needs to be done with the money but also in terms of taking action to add different investments to her portfolio over time.
4. Avantika took a good, hard look at her future plans. She created a set of goals: large ones such as retirement and buying a house, as well as smaller ones such as international trips. This helped her understand what she needed money for and how much, how she thought she could hit those goals with adequate savings and investments, and a solid understanding of her risk tolerance. She also looked at tax implications and costs involved in withdrawal of funds when she would need them.
5. The next step was taking action. The devil is always in the details. Avantika put her learnings to use, assessed where she was with her overall portfolio, and started making changes accordingly. Since she is young and knew she wouldn’t have any major responsibilities for some time, she took a heavier allocation in equities.
These are known to be high risk investments, and with a potential of generating high returns in the long term. If you currently invest, now is a good time to ask yourself – how are your investments allocated? Do you see an overload in safe investments such as fixed deposits? Can you take on some risk now with the potential of getting some solid returns in the future?6. Once step #5 was done, Avantika set up a tracking schedule. She knew that for long term goals, she would need to track her investments infrequently – every 6 months of every year. When a major event comes about – such as a new job, marriage, salary increases, etc, she evaluates what changes she might need to make, and continues to track her portfolio. This is an ongoing exercise, so setting up simple tools such as calendar events and reminders helped Avantika get organised.
Now that you’ve seen how Avantika set herself up for financial peace-of-mind and success, here are a few additional checklist items you can ask yourself on an ongoing basis. Store these somewhere so you can assess every now and then.
? Do you know how to access your health insurance in case a need arises?
? Are the nominations across your investments updated?
? If you have financial dependents, do you have adequate life insurance?
? Your salary has increased, have you increased your investments to that extent?
? The allocation of your portfolio is not aligned with your overall risk profile – for example, if stock markets are on the rise, and your portfolio gets heavily skewed towards equities – are you rebalancing and realigning your investments?
? Are you following the herd? Investments are a personal journey, and what works for someone else may not always work for you.
All that we’ve talked about can be started at any age, irrespective of your marital status and irrespective of your current understanding of your investments. Follow the basic steps, educate yourself, discuss your investments with people you trust (including a financial advisor!), and you’re golden – I promise. Happy Women’s Day!
Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
