“You don’t have to play masculine to be a strong woman.” – Mary Elizabeth Winstead
Financial Independence has given women the freedom to live life on their own terms.
It gives women the choice to live independently if they want.
There are many women now who either have never been married or divorced or widowed and still choose to remain single by choice.
The great motivator behind this decision is money.
However, having money alone will not help you in the long run. It lies in learning how to sustain it.
A robust financial plan will lead you in the right direction in achieving your financial freedom.
TABLE OF CONTENTS:
- Income & Expense
- Insurance for a Single Woman
- Managing Debt as a Single Woman
- Build an emergency corpus
- List down your financial goals
Gain Financial Acumen as a Single Woman:
In India, it is relatively common to keep a woman away from important financial decision-making right from home. This might make you develop a lack of confidence in handling financial matters due to your limited knowledge involving personal finance. So as a single woman, you might face some unique challenges while financially planning for your future.
The maiden step in financial planning would be for you to get yourself educated on personal finance & investments. This will help you to make wise financial decisions in your life.
There are many options available if you are willing to take the first step in gaining financial literacy. You can completely use the resources listed below to your advantage:
- Smart devices
There is no need for you to procrastinate. Each small step you take today will ensure you a better future tomorrow. Be familiar with financial terms like
- Asset Allocation
- Risk tolerance
- Time value of money
Being financially literate will help you become adept at financial planning.
Reassess your current financial health as a Single Woman:
Income & Expense:
If you are someone who was divorced or widowed, you might have received some sort of settlement in the form of alimony or life insurance. This might have given you a temporary reassurance on how all your future needs will be taken care of now. But that necessarily might not be the case if the money you have is not properly channelized.
You have to factor in inflation while planning for your financial future. If you do not, the inflation will eat away at your corpus. This is why structuring your corpus in the source of a regular income will make it sustain for a longer period.
After marriage, many women choose to take a break from the workforce to take care of their young children and aging parents. This makes re-entering the work force harder. But working again will give you the independence and the affordability to cater to your monthly expenses and investments. You would need to reassess your budget by;
- Cutting down on discretionary expenses.
- Re-evaluating your new income with current expenses.
Insurance for a Single Woman:
If you were married earlier, you might have been covered by a family health insurance probably provided by your spouse’s employer. As a single woman now, you can choose any health insurance that suits your needs and apply for health coverage for your children if you have any.
You should also consider buying a pure term insurance as this will help to mitigate any unforeseen event in the future. If you have any kids, buying a term plan will ensure their financial security in case of any unfortunate event.
Managing Debt as a Single Woman:
Debt is something, which the more you let it accumulate, the more it will trouble you later. If you have any debt, your first action point should be to pay off the high-interest debt first. Do not let yourself get more into debt as being debt free will pave the way to financial freedom for you.
As a single woman, it is better to have an action plan to navigate your finances healthily.
- Review your current income and expenses.
- Evaluate where you stand with your finances and what you want to accomplish financially in the long run.
- Build a solid plan, which allows you to progress towards your financial goals.
- Plan to buy a health & term insurance for yourself.
Even if you are single, a term insurance would help you immensely while you are serving any loan. You can also buy health insurance for your parents to help you with their medical expenses later.
Build an emergency corpus:
Based on your job profile or cash inflow, you can build a corpus to act as a safety net for you to fall back on. It is standard to keep at least 6 – 9 months of money for your expenses as your emergency corpus. Keep this money parked somewhere as liquid funds or in bank FD’s for your easy accessibility in case of emergency.
When you are reviewing an investment instrument to keep your money safe, always remember to not opt for a high-interest investment choice. Try to go for easy liquidity instruments, which doesn’t levy you any penalty for early redemption in case you want to in the future.
List down your financial goals:
Listing down all your financial goals and categorizing it in the order of your time line such as short, medium and long-term financial goals will make it easier for you to plan your finances. While categorizing your financial goals time-wise, it is important to also include the goals related to your children if you have any. In case you have alimony or any other settlement, earmark it for your children’s future expenses.
As the average life span of women is 5 – 6 years more than men. Plan your retirement well as this phase of life might leave you with no source to rely on. Sufficient amount of corpus will be required to meet your post retirement living cost.
While planning for your other financial goals, you can also keep some money aside to invest in your self-improvement like upskilling your skills by learning any technical skill or a professional certification. This will boost your confidence as well as making it helpful for your career growth in the long run.
Investment Strategy for Single Woman:
Single women exhibit more risk aversion in financial decision-making than Single men. The risk aversion in single women could also be influenced by their age, socioeconomic background, and the number of children one might have.
But as more younger generations of women are moving into positions of financial control, they are well aware of the risks. A long-term strategy from the start will be reliable as it will provide you with the confidence in managing your wealth. A Financial Advisor can really help you using their experience in customizing financial strategies best suited for your financial goals.
Asset Allocation :
You might prefer Bank FD, as they seem safe to invest in. But this might not help you in achieving financial freedom. If you are below 40 years, the ideal proportion for you to invest would be in equity & debt in a 70:30 with a higher percentage in the equity-based assets.
Debt funds will provide you with safety whereas equity funds will help you to build corpus in the long-run. You can also choose to invest in gold & real estate if you want to, but try to keep it to the extent of your personal use rather than as an investment.
Apart from your monthly savings, whenever you receive any additional bonus or any lump sum amount, invest that as well. This will help you to reach your required corpus faster.
Tax-efficient investment :
Your choice of investment instrument should not only aid in building your desired corpus but it also should be tax efficient. You can choose tax-efficient schemes such as:
- Sukanya Samridhi Yojana
- National Pension Scheme
- National Savings Certificate
You can claim tax deductions on these schemes under sec 80C for the amount you have invested in. The returns of various schemes could be in the form of:
- Capital appreciation
All these are taxable at a different rates. So while you are choosing your choice of investment vehicle, try to keep these points into consideration.
“Formal education can make you a living, self-education will make you a fortune” – Jim Rohn.
Financial planning is not rocket science. However, it is an essential part in everyone’s life irrespective of his or her gender & status.
Financial literacy as a single woman will help you go a long way in life. Budgeting, saving & investing practices will help you to achieve your financial goals.
When in doubt, you can always seek the help of a professional such as a Financial Advisor to help you with your finances. Having the right guidance would help you take calculated risks, which will boost your corpus as well as your confidence as a single woman who plans to manages her finances.