Why Financial Planning is Essential for Single Women?

“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 toward achieving your financial freedom as a Single Woman.

Let’s face it. Money matters! If you are a single, or a career woman or homemaker, you need to take charge of monetary affairs. Managing your money wisely is a prerequisite for financial comfort.

Table of Contents:

How to Survive Financially as a Single Woman?
1.)Gain Financial Acumen as a Single Woman
2.)Reassess your Current Financial Health as a Single Woman

• Income & Expense
• Insurance for a Single Woman
• Managing Debt as a Single Woman
• Build an emergency corpus as a Single Woman
• List down your Financial Goals as a Single Woman

3.)Investment Strategy for Single Women

• Risk Tolerance for Single Women
• Asset Allocation
• Tax-efficient Investments for Single Women

4.)Retirement Planning for Single Women
5.)Reviewing Your Financial Plan as a Single Woman:

Conclusion

How to Survive Financially as a Single Woman?

You might be wondering how to Plan your Finances as a Single Woman.

We regularly conduct free Investment Webinars where Personal Finance Experts with decades of experience in their belt guide newbie and Seasoned investors alike with their valuable insights on Personal Finance and Investment decisions which would be helpful to you as a Single Woman.

Because being Financially Literate is the first step in getting your Financial Plan started which is why Personal Finance Education for Single Women is a must and would help immensely in building a Financially Sufficient future for you in the long term. 

Let us look at some of the Financial Planning Tips for Women in detail below to help you empower yourself to become a financially powerful woman.

1. Gain Financial Acumen as a Single Woman:

The principles of investment planning – starting early, having a long-term plan, and investing regularly is the same for either men or women. So, do women have special investment needs? 

If one looks at the life patterns of women, the answer is a clear “YES”. Women tend to live longer than men, their careers are interrupted by family needs, and more often than not, women prefer a conservative investment strategy. 

Given inflation and the many responsibilities they have taken on, as well as the high aspirations they have, there is a compelling need for women to take charge of their financial planning with a new perspective and urgency. 

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.

Today’s woman has her needs and wants

• I want to enjoy my life
• I want to travel to distant and faraway lands…
• I want my fun times with my friends…
• I want to look and feel good…
• I want my space…
• I want to excel in my workplace 

Most of all,

• I want my financial independence

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 as a Single Woman. You can completely use the resources listed below to your advantage:

• Smart devices
• Blogs
• Books
• Magazines

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

• Inflation
• Asset Allocation
• Risk tolerance
• Time value of money 

Being financially literate will help you become adept at financial planning as a single woman. 

2. Reassess your current financial health as a Single Woman:

How much am I worth?

Do a proper review of your assets and liabilities, which will help you in arriving at your financial worth (or net worth).

Assets
Financial Assets
Growth Assets (shares, equity funds..etc)	Rs.________
Fixed Income Assets (fixed deposits, debt funds, PPF, NSC…etc)	Rs.________
Cash and Liquid Assets (Savings account, cash, liquid funds..etc)	Rs.________
Hard Assets (house, gold, jewellery..etc)
Total Assets	Rs.________
Liabilities
Credit card balance	Rs.________
Income Tax owed	Rs.________
Outstanding bills	Rs.________
Loans (House/Car/Education etc)	Rs.________
Total Liabilities	Rs.________
Net Worth (Total assets minus total liabilities)	Rs.________

i)What is my life stage?

Knowing where you are in life stage, will determine what type of investment strategy you should use.

Starting out

• You are single, young, and have started earning
• You are taking control of your finances for the first time

Marriage and kids

• You are going to be married
• You have children or planning to adopt them
• You have to plan for your children’s education or marriage
• You want to buy a new house

 Suddenly single

• You are divorced or separated from your partner
• You are widowed
• You need to take the responsibility of raising your children on your own.

Retirement

• You are retired or going to retire
• You want to plan for your retirement

ii)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 must 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 as the source of regular income will make it sustainable 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 workforce harder in Financial Planning, especially as a working Indian woman. 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.

Money Management for Women is much needed as it will simplify and do wonders for your Financial Planning to make it hassle-free in handling your finances.

iii) 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 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.

Having an adequate Life cover will also help you set a good foundation for your Estate Planning as a Single Woman.

iv) 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.

1. Review your current income and expenses.
2. Evaluate where you stand with your finances and what you want to accomplish financially in the long run.
3. Build a solid plan, which allows you to progress towards your financial goals.
4. Plan to buy health & term insurance for yourself.

Even if you are single, 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 your medical expenses later.

v) Build an emergency corpus:

Life is full of surprises and some of them can unfortunately catch us unprepared. However well we plan, if we do not have that emergency reserve, life can become tough. Especially in situations like a serious illness/accident, loss of job, death of parents or spouse, or separation. 

While we cannot plan in advance, it is always advisable to create emergency reserves which will come in handy when the situation demands it. Aim to build up an emergency reserve that can sustain you for 6-9 months.

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 FDs for 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 do not levy you any penalty for early redemption in case you want to in the future.

vi) List down your Financial Goals as a Single Woman:

Listing down all your financial goals and categorizing them 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. A 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 make it helpful for your career growth in the long run.

Just like how regular check-ups with the doctor helps you keep your health in check. Reassessing your Financial Situation at regular intervals will keep your Financial Health in check as a Single Woman.

3. Investment Strategy for Single Women:

Risk tolerance:

Your “risk tolerance” is basically your comfort level with an investment option. The risk spectrum ranges from “safe”, with little risk of loss or volatility (like a money market fund), to very “risky”, volatile investments (like equity funds or sector funds)

You need to determine your own “comfort zone.” For example, if you don’t like to be awake all night wondering about your investment, you can invest in moderate-risk funds managed by professional fund managers.

Also, you need to keep in mind “inflation” and “taxes”. With the so-called safe but low-return investments, you can actually end up worse off when these two are taken into account.

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 they 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 Investment Strategy from the start will be reliable as it will provide you with confidence in managing your wealth. A Financial Advisor can help you using their experience in customizing financial strategies best suited for your financial goals.

Asset Allocation :

An integral part of a sound financial plan is “asset allocation”, which is nothing but determining an appropriate mix of investments that is most suited to you. Having a mix of different investments will also help you in offsetting any volatility in the financial markets. The key parameters to keep in mind while deciding on your asset allocation are –

–         Current Financial Situation

–         Financial Goals

–         Time Horizon

–         Risk Tolerance

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 a 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 Investments for Single Women

Your choice of investment instrument should not only aid in building your desired corpus but also should be tax-efficient savings schemes for women such as

• Public Provident Fund
• Equity Linked Savings Scheme
• 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:

• Dividend
• interest
• Capital appreciation

All these are taxable at different rates. So, while you are choosing your choice of investment vehicle, try to keep these points in consideration.

4. Retirement Planning for Single Women

Women have a great habit of saving even the littlest they can. They also try to play it safe in their investment choices. But to plan a long-term goal like Retirement, their investment returns need to beat inflation in the long run.

Here is where Single women should consider investing in Equity. Equity funds can be subjected to risk. But investing in the Right Equity Instruments for the long term has great potential in providing you with inflation-beating returns.

You can always discuss with your Financial Advisor which Equity fund to invest in based on your risk appetite to help you in your retirement planning as a Single woman.

5. Reviewing Your Financial Plan as a Single Woman:

Just having a financial plan does not solve all your problems. As time passes by, your life stage changes and so do your needs as well as income. You need to periodically monitor and review your plan/asset allocation. You need to ask questions like –

• Have my needs changed?
• Has my risk tolerance changed?
• How has been the portfolio’s performance?
• Which investments have done well?
• Is there a need to rebalance my asset allocation?

The last question is very important, because as different investments provide different returns and have varied risk levels, you may need to “rebalance” your portfolio in line with your changing needs and lifestyle. Without rebalancing, you might end up with a plan which is out of tune with your current life stage.

Do a review of your needs and goals by periodically to ensure an appropriate asset allocation.

Conclusion:

“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 of 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, and saving investing practices will help you to achieve your financial goals as a Single Woman.

Financial Freedom for Single Women is also as important as Financial Literacy. Being Financially Independent will help you make financial decisions on the choices available to you as a Single Woman.

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 manage her finances.