Women often face various socio-economic challenges in their life. To overcome these challenges, they need to do effective financial planning to lead an economically inclusive life. Financial planning is crucial and a step closer to becoming financially responsible. Starting early should be the primary objective for everyone, especially for women entrepreneurs and working professionals.
One of the most important factors related to financial planning is that you should make sure that you are creditworthy and maintain a healthy credit score. It shall help you in accessing hassle-free credit from prospective lenders, if you plan to apply for any loan or credit card in future. Moreover, you can check your credit score or download a credit report from Paisabazaar’s platform for free. You can download and access your credit report in your own language for better analysis and receive monthly updates.
Checking or downloading your credit report multiple times shall not lower your credit score, as it is considered a soft enquiry by the credit bureaus. However, if you apply for credit, a lender pulls your score from a credit bureau, which is marked in your credit report. Multiple enquiries in a short span can lower your credit score significantly. Ideally, you should do a thorough research and then apply for credit only with a lender where there is surety of the approval.
Now let’s discuss some of the vital financial planning practices designed specifically for Indian women:
Understanding and Setting Financial Goals
Firstly, you should identify your short-term and long-term goals and start working on them. Your short-term goals may include buying a car, studying educational courses, starting a family, etc. Long-term goals shall include buying a home, children’s education and marriage, retirement planning, etc. While doing your financial planning, consider all of your family’s requirements, including your parents, children & spouse.
Plan your Loans Smartly
It may not be possible to meet your financial goals every time with ease. To fulfil your requirements, you may need to go for loans. If you have a good credit score, you can end up with a very good loan with a very low cost of credit. This cost can be significantly reduced if you get the benefits of an additional rebate for women borrowers. Do check with your borrowers if this can be possible so that you save on paying whatever interest amount you have to otherwise.
Check and Manage Cash Flows
It is advised to have a thorough understanding of your cash flows that shall include your active and passive income. Once you are through with it, you can create a budget and start monitoring your monthly expenditure, along with your savings and investments. Prepare for an emergency fund to meet expenses for at least 6-12 months in times of cash crunch situations or unforeseen circumstances.
Follow the 50/30/20 Rule
As per the financial experts, the 50/30/20 rule is the best rule applicable for efficient financial planning. This rule signifies that 50% of your income should be spent on essentials. Your 30% of monthly income should be saved and invested and the remaining 20% shall be spent on leisure activities and hobbies.
Plan for Savings and Investments
There are numerous savings and investment options, which can be availed to enhance financial security. The savings instruments include savings accounts, National Savings Certificate (NSC), Public Provident Fund (PPF), recurring deposits (RDs), fixed deposits (FDs), etc. Several other investment options include real estate, gold, Sukanya Samriddhi Yojana (SSY), mutual funds, stocks and shares, commodity trading and much more.
Check and Opt for viable Insurance Coverage
Life is unpredictable and it becomes necessary for you to be more prepared. Make sure that you have sufficient life coverage for your family, as well as health insurance to cover medical expenses. It is essential to overcome medical urgencies or any unforeseen circumstances. Insurance coverage makes you more financially secure and relaxed.
Retirement Planning
Retirement planning ensures women’s financial stability post retirement. You need to contribute to the Employee Provident Fund (EPF) for retirement savings. You can also invest in the National Pension System (NPS) for retirement benefits and check out various pension plans offered by insurance companies.
Tax Planning
Tax planning is also an essential part of financial planning. Understanding tax benefits is also important, as it helps you to save a lot of money. You may also avail various tax savings instruments, such as PPF, ELSS, and NPS. Get a fair idea of Section 80C to utilize maximum deductions. You can also avail deductions under Section 80D for various health insurance premiums.
Conclusion
Financial planning is considered vital for women’s financial freedom. Any early initiative can help you secure your financial future. As your life changes, you need to prioritise your financial plans accordingly. Always keep your short-term and long-term financial goals as priority to effectively manage your finances. If you are thinking about what is the best time to start with financial planning, then now is the right time.
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