Do women make poor money managers? NO!

Here's the biggest myth of the financial world: 'Women make poor money managers.' If anything, the argument has swung in favour of the fairer sex in the midst of this global financial crisis. Some critics have even argued that the very lack of female money managers on the Wall Street could be one of the reasons for the mess!

Our grandmothers have budgeted, saved and invested since ages. Of course, the majority of the savings in India are directed towards gold and jewellery or land. Hence, the 'fund management' skills never ever got spoken about.

At an individual level, it would not take a major crisis in our lives to realise that we women have to be in charge of our own finances, to look after our own financial well being, and take the well-trodden path of financial independence and freedom. 

Here, are some simple yet often overlooked rules that all women should know and put into practice when it comes to the essential topic of money and finances.

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Disclaimer: This article is for information purpose only. This article and information do not constitute a distribution, an endorsement, an investment advice, an offer to buy or sell or the solicitation of an offer to buy or sell any securities/schemes or any other financial products /investment products mentioned in this article or an attempt to influence the opinion or behavior of the investors /recipients.

Any use of the information /any investment and investment related decisions of the investors/recipients are at their sole discretion and risk. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Opinions expressed herein are subject to change without notice.

Money Rule #1: Manage your own finances

It's really odd. Women are generally competent at multi-tasking. And I know of numerous women who juggle their careers, families and personal lives quite well. However, when it comes to money matters, we know of many women who either prefer to take a backseat (read: Leave the money matters to their Significant Other) or who simply shy away from managing their own finances (read: Clueless as to what to do with their money).

If you want financial independence then adopting a passive approach towards managing your finances would never get you there. Take charge of your finances today -- work out monthly budgets with the help of a personal budget planner (different versions are freely downloadable on the Internet) to have a clearer idea of what you are spending your money on, which are the areas of spending that you should be cutting down on (read: frivolous spending!) and how much you can afford to save each month, net of all other expenses.  

As a rule of thumb, you should be saving 10 per cent of your income each month. But, you would say go for 15 per cent to 20 per cent if you can. It never hurts to save more money!

Ideally, you should have at least six months' worth of your current drawn salary in emergency savings (and that should be for your personal savings account, and not in a joint account with your spouse!).

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Money Rule #2: Make your money work for you 24/7

Which brings us to our next point -- it's not enough to be a 'saver' only. Women are savers and of course, spenders (Shopaholics Anonymous anyone?), so it is not good enough to leave your money in savings accounts, which earns measly interest rates. India's average inflation has been 5.5 per cent to 7.5 per cent – which means to keep pace with, or ideally, outpace inflation, you have to earn at least 8 per cent per annum on your money! And if you are looking at 'growing' your wealth, you definitely need a much higher rate.

So the only logical thing to do is to invest. With the multitude of financial products and investment options available today, the only worry you should have is: Where to invest your money!

But before diving headlong into making any form of investments, there are three key things we need to ascertain – risk appetite (i.e., the losses you can bear to take on your investment portfolio in the event of a market downturn. Here, you need to bear in mind that low risk instruments typically provide low returns, while high risk instruments typically provide high returns), investment horizon and objective (i.e., investing the money for five years to buy a house, or for 10 years and beyond for retirement, etc.).

The current global economic crisis has made the investment climate all the more daunting, especially for novice investors. But with crises comes opportunities. Investment opportunities abound -- take some time off to read on the markets (the Internet is a rich source of information), get some advice from your friends, and when the market recovery happens, it would have been well worth the effort.

Of course, market volatility is an everyday occurrence in the investing world. But in the longer term, the rewards would have more than compensated for the interim volatility of your investments.

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Money Rule #3: Be adequately insured, not underinsured

By and large, many of us are generally underinsured, or there are 'gaps' in our insurance portfolio that we need to address, but which we have been putting off. If you think you are adequately covered, just by having one whole-life insurance policy or an endowment policy, think again.

Rising medical costs are a global concern, not least in an economy such as ours, where world-class healthcare facilities, or care for some serious illnesses is beyond the reach of many. In the unfortunate event that you are stricken with a serious illness, the medical bills could potentially wipe out a lifetime's worth of savings, or at least a significant chunk of those savings. Women need to have sufficient insurance coverage, especially Critical Illness (CI) coverage, which is usually included as a rider (add-on) to whole-life insurance plans or term plans.  

Other insurance required include Mediclaim plans, but most often your employer may already provide you with a hospitalisation cover and other options. Consult a qualified financial adviser and have him or her work out a comprehensive insurance portfolio for you.

Proper and adequate insurance coverage is crucial; should the need ever arise you would be thankful you got that insurance coverage in the first place.  

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Money Rule #4: Plan for YOUR retirement

To be able to lead fulfilling lives after you retire, you need to plan for your retirement way in advance. And not only do you need to plan early, you need to plan for a good 15 years' worth of living expenses after you retire (assuming you retire at the age of 65). And not forgetting the holiday plans in between, potential medical bills and other miscellaneous expenses. The main factors for consideration when working out how much you need to retire with is:

• Projected monthly/yearly expenses at retirement
• Number of years till retirement
• Number of years after retirement
• Projected annual inflation

The factors listed above serve as a rough guide to the factors that need to be considered when working out a retirement plan. It would be advisable to speak to a qualified financial adviser and have him or her work out a comprehensive retirement plan for you.

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Money Rule #5: Embrace the concept of delayed gratification

We practice 'delayed gratification' almost on a daily basis, most of the times without us knowing. We stop ourselves from eating that heavenly-looking, decadent piece of double chocolate fudge cake when we are trying to lose some weight. We put in the extra hours at work so that we can go for a well-deserved getaway, without having to worry about the office when we are on a holiday.

So why cannot we do the same when it comes to achieving our longer-term financial goals?

Instead of buying another fancy and crazily expensive Louis Vuitton or Prada bag, or buying yet another pair of Jimmy Choos or Mahnolo Blahniks (I exaggerate here, but you get the point!), the money could be channeled to your retirement fund, or for other long-term goals such as buying an apartment.

It would be impossible to do away with retail therapy for us women (think about how the economy would suffer as a result! J), so it all boils down to budgeting and proper financial planning.

Keep these 5 rules in mind and you'll be on the path to financial freedom!