7 Tips for Women to Ensure their Financial Freedom

Many women consider their financial independence as their financial freedom. You must know that financial independence is a path to achieving financial freedom. Being financially independent is the status of having or earning sufficient wealth to pay your living expenses without having to be dependent on anyone. Whereas, financial freedom is the ability to live your desired life, make your own financial decisions, and achieve your financial goals. It is not just paying your bills and living a debt-free life. It is knowing your finances and actively participating in all your money-related decisions, such as investments, loans, tax-filing, etc.

While financial freedom is paramount, remember that it is not something that can be achieved overnight.

"Liberty, when it begins to take root, is a plant of rapid growth." - George Washington

It is a long yet exciting journey that needs a simple and small start. Whether you are a working woman or a homemaker, here are 7 tips for you to ensure your financial freedom:

1. Have a Separate Savings Bank Account:

For most people, a Savings Account is generally their first interaction with the financial system. Homemakers typically open a joint account with their spouses. However, in order to achieve financial freedom, you must have your own Savings Account that you handle by yourself. If you are a working woman, you must already have a Savings Bank Account. However, even many working women use their Savings or Salary Accounts only to withdraw their salary or swipe the debit card for everyday purchases. While a Saving Bank Account seems like just a way to deposit and withdraw cash, it can teach you several financial lessons through its various features. By regularly operating your account, you can learn about how the interest on your deposit, average monthly balance, and different charges are calculated, you will be able to operate the locker by yourself, and open a Recurring Deposit or Fixed Deposit to start your investment journey. The Savings Account can also help you build the savings habit and open the doors for you to take advantage of various government-backed investment and loan schemes.

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2. Be Involved in Your Finances:

The more you are involved in your family's finances and know them, the better. Nowadays, with internet banking and e-statements, checking your bank statements has become way easier. It is advisable to review all your bank accounts, credit cards, e-wallets, etc. at least on a monthly basis. This will give you a clear picture of where your money is going and help you manage your finances better. Using budgeting and expenses tracking apps is a good option to categorise and keep an eye on your expenses.

Many homemakers do not know their family's income, fixed expenses, outstanding loans and interest rates, investments, etc. If due to some incident the family's responsibility falls on their shoulders, it can become challenging for them to manage their finances without any knowledge and experience. Hence, it is necessary to know your family finances irrespective of your working status.

3. Start Investing for Your Financial Goals:

Each of us has certain financial goals, such as marriage, child's education, child's marriage, buying a home and/or car, etc. If you have never been thinking of these goals, it is about time you start setting your financial goals or speak to your spouse about how you can achieve these goals together. Saving money in Savings Bank Account and investing in fixed income financial instruments like Fixed Deposits and Recurring Deposits are baby steps toward your financial goals. However, the interest earned on these instruments might not generate sufficient corpus to achieve your financial goals. Once you have started your investment journey, learn about other investment avenues, such as mutual funds, Systematic Investment Plans (SIPs), gold, direct equities, real estate, government securities, etc. Bear in mind that your investment should be based on your investment objectives, risk appetite, and investment horizon. If you feel overwhelmed with the technicalities, it is advisable to take the help of professionals who give unbiased investment advice considering your investment goals and risk appetite.

4. Build Good Credit History:

While you might have heard the benefits of staying debt-free, let me tell you having debt is not a bad thing. In fact, having credit in your name is as important as taking any other financial move. The lenders generally deny approving a loan if you do not have any credit history. Whereas having a good debt-to-income ratio and good repayment record will help you build your credit history and credit score, which will ultimately help you avail loans at attractive interest rates in the future.

You should be careful when taking a loan to build a credit history. It makes sense to opt for low-cost loans and avoid taking high-cost short-term loans, such as Pay Day Loans, App-based Loans, Personal Loans, etc. Click here to read 8 guaranteed ways to improve your credit score.

5. Clear Your High-cost Loans:

If you already have multiple loans in your name and your debt-to-income ratio is high, it would help if you clear your high-cost loans. The high-cost loans could be financially draining as they share a large portion of your monthly EMIs and you end up paying a much higher amount than the principal in the long term. Therefore, it makes sense to clear such loans as soon as possible to achieve financial freedom. Before opting for a foreclosure or part-payment, make sure you check pre-closure charges and calculate total savings after deducting the charges.

6. Maintain a Contingency Fund:

Life is full of uncertainty and, hence, is essential to maintain a contingency fund to attain financial freedom. You must have seen your mother and grandmother secretly keeping aside money from the savings done from the household expenses for emergencies. Such contingency funds can be useful in challenging times, such as medical emergencies in the family, shortage of money for the down payment of a home loan or for paying tuition fees of a child, etc. Ideally, you should save at least 12 months of your living expenses, including loan EMIs, as a contingency fund.

7. Secure Your Family with Insurance:

While there is an increased awareness about life insurance and health insurance in India, women are still far behind when it comes to covering their lives with insurance. A lot of women and their spouses do not realise the importance of buying insurance for women. If you are a working woman, the lost income can affect your family's lifestyle. Even if you are a homemaker, you work for more than 12 hours a day without any leaves and holidays. You take care of your household chores, tutor your children, and manage your household monthly budget. While these services are done out of love and go unnoticed, the absence of a homemaker can put the family not only in a state of emotional void but is likely to pinch their pocket. Here's why life insurance is important for homemakers.

Besides, women are more prone to critical illnesses like immune disorders, irregular blood pressure, diabetes, arthritis, breast cancer, bone-related disorders, etc. Women give birth that can make them vulnerable to health issues, typically after the age of 40. However, whether you are a student, working woman, or homemaker, and irrespective of your age, a medical emergency can occur to anyone and any time.

Hence, buying life insurance and health insurance cover for you will not only protect you and your family financially but also give you peace of mind.

To Conclude...

As they say, "to educate a woman is to educate an entire generation". A financially literate woman can not only make her own financial decisions but can also guide her family in achieving their financial goals. A woman, who is known as Laxmi of the house, must aim at attaining financial freedom and bringing light to her family's future. PersonalFN's initiative the "Certified Financial Guardian" offers an opportunity to learn the nuances of money management and help you make informed investment decisions.

Warm Regards,
Ketki Jadhav
Content Writer