Financial planning – the term in itself refers to making of concrete plans to improve your financial power. Now, unlike what some people may think, financial planning is not at all difficult, all you need is to be aware, think and calculate. After all, financial planning is a mathematics, which is rational and as simple as 2 plus 2 equals 4. So fear not, here are some tips, plans and some do’s, also some don’ts.
Now, here, I shall be taking you through some great investment and planning channels, plus some tips for planning your expenses well in advance. Financial planning for women involves handling two primary aspects related to personal finance, expenses and investment. When you receive your paycheck, there are two things that you can potentially do: one, use the money for essential expenses; and two, investment the money. Note that common savings is also included in expenditure.
Planning for Expenses
Personally, guys no offense, I believe that since women are capable and do manage one of the most difficult institutions in society, that is their family; they are better at handling expenses (not through credit cards), than most men. This was not a compliment, but a fact.
So, principally, about 20% to 40% of your income is going to be spent on essential expenses, food, clothes, make-up and cosmetics, rent and commutation. Now before the month starts, calculate and estimate how much you would spend on each item. Also you would need to include some expenditures such as a couple of parties, sleepover and hangouts while doing so. Some of you may have medical expenses hence consider those too. Listing these out was the first step, next analyze and make a list for identifying the expenses which you can cut down. If you look, observe and think properly, you will notice that, except for things such as food, rent and medication, you can cut down on almost everything.
The third step is to make a table of budget with 22-30-31 columns (covering days of a month), whichever is appropriate. In this table, write down the expenses that you have estimated and throughout the month try to stick to them. This can be quite difficult and also quite easy. Since sticking to the budget is not always possible and some unexpected expenses tend to come up, one can always put away certain amount of money as a backup fund.
Planning for Investments
After you have paid off all your expenses, you can turn your attention to investments. Again this can take about 30-40% of your income. The following are some excellent options which you can use.
- Life Insurance: If you have a family, then this is the most important investment for you, as a life insurance not only pays off all the returns on investment, but there is a death benefit which is available which ensures your family’s financial security and well-being. You can invest up to about 10-15% of your income in such an insurance policy.
- Funds and Securities: Mutual funds, variable annuities, Systematic Investment Plans (SIP), Collective Investment Schemes (CIS) and other mutually invested funds are medium risk investments. Here you have a 5-7% return on investment along with the total amount that you invested initially. This facility is termed as guaranteed minimum returns facility. Apart from the minimum returns in such schemes, you also receive the bonus and portfolio performance returns, which chiefly depend upon the portfolio performance and also economic conditions. Again this can take up about 10-15% of your income.
- Government Provided Investments: These are the most secure of all as investment options. Channels such as IRA, 401(k), government bonds and certificates tend to provide a good rate of return that accounts to about 5%. Such investments will take up even lesser than 5% of your income.
You can also consider some options such as real estate, direct share investments, gold, silver and bullion and futures and options. However, such investments are quite risky and worst of all you have to invest a lot of time in them. Apart from that it is also recommended that you maintain a 30% balance in your bank account as a safety precaution. Now, all you have to do is plan accordingly and choose the right expenditure and investment.