Master Financial Planning: Essential Guide for Women

Beyond women breaking the glass ceiling

In the last few years we have several women break the glass ceiling and reach positions of eminent in industry, banking and consulting. It is not just in jobs but women entrepreneurs are also growing by the day and women like Kiran Mazumdar Shaw and Falguni Nayyar remain girl icons. However, as increasing number of women break the glass ceiling, the real question is how many of these women are actively and intimately involved in financial planning. Today, women can longer afford to leave the nuances of financial planning to the father, brother or spouse. They must to take charge of their financial future and that begins with a much bigger role and say in financial planning. Here is to go about it.

Use spreadsheets, but grasp 3 key concepts

There are 3 financial concepts that women must start taking more seriously; Returns, Risk and Time Value. All financial planning revolves around or gravitates towards one of these aspects. Investments generate returns, but they also carry risk. The first thing women must get used to do is using spreadsheets to understand risk return trade-offs of various investment options. Risk is volatility and that is why risk adjusted returns matter. Above all, understanding time value underlines the need to start financial planning early and persisting with the plan for a long period with discipline and consistency.

There is no simulation like the real thing

At the end of the day, what matters is the real thing. Simulations and dummy data can help up to a point. You need to put you hard earned money on the block to understand risk and for that you need to be well prepared and equipped. Take time off to read annual reports and fund factsheets. Check out the bond application forms and grasp YTM and risk. There is plenty of information on investment products on your broker’s website. Above all, open a trading and demat account and familiarize with equity, debt and mutual fund investing. It is ok to start with small positions and evaluate your performance. The education value of such practical moves is immense and no amount of simulation can match that.

How to interpret news and cues

Financial planning is a rather dynamic exercise. That is because most variables are constantly changing. Inflation changes, interest rates change and exchange rates fluctuate. All these factors can change the fortune of your investment portfolio, much more than you care to imagine. When the Union Budget is out, read the budget and make your own notes on the implications. Be open-minded since you are not yet taking major investment decisions, just educating yourself.

You are now prepared to draft your financial plan

Now it is time for action; and some real action. You have understood spreadsheets, investments and the interpretation of cues. Now start with your medium term and long term goals. Financial goals are nothing but dreams nourished with a sense of purpose. You want to retire comfortably, send your child to B-school, plan an exotic vacation, own a second home etc. All these goals need money and hence must be planned for. Your plan helps you reach your goals with minimum hiccups. It has to be your story.

Let your financial advisor partner you

You must involve a financial advisor at an early stage. They bring domain expertise, fitment skills and an external perspective. You and your family may be too closely involved with the goals so it is always good to have a financial advisor for the maker-checker effect. The advisor is more objective and acts as your gateway to becoming financially savvy.

To paraphrase Ben Graham, “No investment pays as much as some meaningful self-education”. That is the starting point for women to be more financial self-sufficient.