On a lazy Sunday afternoon my 5-year-old and me were having a time of our own when I asked her when can we go to buy a bicycle? Out of nowhere, she replied ‘I am not going to get one, since I heard you talking to Papa that you do not know to ride a two-wheeler, how will you teach me then?’ Bang! It was on my face, somewhere we want our kids to be independent and do things on their own; however if we are the teachers how would we teach them things we do not know ourselves. That was the day I made a list of the things I do not know or fear to indulge in. Amidst driving, riding and swimming, I realised there is one more life lesson to be learnt, Managing Own Finances.
Managing finances is always done by the head of the Family, and in most Families it is done by the ‘Men’. But question being are we really independent? We talk about women empowerment, liberation of our Women, equality for women, and all such jargons but often as women we fear the thought of managing our own Finances.
Now let me ask you this:
How many of you women take part in major financial decisions at home like buying a vehicle, land or property? (Obviously I am not talking about choosing the asset but the financial aspects of it (how much you can pay and how you would be sourcing the funds, the documentation required etc.)
How many of you women watch the annual budget with an intention to know how it affects your family income and investment decisions?
How many of you choose your own insurance policies and investment plans?
You might be earning an income, now if you have answered these questions, you would know if you are truly financially independent?
We might be good in managing homes and offices and doing all together but when it comes to managing our own hard earned money we often make our male counterpart take the lead. Kids are really good in observing and they grasp what they see, therefore to create a stigma about managing finances in their minds is not a step towards empowering our girls and it is time we evaluate this part and work towards it.
Let us immerse ourselves in understanding why do not get into the intricacies of managing our Finances.
Assumptions about finances that is misleading:
- You Earn Big numbers, so you are the most secured : Just earning a good salary does not secure you financially. It is important to apply a simple math with your earnings and expenditures.
- We will see when time comes : This approach starts with a red flag, simply that you would not be ready for your life’s big events if you do not start planning your finances at every step. When it comes to finances a proactive approach is essential, with a realistic plan and budget.
- Who has the time for Budgeting : Definitely budgeting is time consuming in the initial months, but when placed once it becomes easier to follow. Budgeting will only help you reach your financial goals in a realistic manner.
- Saving for retirement can wait : As we grow our income increases and so does our expenses, and most of the times with increasing expenses we mostly do not have the money to save for our futures, hence it is necessary to save for retirement early.
- No need to worry for the invisible, live in your present : Often emergency comes without warnings, we can never predict our future emergencies in the present however, and having an emergency fund can sometimes be life saving.
Easy methods to manage your own finances:
Step 1: Where do we stand?
Analyse your current scenario, record your earnings versus your expenditures. The first month when you do this it might be overwhelming but do not give up, once you set the pattern then it would be a part of your routine. In case you find it tedious to note everything you can use various apps like FinArt-Expense Tracker, Money Manager Expense & Budget, Money Lover – Spending Manager. Another easy method would be Google Sheets, with various templates available you can use the one that suits you the best.
Step 2: Synchronization of Goals :
Once you are aware of your monetary position it is now time to decide if it sinks with your values / personal goals. Most of your personal goals can be achieved with a viable budget in place. For example if your personal goal is to spend more time with your kids then it would be necessary to get a house help and that can give you some extra time hence you can adjust your budget accordingly. Meanwhile if travelling / vacationing are a priority then you can manage your finances and save for this goal.
It is time to evaluate and synchronize your personal goals and your financial goals this step can be eye opener for many.
Step 3: Make a Budget and track it :
Keeping in track of your spending is essential and making a budget will help you be on track. With alluring sales and fest happening in and around these days it would be a task to control the splurge of over spending, at such times it is important to remind self of that one priority personal goal that you would want to achieve. Sticking to the budget would be the only key.
Step 4: Create an emergency fund :
Emergency fund cushion to fall on set an automatic transfer into a savings account before you start paying your expense or impulse buys. This would help you have enough cash available in case of any unforeseen events. A popular saying goes that money saved = money earned.
Step 5: Retirement Plans:
Gone are the days when people use to get pensions after retirement, therefore it is essential that you get a retirement benefit plan for self and set aside some budget for such plans. Retirements can be peaceful if you have your share of money still flowing in.
Step 6: Balancing debt pay offs:
Key is to take shorter debts and speed up repayments. Concentrating on one debt at a time will help in quick repayments and then this amount can be rolled into paying off another debt. This does not mean that savings can be on a hold, ensure you balance both at the same time.
Step 7: Revisit Review Change:
Managing Finances is an ongoing process, evaluate your financial position and identify mistakes. Important to talk about finances and gain knowledge from various sources. Review your plan either self or with a trusted person and make valid changes that would enable not only enhancing your current financial situation but also help you reach your personal goals.
One step at a time is the only way out, happy tracking!
If we truly want to be independent in all senses, and pass it on to our next generation, it is high time we break our inhibitions and actively engage in financial planning. And like most lessons, this lesson too begins at home.