ATM :: Financial planning for young women

Nirmal Rewaria | Wednesday, 16 July 2014 – 7:50pm IST | Place: Mumbai | Agency: DNA
You’ve got your first job and you’re unsure how to manage your finances? Nirmal Rewaria, Head Financial Planning, Edelweiss, gives you some tips


For a young woman, her first job is a happy place to be in. She is most likely to be unmarried, earns a steady income and has no worries about meeting financial commitments. But it is important to have an anchor that instills focus and purpose in managing money. Once she pencils her goals and aspirations she will realize that there is a lot more they can do with their money than splurge.

The first important thing is to plan on how you want to spend the money.

Here are some ways to go about it:
1. List down the top three objectives you wish to achieve with your income.
This could take several forms, for instance you may want to:
a. Pursue higher education – maybe an MBA
b. Plan for your younger sibling’s education
c. Contribute to your sibling’s marriage
d. Plan for your own retirement
e. Buy your own apartment

2. Once you have listed the objectives, it immediately introduces a sense of responsibility and commitment. You are no longer inclined to spend money like you used to, because now you have better things to do with your money.

3. Next is to prepare a plan to achieve each objective listed down in step 1. This could get a little heavy as it involves making calculations and assumptions like the rate of inflation for instance, which are typically handled by qualified financial planners. For any financial advice it is best to consult a competent financial planner. He will not only do the math, but also draft a suitable portfolio with investments that give you an edge in achieving these goals.

4. The individual must set aside money every month from her salary towards these goals. This is best achieved through an Systematic Investment Plan (SIP). This involves investing a fixed amount at intervals (monthly/quarterly) in a mutual fund plan. SIPs are light on the wallet and help investors benefit from rupee cost averaging, which reduces the purchase cost of the mutual fund investment over a market cycle.

When it comes to SIPs, investors need to start small and increase the amount progressively in line with the salary. For instance, take Deepika who earns Rs 20,000 a month. She invests Rs 2,000/month in an equity fund over a period of 20 years. The rate of return is assumed to be 10%. She will amass Rs 1,518,738 (Rs 15 lakhs plus), a reasonable sum, after 20 years. However, if Deepika had upped her SIP by 5% every year factoring in the salary hike, she would have garnered Rs 2,553,710 after 20 years, an impressive sum, compared to Rs 1,518,738 in case of a constant SIP.

A lot of investors initiate SIPs with enthusiasm but forget about them. They do not increase the amount and at times even forget to renew them. SIPs will be particularly rewarding if they are managed effectively. So the amount has to increase progressively over time.

5. Younger individuals must not ignore the importance of life insurance. Insurance is cheaper when taken at an early age. The most cost effective insurance solution is the term plan, which means you can opt for a larger cover at a relatively low premium.

Opt for a health plan as well. Again there are benefits of taking health insurance when you are young and are free from medical conditions which can make health insurance expensive.

Source :

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