An early start, smart decisions and a little more appetite for riskthese are the ingredients to financial independence and confidence
Bengaluru-based Shilla Shree, 47, is wiser today when it comes to managing her money. Life taught her tough lessons. Before she separated from her husband in 2003, when she was 34 years old, she had investments in real estate and jewellery. By her own admission, she had bought jewellery of stones “of almost every colour". But after her divorce, when she tried to sell these to rebuild her money box, she was in for a shock. “I tried to sell but I got back just about 40% of the total value. Most of the weight was of the coloured stones, and that didn’t fetch me anything," she said. “That’s when I realised that investing in jewellery is a waste of money," she added.
Today, Shree is a different woman. Her money box may still not conform with popular standards—she invests in mutual funds but largely in debt and liquid funds and avoids equity funds; and she continues to invest in real estate—but she is financially independent. She runs her own executive search firm called Search Partners, which caters to top level positions across industries.
Mint Money has always advocated financial independence. But for women in India who have traditionally depended for monetary support first on their fathers, then their husbands and eventually the children, financial independence means more than just having money in their wallets. “It’s a subtle feeling to be in a position to give rather than take. More women need to feel good about their money management skills to make the move from taker to giver, which has been her traditional role in all aspects besides money," said Nisreen Mamaji, a Mumbai-based certified financial planner, and founder, Moneyworks Financial Advisors.
Most of us tend to start spending the moment we start earning. “When you have money in your hand, you get the itch to spend it," said Vandana Mehrotra, 42. She didn’t think of investments when she got her first paycheck in 1996 and till 2001; during this period she did not have any financial commitments. By the end of the month, her bank balance would be nearly zero as she would have spent on jewellery, clothes, gifts and luxury items. She even bought a two-wheeler. Then, after working abroad with a software company for a few years, she had a large sum when she came back to India, but she did not know what to do with it. So, among other things, she bought a car, paying for it fully in cash.
Bengaluru-based financial educator Mrin Agarwal, who conducts financial literacy workshops for women under Womantra, said that the urge to spend is prevalent not just among women, but also men. “The reason why they don’t think of investments early on is that personal finance is not taught in homes, or in schools or colleges. Most people think of making investments only when they get married," said Agarwal.
Although Mehrotra’s father used to frequently invest in stock markets since 1980, the family never cultivated the habit to invest in equities for the long run. Moreover, her father was a day-trader.
Bad decisions made today can come back to haunt us tomorrow. When Rowena, 33, bought a house in 2012 after she got married, she started paying an equated monthly instalment (EMI) of around Rs50,000. Then she had a secure job. But after her daughter’s birth in 2013, she lost her job because the company was going through a financial crisis. Her income stopped suddenly; her EMIs did not. “That loan became the biggest dent in my life," said Rowena. Although she was a compulsive—and conservative—saver, her planning alone was not enough to foresee such eventualities. Up until then, Rowena had invested only in fixed deposits, postal savings and insurance policies. Once she attended Agarwal’s workshop and realised that apart from having a contingency fund, she also needs to increase her risk appetite a little to be able to earn inflation-beating returns. That’s when she started investing in mutual funds. From starting to set aside 25% of her monthly savings for systematic investment plans (SIPs), today she and her husband invest up to 75% of their savings in mutual funds, every month.
For some like Rowena, a course correction can set things right. But what happens if spending is a necessity? A lot of Shree’s work involves networking with company heads, decision makers and industry leaders. She says that grooming is an essential expense for her; and she drives a Mercedes car in keeping with the image. What pricks her though is this: after her separation, she over-invested in insurance to provide for her daughter and now pays a monthly premium of Rs1 lakh.
Like many women, Rashika, 45, too woke up to the need of a comprehensive financial plan after her marriage. A corporate lawyer by profession, her family’s defence background kept her spending habits in check as she had a conservative upbringing and had invested in real estate, Public Provident Fund and insurance policies. She also entered mutual funds at just the right time—around 2005 and 2006, in the middle of one of India’s biggest bull runs till date. From investing just 14% of her total savings in SIPs in those days, now she and her husband jointly invest close to 70% of their monthly savings in SIPs. More importantly, their approach changed. “Once we were convinced that mutual funds were long-term investment vehicles, we looked at investing in them as a compulsory expenditure. We would invest first, and then spend from whatever was left over," said Rashika.
Rashika says both she and her husband understand the need for financial independence and want to pass these qualities to their 14-year-old son. “We don’t give him unlimited pocket money. Kids should be sensitised that they need to earn their money. We will support him till his post-graduate education, but after that, he will have to support himself."
Meanwhile, in 2004, Mehrotra invested in an initial public offering and stayed invested for many years. That gave her confidence to try out equity mutual funds years later. Eventually, she and her husband turned serial entrepreneurs and now have an information technology consultancy business, a jewellery showroom and a social sector online platform called GIGA (Give & Gain) where people can donate their time or possessions for the less privileged and the platform ensures last mile connectivity.
The Mehrotras consciously kept their business costs low. Another effect of turning entrepreneurs was they became financially responsible since they had to ensure business continuity as well as earn from there. This led them to making investments and eventually getting a financial planner on board to guide them.
Mamaji has some practical advice for women who want to start their journey to financial independence. “Many people do internships these days before they pass out of college. So, as soon as you get your first paycheck, open a bank account and start a small SIP. Just invest Rs500-1,000 a month. They shouldn’t blow up all their money. Girls are very drawn to online shopping where they buy stuff like make-up kits. That urge needs to be controlled," said Mamaji, who is also a mother of a 19-year old and knows “what attraction to online shopping is, first-hand". Ultimately, she added, experience is the best teacher when you see your Rs500 or Rs1,000 a month SIP grow.
Experience is also what helped Radhika Apshankar, 42. After working for 15 years, she felt she needed a break. The meticulous way in which she had built her corpus over the years came to her rescue. In 1997, at age 23, when she didn’t have much money to invest, her first investments were in fixed deposits. But she wasn’t happy with the low returns. She tried her hand with real estate, but soon realised it was not her cup of tea. “At the time of buying and selling a plot of land, you need to have reliable contacts, you need to know the builder’s credibility, whether the plan is approved, and so on. Knowing the local language is also essential, if not compulsory," she said. That’s when she started looking at mutual funds and making gradual investments through SIPs. Thanks to these investments, Apshankar quit her job in May 2012 to pursue her main interest: travel. She has since visited the US, Bhutan, “and many places in India". “I don’t churn my investments. I stay invested in them as long as the schemes do well, unless these schemes underperform while the markets do well."