Women are better than men when it comes to money, this is how they should manage finances

Managing the household budget is something that every Indian woman as well as women across the world have done super efficiently for many years. Growing up, I learnt my first money management and budgeting lesson from my mother. It was not formal training but just by looking at how she handled the household budget and was able to plan expenses to the last rupee, I learnt a lot.

Multiple studies across the developed world as well as the experience of microfinance companies in the most underdeveloped regions of the world have pointed to a common fact - that women manage money much better than men.

But in spite of being better money managers, one of things which women tend to not do a lot is long-term financial planning (see a sample financial planning process below).

Why should women do financial planning?

1) They live longer than men

Multiple studies have shown that women tend to outlive men. There have been many reasons attributed to the same, such as testosterone toxicity, byproduct of genetic forces (derived from Darwin’s theory) which maximises length of time during which women can give birth and raise children and possibly grandchildren.

A longer life span for women introduces important challenges on the financial planning front. As women are more likely to outlive men, they will need financial resources to ensure they live securely in old age.

2) They have more volatile career paths

Women’s careers are subject to much more volatility then men. Giving birth to kids and raising them results in long breaks from work and hence significant disruption on the financial side  in terms of cash flows. While most of these decisions are planned along with your husband, it’s imperative that you consider all these scenarios while planning your finances.

3) Increasing divorce rates

With increasing economic independence of women, as more women get into the job market then ever before, longer and more strained work hours, marriages have been under pressure across the board, resulting in higher divorce rates. Divorces are not just an emotional strain but they are a big financial strain too. It is imperative that you do proper financial planning which can help you manage your finances better in any unforeseen circumstances.

4) Women as equal partners in running house

Most metros and big cities' proportion of double income families are increasing. Women are not only contributing to running the house but are increasingly becoming equal contributors. More than ever its important for working women to start financial planning early, as it will impact not just their personal well-being but well being of their future families as well.

Ten financial planning tips for women

Now that we understand the reasons why women should undertake financial planning, let me summarise some quick financial planning tips for them.

1) Men are not your financial plan. Please get out of this notion that your man will will take care of your finances. Even if he offers to do so, you are going to do a better job.

2) The first step to great financial planning is to secure you against any eventualities, so go ahead and buy a good health insurance. If you are married, sit with your husband and buy a right family health insurance plan.

3) Always set up financial goals and review these goals as you go along.

4) Saving and investment are two different things. Don’t save, invest.

5) If you are married, do the money talk with your husband and if possible set up a joint financial plan.

6) Have a proper retirement plan assuming you might outlive your partner.

7) Over the long-term, equity markets normally outperform all other asset classes. Invest for the long-term.

8) Raising kids is becoming costlier every day - so provision properly for your kids' wellness (education expense, marriage expense), etc.

9) If you need help to create a financial plan, hire a financial adviser now.

10)  Teach all of this to your daughters.

Also read: 5 reasons why India is not ready to give up cash