Financial freedom is the ability to manage your finances independently, ensuring you can cover expenses and achieve goals without relying on a steady income. It empowers individuals to make choices free from financial constraints. Making intentional and informed financial decisions is essential to financial independence, whether you’re a homemaker, working professional, or balancing both. For one-person financial freedom may mean preserving financial stability after quitting a career and on the other hand for another it could mean generating income to cover unforeseen domestic expenses.
In a BBC article on November 24, 2024, Soutik Biswas correctly stated that “saving is a cultural norm in India”. But the important question remains: Are we genuinely financially free and empowered to choose our financial future. Also, the Indian women are known for their ability to save, as was demonstrated by the demonetization in 2016. Saving is a strength, but we must also invest further to improve it as locking money in cabinets or lockers doesn’t fight inflation.
The rule to investing says that Income minus Investments(savings) should be your expenses, whereas most of us first spend and then invest. Ideally we should follow the Investments (savings) first rule but even if not investing should happen and for this we must take two steps which are primarily managing risk and then Investing.
For Managing Risk:
- Buy term insurance, a basic life insurance plan that’s inexpensive for everyone. Insurance coverage should be at least ten times your annual salary.
- Secondly, if there is no family health insurance, talk to your spouse and acquire one that covers you, your spouse, children, and one side of the parents per work policy.
For Investing:
Among the numerous asset classes and investment options available, let’s focus on a few key ones tailored to our readers’ specific needs.
- Start with a fixed deposit in your bank account. Fixed deposits earn 6.5–7% annually. Unlike variable interest rates, your investment rate remains constant during the term, ensuring stability and certainty. (These rates may change periodically but remain consistent once we purchase it.)
- Second, start a systematic investment plan (SIP) with a minimum of Rs. 500 per month to explore mutual funds. (SIP, or Systematic Investment Plan, is a method of investing in mutual funds where a designated amount of money is automatically deducted from the bank account every month and invested in the chosen fund.) One can always increase this amount based on your income and savings. This can be started with a trustworthy company, and this can be accessed on the SEBI website and financial dailies. Although mutual funds are subject to market risks, but historically they have well-performed and have offered returns in the range of 12%–14% annually, making them an excellent choice for long-term wealth creation.
- The third perspective pertains to women who are interested in acquiring gold, particularly for their children’s weddings. Gold has long been a favorite investment and jewelry material. If investing is your main goal, try gold ETFs, sovereign gold bonds, or gold mutual funds.
These investments have several benefits. You avoid fees, save taxes, and get a fair investment. They also accept one-gram gold investments. Investing one gram of gold per month yields 12 grams per year. Consistent investments can help you accumulate a lot of gold by the time your youngster is marriageable. And all this accumulated digital gold investment can be converted to cash easily at a fair value and any other asset or property can be acquired with this money.
Detailed information from RBI and SEBI on these investment avenues is readily available and accessible to everyone. Following these steps can significantly enhance financial stability and pave the way toward smart year-end money moves for women.
Shared by : Dr. Supriya Agarwal
Author’s bio:
Dr. Supriya Agrawal, Assistant Professor of Finance at Amity University, excels in financial literacy and investment planning and is registered with SEBI as SMART. She is honored with the Financial Inclusion and Literacy Leadership Award in 2024.
