As educated women most of us are financially independent before marriage. Unfortunately in the haze of romantic bliss or to fulfill conservative stereotypes we hand over our financial resources to our husbands or in-laws soon after marriage. I have seen and experienced first-hand the outcome of such foolish decisions. There have been a few instances where I found my debit card missing only to find it later, with all money removed from the account. I have found myself penniless and scared in a strange city after having been thrown out of the house for the umpteenth time. Instances like this have made me a little wiser about retaining my financial freedom. After all even if money can’t buy you happiness it certainly helps you find the path to happiness. In my case completing my education, moving out of the city where I lived as a married woman and now money to help me fight divorce cases in courts.
Some of the simple things to remember:
**SAVE. It is never too late to save. At least save 10-15% of your monthly income in a Recurring Deposit or open a Simple Investment Plan with any of the banks wherein the bank invests your money in mutual funds. For both these schemes, there is no lock-in period so you are free to withdraw the money in case of an emergency.
**Never share a joint account with your spouse. If you plan to share a joint account do so only for the purpose of meeting the monthly household expenses. The rest of the money should be in your single account.
**Always get yourself a life insurance and do not nominate your spouse until you have been married a few years at least, preferably five years and more.
**Always make a will and it is never too early or late. This may sound morbid but it is always important to make a will. Even if things are going smoothly you never know when it might go downhill. So make a will and bequeath whatever assets you have to whomever you want to be the beneficiary. Once again, do this in a level-headed way not clouded by emotional sentiments. You will probably spend Rs.1000 if you want it done by a lawyer. Or you could write one yourself and have two witnesses attest it.
**Do not share pin numbers of debit or credit cards.
**Always share the household finances jointly unless you are extremely sure of the person you are with.
**Try and buy a house early. Get a home loan. With so many banks, both retail and public sector banks more than willing to give loans to working women do it as soon as it is possible. And banks like HSBC, IDBI and UTI even go far as extending a 90% home loan.
**Try and invest in as many savings instruments as possible. NSC certificates. If you are employed increase your contribution to the Provident Fund account.
**Get yourself and education. Learn new skills and spread your knowledge base. You never know when education will land you a better job.
**Always have a passport. If you don’t have one get it made immediately.
Here are some rules of financial freedom I came across in Forbes magazine which might be of help. And remember most of it has to do with common sense.
You need enough life insurance to replace at least five years of your salary – as much as 10 years if you have several young children or significant debts.
Life insurance lets surviving family members maintain something close to the standard of living they enjoyed prior to you or your spouse’s death. Stay-at-home spouses also should have life insurance, since they do all sorts of things that you would need to pay someone else to do in their absence.
There are two types of policies:
Cash-value: These cover you for your entire life and includes an investment component.
Term: These cover you for a specific period of time and provide a death benefit only.
For most people the choice is a no-brainer – the premiums on a term policy are much lower
When you buy insurance, choose the highest deductible you can afford. It’s the easiest way to lower your premium.
It’s the open secret of the insurance game: File a claim, your premiums go up. For that reason, it’s in your interest – as much as possible – to shoulder small damages out of pocket.
If you’re not saving 10% of your salary, you aren’t saving enough.
The earlier you start saving, the less you’ll need to set aside every year to meet your goals. That’s because you allow your money more time to grow — the gains on your invested savings will build on the prior year’s gains. That’s the power of compounding, and it’s the best way to accumulate wealth.
Saving at least 10% of your annual salary for retirement is recommended, but the older you start saving, the more you’ll need to save. If you start at 50, you may need to put away 30% a year and still postpone retirement by a few years.
Keep three months’ worth of living expenses in a bank savings account or a high-yield money-market fund for emergencies. If you have kids or rely on one income, make it six months’.
An emergency fund is a hassle to build, but you’ll be glad you did next time your transmission sputters or your boss hands you a pink slip. Besides curbing spending where you can and setting aside a small amount of your pay every two weeks, there are several ways to build your cash cushion. Some sources to draw on:
*A bonus or financial gift from a relative
*Money you get back from a flexible spending account, a transportation reimbursement account or an insurance claim.
*An extra paycheck. If you’re paid every two weeks, you’ll get 26 paychecks a year. So in some months you’ll get three instead of two. If your fixed monthly expenses don’t change, you might be able to set aside one paycheck a year.
Aim to build a retirement nest egg that is 25 times the annual investment income you need.
So if you want $40,000 a year to supplement Social Security and a pension, you must save $1 million. This rule is based on the amount that you can safely withdraw from your nest egg in retirement.
The single most effective thing you can do to ensure that your money will last is to start out with a low withdrawal rate of 4 percent, then raise that amount annually to compensate for a cost-of-living increase or inflation.
The reason is that if a bear market hits early in retirement, an enormous loss can put such a big dent in the portfolio that it won’t be able to recover in time to benefit when the market rebounds.
By Jamais Moi Meme