5 Money Rules Every Woman Should Know

Source: http://www.fundsupermart.com.my




Money Rule #1: Manage Your Own Finances


It’s really odd. Women are generally competent at multi-tasking. And I know of numerous women who juggle their careers, families and personal lives quite well. But when it comes to money matters, I know of more than a few women who either prefer to take a backseat (read: leave the money matters to their Significant Other) or who simply shy away from managing their own finances (read: clueless as to what to do with their money).


If it’s financial independence that you long for, taking a passive approach to managing your finances would never get you there. Take charge of your finances today – work out monthly budgets with the help of a personal budget planner (different versions are available for download on the Internet for free) to have a clearer idea of what you’re spending your money on, which are the areas of spending that you should be cutting down on (read: frivolous spending!) and how much you can afford to save each month, net of all other expenses.


As a rule of thumb, we should be saving 10% of our income each month. But I would say go for 15% to 20% if you can. It never hurts to save more money! Ideally, we should have at least 6 months’ worth of our current drawn salary in emergency savings (and that should be for your personal savings account, and not in a joint account with your spouse!)




Money Rule #2: Make Your Money Work for You 24/7


Which brings us to our next point – it’s not enough to only be a ‘saver’. Women are savers and of course, spenders (Shopaholics Anonymous anyone?), so it’s not good enough to be leaving our money in savings accounts or fixed deposits, which earns us measly interest rates. Malaysia'’s Consumer Price Index (CPI) was at 4.4% in 2008 – this means that to keep pace with, or ideally, outpace inflation, we have to earn at least 4.4% per annum on our money! And we most certainly cannot achieve that with only savings accounts or fixed deposits.


So the only logical thing to do would be to invest. With the multitude of financial products and investment options available today, the only worry we should have is where to invest our money!


But before diving headlong into making any form of investments, there are three key things we need to ascertain – risk appetite (i.e. the losses you can bear to stomach on your investment portfolio in the event of a market downturn. But bear in mind that low risk instruments typically provides low returns, while high risk instruments typically provide high returns), investment horizon and objective (i.e. investing the money for 5 years to buy a house, or for 10 years and beyond for retirement etc.). Some of the more common investment options include [B]Stocks and Unit trusts [/B


The current global economic crisis has made the investment climate all that more daunting, especially for novice investors. But with crisis comes opportunities. Investment opportunities abound – take some time off to read up on the markets (the Internet is a rich source of information), get some advice from friends in the know, and when the market recovery happens, it would have been well worth the effort. Of course, market volatility is an everyday occurrence in the investing world. But in the longer term, the rewards would have more than compensated for the interim volatility of your investments.




Money Rule #3: Be Adequately Insured, Not Underinsured


By and large, many of us are generally underinsured, or there are ‘gaps’ in our insurance portfolio that we need to address, but which we have been putting off. If you think that you’re adequately covered just by having one whole-life insurance policy or an endowment policy, think again.


Rising medical costs are a global concern, not least in a developed economy such as Malaysia, which prides herself on having world-class healthcare facilities. Though the government provides patients of public hospitals with subsidies, in the unfortunate event that you are stricken with cancer or other serious illnesses, the medical bills could potentially wipe out a lifetime’s worth of savings, or at least a significant chunk of those savings. Women need to have sufficient insurance coverage, especially Critical Illness (CI) coverage, which is usually included as a rider (add-on) to whole-life insurance plans or term plans.


Other insurance required include Hospital & Surgical (H&S) plans, and possibly even Long-Term Care Insurance, due to the longer life expectancy for females. Consult a qualified financial adviser and have him or her work out a comprehensive insurance portfolio for you. Proper and adequate insurance coverage is crucial; should the need ever arise, you would be thankful that you had gotten that insurance coverage in the first place.




Money Rule #4: Plan for a Longer Retirement


Women in general live longer than our male counterparts. In Malaysia, the 2008 average life expectancy for males is 71.8 years, while that for females is 76.3 years. To be able to lead fulfilling lives after we retire, we need to plan for our retirement way in advance. And not only do we need to plan early, we need to plan for a good 20 years’ worth of living expenses after we retire (assuming we retire at the age of 55). And not forgetting the holiday plans in between, potential medical bills and other miscellaneous expenses.


The main factors for consideration when working out how much you need to retire with is:


• Projected monthly/yearly expenses at retirement
• Number of years till retirement
• Number of years after retirement
• Projected annual inflation


The factors listed above serve as a rough guide to the factors that need to be considered when working out a retirement plan. It would be advisable to speak to a qualified financial planner and have him or her work out a comprehensive retirement plan for you.




Money Rule #5: Embrace the concept of “Delayed Gratification”


We practise ‘delayed gratification’ almost on a daily basis, most times without us knowing. We stop ourselves from eating that heavenly-looking, decadent piece of double chocolate fudge cake when we’re trying to lose some weight. We put in the extra hours at work so that we can go for a well-deserved getaway, without having to worry about the office when we’re on holiday.


So why can’t we do the same when it comes to achieving our longer-term financial goals? Instead of buying another fancy and crazily expensive Louis Vuitton or Prada bag, or buying yet another pair of Jimmy Choos or Mahnolo Blahniks (I exaggerate here, but you get the point!), the money could be channelled to our retirement fund, or for other long-term goals such as buying an apartment.


It would be impossible to do away with retail therapy for us women (think about how the economy would suffer as a result!), so it all boils down to budgeting and proper financial planning.