Wealth Wisdom for Women

Key steps that women should take so that they are smart with money

Woman using credit cardThere was a time when the woman held the key to the lockers of the household. It is not clear when the deterioration happened, but soon enough women got reduced to the name their husbands included in business or investments. Many seem to have resigned to simply not knowing how money decisions are taken. So here is my list of ten things a smart woman should know about money and money matters.

  1. Get the basics in place

    Financial dealings require that you have a bank account, a PAN [Permanet Account Number] card, a demat account, and such basics in place. It is important that you understand that the first holder is the one with rights to all accounts. Therefore bank accounts that hold the money that flows in, PAN card to invest in financial products, and a demat account to keep shares that are bought, are the basic needs. To this list, you can add an internet trading account, for those familiar with the stock markets.

  2. Keep key documents in order

    Financial transactions require documentary proofs in several cases. Rather than depending on others in the family for documents, it is important that as the woman of the household you know what is required and are able to keep them accessible. These documents include marriage certificate [for change of maiden name], proof of identify [one of voter's ID, passport, driving licence] and proof of address [ownership or lease agreements, utility bills like electricity, gas or phone bills].

  3. Take charge of transaction details

    A household would have bank accounts, loans, investments and various financial dealings that have been done over time. It is important to know the details of these transactions. A worksheet with the relevant details is a good choice. This includes account numbers, loan numbers, supporting documents, photocopies of originals, and dates of maturity of loans and deposits. Without records of financial transactions in one place, there is no way that finances can be managed.

  4. Understand process features

    I know of a senior citizen, who was asked to sign blank cheques when she opened an account. She gave them to the agent, only to know that her account had been swiped clean and the agent went untraceable. Her only mistake was that she was unaware of the implications of handing over a blank cheque. She also did not know that sample cheques have to always be cancelled. You can avoid such situations if you understand how a process works. If a bank account can be accessed with an ATM [Automatic Teller Machine] card, and if that card is authenticated with a 4-digit PIN [Personal Identification Number], this means the PIN cannot be shared with anyone. The safety and security features of transactions have to be well understood to protect it from being defrauded.

  5. Use electronic efficiencies

    Technology today helps us to conduct most of our transactions by ourselves. Using internet banking, phone banking, seeking sms confirmation of transactions, using the ATM, trading on the internet, are all facilities women can use, to make sure they are implementing their decisions directly, rather than depending on someone else. Do-it-yourself is a great trait in financial dealings.

  6. Understand safety features

    The joke about the ATM and the woman is very popular. Among the many things she does, she pulls out the card and the PIN from her bag. Keeping the two together is like having your house keys in a chain that holds your address. The thief not only has the keys but also knows which door it opens. Passwords to accounts, PIN of credit and ATM cards, and cheques have to be kept safely. Your signatures may be all over, but you can decide where your cheques will be.

  7. Know your rights

    Every transaction comes with its rights and obligations. If you are a nominee, you have the right to receive the proceeds of the account or investment. I have heard from a divorcee who had kept all her money in a joint account with her husband. He was the first holder, and he could operate the account on "either or survivor" basis. Obviously, as their relationship soured, he was swiping off the money, without her knowing about it.

  8. Make the effort to know

    Every product is defined only by its cash flow. In an investment, it is about what you pay now and what you get later. In a loan, it is about what you get now and what you pay later. If you know what cash you will have or need, you can understand these products better. Before signing on an insurance, to save taxes, ask yourself if you will be able to pay the premium every year. If the loan agent pushes a higher home loan, you need to ask yourself whether you can pay the EMI [Equated Monthly Installment] and still run your home. Most financial decisions are easy, if you make them after proper analysis of your financial status - at the present and the near future.

  9. Beware of selling tactics

    If someone were to tell you that you have to do a deal here and now, to get a special price, you better not do it. A financial transaction made in a hurry, can be wrong. Always question the incentive of the seller. If someone calls up and tells you that you have a pre-approved loan, or a credit card, don't be taken in by the feeling of importance. He has a target to meet. Just go by your needs.

  10. Goals matter most

    Investment decisions are stable when they are based on specific goals. If you begin a SIP [Systematic Investment Plan] for your child, on his first birthday, to fund his education, you have the entire family with you. You save systematically, and you take care of the goal. Rather than creating a situation of tension, arising from debates on "your money" and "my money" goal-based investing enables taking care of the husband's need for exotic holidays and the wife's need for a bigger home.

Getting your finances in order is not really that complex. Most of the above mentioned steps are actually things we already know but somehow neglect. Take a little effort and give it a shot. Enjoy the power of being in charge.

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Uma Shashikant, a PhD [Finance], runs a learning solutions company, Centre for Investment Education and Learning [CIEL]. She has been a trainer, researcher and consultant in the capital markets for 18 years, 10 years of which was with the Indian Institute of Capital Markets. She has been associated as consultant in projects of the USAID, ADB and the World Bank.

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