What Single Women Are Getting Wrong About Money

What Single Women Are Getting Wrong About MoneyHello, single ladies, this is your financial wake-up call.

A recent study from Fidelity Investments looked at the financial planning and investment habits of never-married women, divorced women and widows. What it found was that a large share of these women don’t have in place the planning, investments and emergency provisions that lay the foundation for a secure future and greater wealth.

“Women have more financial earning and decision-making power today than ever before,” says Kathleen Murphy, president of personal investing at Fidelity. “And yet, too many limit the benefits of that power by shying away from taking control of their financial futures.”

Women are making more money, but …

First, let’s look some of the reasons these women aren’t doing better with their money. Then, we’ll get to how to change course.

Even though nearly all (97 percent) of single women surveyed said they believe it is important to be engaged in managing their money, the Fidelity study found them making three overarching mistakes:

  • They underestimate their ability to handle money.
  • They worry about the future, but often fail to create a long-term plan.
  • They rely too heavily on cash holdings, missing out on more profitable investments.

Looked at in more detail:

  • Forty-eight percent of single women tend to spend without thinking about the long term.
  • Nearly 47 percent of single women do not have an emergency fund in place.
  • Single women are also less likely than other women to have a will, health care proxy and estate plan.
  • Eight in 10 single women keep a portion of savings in cash, with 35 percent reporting keeping 50 percent or more of their savings liquid.

Widowed, divorced or never-married

Of course, there are differences among single women, depending in part on how they arrived at their single status.

Never-married women have done the least amount of financial planning, compared with widowed women and divorced women, the Fidelity study found.

That may be because, according to a separate study, something about getting hitched prompts many people to look more seriously at their finances. According to TD Ameritrade’s Marriage & Money survey, about one-third of respondents said that after getting married they paid more attention to their finances, found the partnership a source of moral support for staying on track financially, and relied on their spouses to help manage savings and investments.

“For many Americans, wedding bells serve as a wake-up call to get their finances in order as they now have a partner to think about, says JJ Kinahan, chief market strategist and managing director at TD Ameritrade. “Having a spouse, and perhaps for some a family, can encourage better financial habits, deter overspending, and keep long-term goals in focus.”

Fidelity found that just 17 percent of never-married women have a comprehensive financial plan in place. Only 46 percent of never-married women have a three- to six-month emergency fund. Just 16 percent of never-married women have a will. Only 9 percent have an estate plan. And just 19 percent have a health care proxy.

In contrast, widows seem to have their finances much more settled, with 56 percent of widows having a comprehensive financial plan in place and 75 percent of that group having an emergency fund. Eighty-one percent of widows have a will, 64 percent have an estate plan and 72 percent have a health care proxy.

 Divorced women fall somewhere in between never-married women and widows in terms of their financial planning. Thirty-two percent of divorced women have a comprehensive financial plan, and 56 percent have an emergency fund. Fifty-five percent of divorced women have a will and 29 percent an estate plan. And 44 percent of divorced women have a health care proxy.

Do you see yourself, or someone you know in those numbers?

Turning it around

If so, it’s time to turn it around.

Fidelity Investments urges you to get into your financial front seat: Know what you own, what you owe and what your goals are for your money. Only then can you to ensure that your investments are working toward the future you envision.

Put financial safeguards into place, including a holistic financial plan that accounts for your individual situation and goals.

Take the next step from saver to an investor. Make sure that you choose investments suited toward your tolerance for risk, and time horizon to save.

Luckily, the financial fixes are easily learned and accomplished, a step at a time:

Establish an emergency fund, pronto. Emergencies happen to everyone. Whether it’s a big car repair, job loss or unexpected home repair or a health crisis that knocks you out for a couple of months, having money put aside for such occasions helps you sleep easier at night.

Get a grip on your income and expenses. These days, an array of apps and online tools make it so much easier to make a budget, adjust it, and stick to it.

Invest: Fidelity found that many single women are saving, but keeping that money in cash. That means that over time, inflation is likely to erode the value of that cash. It also means that they are missing out on investments that can earn more for their future security and retirement.

Credit: www.moneytalksnews.com

I Am A MOMPRENEUR, I Don’t Have A Regular Income!

I am a MOMPRENEUR, I don’t have a regular income!Guests to my home have a knack of arriving without prior notice. It looks as though the whole mobile revolution has just escaped my extended family. They love to surprise us with their unplanned visits. Earlier I would get very unsettled with these unannounced visits and the follow up high teas and dinners. No longer!

Last few years have seen a surge of mompreneurs in our city, look around and every housing society has home cooks, bakers, event planners etc. you name it and you have it. So now whenever someone visits I quietly order a meal from the home cooks and pass it off as mine!  I must mention there are many like me who are regular patrons and are a reason for the success of the mompreneurs. They enjoy a large and loyal clientele and have established a good business from their homes!

A few weeks ago I got curious and wanted to understand what do they with all the money that they are earning.  I called a few of my mompreneurs friends to do a survey of sorts and the answer surprisingly was “Nothing”! Money just stays in a savings account and used to fund a few expenses around the house. The good part was most wanted to invest in mutual funds but were apprehensive to commit to a SIP (systematic investment plan) as their income is irregular.

Well, the solution is simple. Use STP, Systematic Transfer Plan. People with erratic income who want to invest in mutual funds can accumulate funds in a short-term debt mutual fund and transfer from there in a systematic way to equity mutual funds. STP like SIP staggers the investment over a period of time and helps benefit from rupee cost averaging.

1. What is STP?

STP is a facility provided by the mutual fund house that allows investors to invest a lump sum amount in one scheme and transfer regularly a pre-defined amount into another scheme.

The scheme that is considered for lump sum investment is called ‘source scheme’ and the scheme to which the amount is transferred is called ‘destination scheme’ or ‘target scheme’.

Generally, investors put lump sum amounts into a liquid fund and transfer it to an equity fund.

2. How does it operate?

Every month or whenever you generate a surplus you invest it in a short-term debt fund instead of keeping the money in a savings account and in parallel set up an STP in an equity fund.  The process is explained with an example below:

Depending on the expected surplus that will be generated you can decide on the amount to be transferred.  Transfer facility is available on a daily, weekly, monthly and quarterly interval. You can at any time increase, decrease or completely stop the STP as well.

3. How do you benefit?

In an STP, the money remains invested in a short term debt fund till it is transferred to equities. This money earns a return, which is generally higher than that of a savings account. STP helps in averaging out the cost of investors by purchasing fewer units at a higher NAV (net asset value) and more at a lower price just like a SIP.

4. Next Steps

a) Evaluate your last 6 months or 1 year cash flows

b) Understand the amount of surplus that is generated

c) Check the amount currently lying idle in the savings account

d) Invest the amount lying idle in a savings account in a Liquid fund/s of any reputed fund house/s

e) Set up an STP of the expected surplus into equity mutual fund/s

f)  Relax!

There is a lot of satisfaction and security in seeing your money grow so it is imperative for all of us to take out some time from our busy schedules and plan our investments. Read more on how to plan your investments here.

Read More at Momspresso

Want to invest your FD proceeds in mutual funds? Here is how to do it

risksMany investors, it seems, are looking alternatives to their bank deposits. According to some mutual fund advisors and financial planners, many individuals are asking them where should they invest their FD maturity proceeds.

“There are many investors who align their fixed deposit term with the financial year. Those whose FDs are maturing soon and who do not need that money now are asking where should they invest the proceeds,” says Ankita Tanna Narsey

Most individuals can’t think beyond bank deposits when it comes to deploying their savings. However, fixed deposits do not pay much and the interest is added to the income and taxed as per the Income Tax slab applicable to the customer.

This is the main reason why many financial advisors advocate investing in debt mutual funds instead of parking money in bank deposits. Debt mutual funds may offer market linked returns, which could be marginally higher than bank deposits.

If invested with a horizon of more than three years, debt mutual funds may offer better after-tax returns. Investments in debt mutual funds held over three years are taxed at 20 per cent with indexation benefit. The indexation helps to bring down the actual taxes to a single-digit in an inflationary scenario.

If you are investing for less than three years, both bank deposit and debt mutual funds are taxed similarly. Returns or interest would be added to the income and taxes as per the income tax slab applicable to investor.

 If you would like to explore debt mutual funds, here is some help. Point to note: there are several kind of mutual funds. You should choose a scheme that matches your investment horizon and risk profile. Read to find out more about debt mutual funds.
Liquid Funds are very low risk funds. They invest in highly liquid money market instruments. They invest in securities with a residual maturity of upto 91 days. Investors can park money in them for a few days to few months. These funds may offer marginally higher returns than bank deposits. For example, the category has returned 6.44 per cent in the last year. It is recommended if you want to park your money for few days to a few months.
Ultra Short-Term Funds are low risk funds. These funds invest mostly in very short-term debt securities and a small portion in longer-term debt securities. But, these are not as safe as liquid funds. Investors can park their money for a few months to a year in them. The category has offered 6.90 per cent in the last one year.
Fixed Maturity Plans (FMPs) are a good alternative to fixed deposits for investors in the higher tax bracket. These are closed-ended debt mutual funds with defined maturity. FMPs usually invest in securities which match their tenure and follow buy and hold till maturity strategy. This makes it free from interest rate risk. An FMP may match the yield offered by its portfolio constituents with minute deviations. FMPs also have credit risk, which means that it’s returns will be hit if any security held in its portfolio face rating downgrade.
Short-Term Funds invest mostly in debt securities with an average maturity of one to three years. These funds perform well when short term interest rates are high. They are suitable to invest with a horizon of a few years. The category has returned 6.41 per cent in the past year.
Dynamic Bond Funds have an actively-managed portfolio that varies dynamically with the interest rate view of the fund manager. These funds invest across all classes of debt and money market instruments with varying maturities. They are ideal for investors who want to leave the job of taking a call on interest rates to the fund manager. The category has returned 4.25 per cent in the last year.
Income Funds are highly vulnerable to the changes in interest rates. These funds invest in corporate bonds, government bonds and money market instruments with long maturities. They are suitable for investors who are ready to take high risk and have a long term investment horizon. The right time to invest in these funds is when the interest rates are likely to fall. The category average returns were 5.13 per cent in the past year.
Credit Opportunities Funds are the debt funds which invest in corporate bonds and debentures of credit rating below AAA. The idea is to invest in low-rated securities with strong fundamentals which are expected to see a rating upgrades in the future, benefiting the portfolio and investors. These funds involve high credit risk. A default or a downgrade in rating of the scheme’s portfolio holdings may hit the returns badly. Their portfolio consists government securities and T-Bills as well but in small percentage to provide liquidity in case of heavy redemptions. These schemes are not recommended to meet your non-negotiable goals.
Gilt Funds invest in government securities. They do not have the default risk because the bonds are issued by the government. However, these funds are highly vulnerable to the changes in interest rates and other economic factors. These funds have very high interest rate risk. Only investors with a long-term horizon should consider investing in them. Gilt medium and long term category has returned 2.08 per cent in the past year.

Debt-oriented Hybrid Funds invest mostly in debt and a small part of the corpus in equity. The equity part of the portfolio would provide extra returns, but the exposure also makes them a little riskier than pure debt schemes. Investors with a horizon of three years or more can consider investing in them.

Credit: Economictimes

Be Wary of These 6 Financial Mistakes

6 mistakesYour financial future will significantly influence the financial decisions you take today. A poor financial decision can adversely affect your future. Here are some of the common financial mistakes that you should not make. Learn from them and make sure that you don’t commit them:

Not Maintaining Emergency Fund

It is essential to have a cash buffer at all times to overcome the financial crisis, like a medical emergency, job loss, etc. Caught unprepared, you may have to take a personal loan, which comes with high-interest rates. To prevent this, it is advised to set aside a certain amount regularly from your earnings and create a fund that is equivalent to 7-8 months of income. You should remember that contributing to this fund is non-negotiable and you should never use this fund to meet non-vital expenditure.

Taking Too Little Term and Health Insurance Policies Cover

Well, one may never get to regret taking a life cover, but your dependents will surely feel the burden. An insufficient life cover means that your family will have to go through a tough life after your death. The term insurance cover should be adequate to generate necessary income that can take care of the expenses of your dependents till they become self-reliant. One broad estimation is that life cover should be 6-7 times of the annual salary. Whatever cover you choose, make sure it is sufficient enough to take care of household expenses, including loans and liabilities in your absence. In addition to this, the insurance cover should be adequate to generate income that can take care of life’s different goals, like child’s education, marriage, etc.

Just like term insurance, make sure your health insurance policy is sufficient to beat the rising medical costs. A sudden hospitalisation can wipe out your years of savings in a single blow. You can go for a family health plan to cover all the members of your family under a single plan. Choose the cover by looking at the size of your family, their lifestyle along with current medical costs in your city.

Delaying Investments
There are many expenditures which need to be taken care during the early stages of a career. As a result, many people find it difficult to invest money. ‘Essential’ spending on holiday and shopping in the 20s is replaced by child’s education, loan EMIs, in 30s. As a result, such people never have ‘enough’ funds to start investing.
However, in reality, despite the small size of your savings, the power of compounding can build a sizeable amount over the period. The longer you wait to build your investment portfolio, the smaller the corpus you will be able to generate. Remember, the power of compounding can grow your money in a long run. However, it also needs time to show its magic.

Depending on Conservative Investments

For most of the people, fixed deposits and public provident fund (PPF) are the only investment options. While they are safe investment options, they are not lucrative and might not give returns enough to beat the inflation impact in the long run. To grow wealth, make sure to choose mutual funds’ investments that can grow your wealth faster than the inflation rate. You might need to change your investment strategy of your 30s if you want to earn a high income in your 40s and beyond. If the time is at your side, go with aggressive investment approach and choose mutual fund investments. With mutual fund investments, you get a chance to invest both in equity and debt as per your risk appetite.

Getting Lured by Uncertain Investments

Greed can affect the financial decisions of many people. People flock to those investment schemes which promise to give them 15%-20% returns every month. However, it is impossible for any scheme to churn out 10% or more returns every month. Therefore, stay away from such schemes. Otherwise, you might have to lose your money as well.
While investing in any scheme, make sure it has SEBI approval. In many times, fraudsters upload the images of PAN card and incorporation certificates to mislead investors. However, all these certificates don’t mean SEBI approves them, so be wary before choosing an investment option.

Ignoring Inflation

Assuming inflation at 7%, Rs 1 lakh today may worth less than Rs 15,000 after 30 years. It means, things will get expensive and you will be able to buy fewer things at the same amount of money. It is essential to plan your investments in such a way that they generate enough returns to beat the inflation impact.
You don’t need to be a financial expert if you want to avoid the financial mistakes. A little bit of commitment, awareness and self-discipline can help you in enjoying a worry-free financial life.

5 things you must know before you buy life insurance

Things you must know before you buy  a life insurance

Life Insurance is a must if you have people financially dependent on you. Choosing the perfect policy and what we’ve prepared below is a list of 5 questions you must ask to ensure you get it.

1). Types of Life Insurance in India

Like most things in life, different life insurance policies offer different benefits. While choosing an insurance plan, it is important to be clear about why you want to purchase it- what your end goal is- and what you expect from it. Answering these two fundamental questions will help you zero-in on the exact type of policy you need.

2). Premium Frequency

The next step is deciding how often you can afford to pay a premium to keep your Insurance Plan active. You can either pay the entire premium amount in a lump sum or you can pay it at regular intervals – monthly, quarterly or annually. The frequency of your premium payments should be based on a thorough and practical assessment of your financial situation, which should be done keeping in mind what’s most convenient for you.

3). Life Insurance Riders

As demonstrated above, insurance policies do not follow the one-size-fits-all approach. To meet disparate investor needs, companies offer add-ons that can be availed over and above your policy. These add-ons are called riders. You can avail riders for critical illnesses like heart attack, for death by accident, for income benefits, etc. Make sure you ask about these at the time of purchase.

4). Loan against your Insurance Policy

A valuable feature of an insurance plan is that it not only provides financial protection and saves you money by reducing your tax liability, it can also serve as collateral while borrowing funds. As a policyholder, you have the right to avail a loan against your insurance policy which can be extremely beneficial for investors with limited assets. However, these loans are granted only against traditional policies like endowment and money back policies that offer both life cover and savings. Term insurance covers and ULIPs cannot be pledged as security.

5). Claim Settlement

The chief responsibility of your insurance company is to pay claim amounts and deliver life insurance maturity benefits. Just like insurers check your credit score before making a commitment, make sure you too select an insurance company that has a high claim settlement ratio- which you can check on IRDA’s official website- and a hassle-free claim process. Also, ask your friends and family to share their personal experiences with a particular insurer before you commit. Remember, however, that the insurer might not be deliberately rejecting claims; there’s also the possibility of adverse selection, so try and find out why they were rejected.

Now that we’ve equipped you with the 5 basic questions you must ask before you choose an insurance provider to sign a contract with, make sure you get life insurance sooner rather than later.

Credit: Tomorrowmakers