The times are changing. Especially for women because the new possibilities of education, career, business, social life and politics are dawning for them. Many women are showing capabilities that hitherto were unknown even to themselves. While it is still a long way to go for a model gender equality, there is no doubt women's confidence is ever increasing. However, when it comes to managing finances at home, most women feel less confident. There are exceptions like those who own an enterprise or work in the decision making positions in corporate sector. But a vast majority of women find themselves weak in financial aspects.
We are talking about the women in their family comprising husband, children and optionally parents in law. The single women are compelled to manage their own finance but some feel helpless and short of resources in financial matters. We are talking about the women in all strata like urban and rural, educated and uneducated, rich and poor, formally employed and casual workers, liberal families and orthodox families. In a household, the woman might be managing monthly purchases but may not know how investment decisions are taken. A woman might be booking a deposit in her bank or signing a cheque for mutual fund but may not be aware of the options available. A lecturer in economics may be investing in an unstable bank giving higher interest rate at the behest of her father or husband. A young saleswoman might be saving a handful from her meagre income every month but may be pooling her saving in an informal group 'ponzy' scheme due to the lack of knowledge of more fruitful options like mutual funds. There could be thousands of such common cases and also hundreds of uncommon cases of financial dealings of women. These point to the need of improvement in financial understanding of women, in the current context of changing lifescape of them.
So, what is it that the women of this era should do? Should they undertake some course giving basics of finance? Should they strive to learn Stock Market investing? Should they acquire skills to use financial tools? Actually, no. What women need is neither text book knowledge in finance nor the cutting edge tools of speculative trading. All they need is a all round, go getter type wisdom. That's why we call for Financial Prudence in women.
So, what is financial prudence? Or, what needs to be done to achieve financial prudence? To start with a positive note, we admire women's ability to adapt to the situation,be it one with financial bonanza or be it one with financial hardships. It is the woman of the house who takes it in a stride herself first among others. Going beyond, the woman of the house builds confidence in the other members' mind, including school going child and the male partner. The woman can make a budget for the house and stretch it to either side, luxurious or frugal based on the financial context. While this unique characterstic of a woman should be applauded, it must be noted that she lacks in the big picture of finance of a family as a going concern. And that is what we are talking about financial prudence.
We will get into this financial prudence of women with a question and answer style.
Question : What is meant by having financial prudence in myself as a woman?
Answer : Financial Prudence means ability to judge the money position of a family unit (within the circle of influence) and do the cost benefit analysis at a major decision point. There are two parts in this, first 'to judge the money position' and second 'cost benefit analysis'. The money position comprises the income, the outgo, the assets and liabilities. If you know the money position of your family unit, it helps. However, it is also important whether you know the money position as of today. As the four constituents keep changing, it is impractical to know the money position on daily basis. But any information older than a month is not considered as reliable in money matters. The cost benefit analysis simply implies identifying perceived benefits and looking at costs that need to be paid then evaluating if the benefits are worth the costs. This analysis may be done even on a piece of paper, if not in mind.
Question : OK, if I do not have financial prudence, what difference does it make as a woman?
Answer : Mostly women tend to buckle down while taking a significant financial decision. They are unprepared with the money position and unaware of the cost benefit analysis. The risk they see at such incidence is beyond their mental capability to handle. Therefore most women turn to the decision making man, either husband or father or son, in their family unit. Or the woman delegates the job to such man and expects to be informed of the decision only. There is no active participation of the woman in the decision process. As a result, in the next incidence, the woman may not even get to know the decision made by the man. Thus the woman gets relegated slowly to the oblivion in the decision making. On the other hand, if a woman persists to take the decision despite lacking financial prudence, she makes the decision merely on emotional, sentimental basis. Such financial decisions are bound to fail more often than not, thus resulting not only in money loss but also the loss of confidence for that woman.
Question : If there is a trustworthy man in my family, why is it necessary to have financial prudence in myself as a woman?
Answer : True, financial prudence not at the cost of relationships in the family. But if it is just an excuse to skip getting into 'boring' financial matters, the woman must think twice. What if your man is sick in hospital or traveling abroad for business when a decision incidence appears next? What if your man actually expects you to participate actively in financial decisions? What if your man passes off leaving behind money and assets that you will have to manage? In general, you should yearn for equal status in the family by being assertive, not aggressive. This requires you as a woman to have financial prudence.
Question : Give an example, how would a woman with financial prudence deal with a real situation like planning a holiday abroad?
Answer : That's a good example because a family trip abroad is a dream every woman has. The actual trigger happens when you and your spouse realise that you are going to get good bonus this Diwali. Usual scenario is this: you find out the cutest destination from acquaintances; your husband comes up with a different one; the emotional fight resulting in either your choice or cancelling the plan and in case your choice then financial burden. As a financially prudent woman, you decide to take the lead and note down various aspects of such a first time big ticket plan, such as essential costs and descretionary shopping limit, weather and geographical preferences, outdoor activities preferences, air travel and visa considerations, food and cultural preferences. With the knowledge of current money situation and upcoming major expenses including ones after holiday, you discuss with your husband. First you tell him that you would take lead and plan. Then you two discuss over individual preferences of the various aspects and reach a common understanding which includes a range for budget. You keep couple of options for destination to evaluate cost benefit comparatively. Now you ask your acquaintances if anyone has any information about your chosen destinations. You try to find out specific information like visa process and fees or hotel charges from online search. If you are not that savvy, you take help of your knowledgeable kid or husband. You put down the observations in a tabular form on a piece of paper with a rating or a number for the parameters considered. Once all costs are estimated, you work out the total cost of each destination. You also add a contingency amount to accommodate any unknown factors. Now, with the non cost parameters and cost amounts side by side on paper, you discuss with your husband. If the costs are within your preset limit, bingo, you are done. If not, two of you could decide whether to take a personal loan or rework with different set of destinations. Isn't this a practical and logical way and not much difficult? Unless of course you want your emotions run over the logic!
Question : But how do I know the current money situation in my family?
Answer : Knowing current money situation in your family is very important for financial prudence. Though it is boring, it is not rocket science for a woman. Remember money situation comprises income, outgo, assets and liabilities. That is, current income, expected outgo, current assets and expected liabilities. If your husband monitors these on periodic basis, then you make sure to attend his work next time he is going to update. If he doesn't, you two decide a suitable day of month to spend an hour together to assess your money situation. The current income comprises the salaries, interest and dividend received or expected in next month. The expected outgo comprises routine monthly expense and any special expense foreseen in the next month. The current assets include the value of the investments and real estate, gold etc. The expected liabilities comprise your outstanding loan and credit card balance. Knowing this information on an ongoing basis necessitates documenting it every time you work it out. For this you can use an Excel spreadsheet or Google sheets or appropriate app. In your feminine world of imagination, this task is boring but mandatory for having financial prudence.
Question : If I am a home maker, why and how should I ask my earning husband all money details?
Answer : Well, this is a common mind block for majority of women. Why ask if I am not earning? Because you are very much a responsible partner in family. If your husband can ask you about dinner plan and what does he like and what not even if he doesn't fill his glass with water, you can ask him details of income, assets etc. If your husband considers you as an equal partner in family, he won't mind. But if you don't ask, don't expect him to come to you to educate you. If he is an old style super egoistic dominant man, then you have a difficult task of finding out but not impossible one. If you are determined, you can find a tactical way to approach him. This depends upon the chemistry in your relationship. First of all, you should be convinced that your 'home making' is not worthless, it has some monetary value. Secondly, you and your husband must understand that in case he is sick in hospital or traveling abroad for business you will have to handle any financial situation hence you need to know. In fact, you can discuss with your husband to include some respectful amount as your income in the calculation and also put the same amount in outgo part. This will keep unaffected the overall money position but will give you a tremendous confidence in attaining financial prudence and gender equality.
Question : Even if I know the money position, how to do cost benefit analysis? For example, money for major hospitalization.
Answer : Generally women are good at cost benefit analysis in day to day life like buying new crockery or exchanging kid's old cycle for new. When it comes to unusual situation and a large amount involved, a woman lacks confidence. You should not because if you think calmly, you can use the same process in a bit formalized manner. Let's consider the example : your husband has been hospitalized and you need to arrange one lakh rupees. First you need to find money in your hands and then how to make up for whatever short. So, check the bank account balance of all accounts. Think of how much you need to keep as safety in account and remaining amount is available. This is the cheapest money available because there is no penalty for withdrawal and interest loss is lowest. Suppose, you have ₹25,000 available from bank accounts. The shortfall is of 75,000. Next, you look at the assets like fixed deposits, PPF, shares, mutual funds, gold, real estate whatever you have. All of these give you some gains like interest, capital gain, rental income. You need to find out which one can be liquidated to get 75,000 with least impact on gains. Bank fixed deposit liquidation may attract penalty. PPF may be locked in. Shares may give good value but the time to get money may be longer. Thus, think about each asset and zero in on one or more of those to make 75,000 with least impact on gains and faster liquidation. If you can't make the required shortfall from your assets, you will have to borrow. Again, find out various options like loan against fixed deposit, loan against PPF, loan against shares, loan against gold instead of thinking straight of taking personal loan. You might save a lot by simply taking loan against gold. This is nothing but cost benefit analysis. There are no formulas, no processes, no tools required. It just needs you to have confidence and such confidence can come only if you know the money position. Once you go through this process of cost benefit analysis, next time you will not find it as difficult. After going through few times, you will be alert all the time about the money position and be prepared for cost benefit analysis when the situation warrants. This is nothing but financial prudence!
Question : Suppose I have financial prudence, but what if I fail after taking a major financial decision?
Answer : No one can guarantee success in making financial decision. What if your decision goes wrong? Instead, let's consider what if a decision taken by your husband goes wrong. He feels the stress, frustration, anxiety. But you support him. It would be the same way if your decision goes wrong. Why think that the financial decisions made by a man never go wrong? But the man usually takes it in stride, learns from the experience and faces next situation without hesitation. So, a woman - being same human - could also go wrong. But if you declare that you won't get involved into any financial decision henceforth, that is a bigger wrong. Because you would deprive yourself of the learning from experience. Because you would make your husband repent for sharing or delegating to you. Because you would declare that women are incapable of having financial prudence. So, in case your decision goes wrong, admit that it went wrong calmly, ask for moral support and find out what is the learning. Take a deep breath and tell yourself, "I have learnt my lesson, now I am better prepared for next situation."
Question : Ok, that's good enough, how should I keep the essence of this whole discussion in mind for my day to day life?
Answer : Let's wrap this topic of Women's Financial Prudence in four necessary action items you need. Say loudly while reading the following text :
I need to
We are talking about the women in their family comprising husband, children and optionally parents in law. The single women are compelled to manage their own finance but some feel helpless and short of resources in financial matters. We are talking about the women in all strata like urban and rural, educated and uneducated, rich and poor, formally employed and casual workers, liberal families and orthodox families. In a household, the woman might be managing monthly purchases but may not know how investment decisions are taken. A woman might be booking a deposit in her bank or signing a cheque for mutual fund but may not be aware of the options available. A lecturer in economics may be investing in an unstable bank giving higher interest rate at the behest of her father or husband. A young saleswoman might be saving a handful from her meagre income every month but may be pooling her saving in an informal group 'ponzy' scheme due to the lack of knowledge of more fruitful options like mutual funds. There could be thousands of such common cases and also hundreds of uncommon cases of financial dealings of women. These point to the need of improvement in financial understanding of women, in the current context of changing lifescape of them.
So, what is it that the women of this era should do? Should they undertake some course giving basics of finance? Should they strive to learn Stock Market investing? Should they acquire skills to use financial tools? Actually, no. What women need is neither text book knowledge in finance nor the cutting edge tools of speculative trading. All they need is a all round, go getter type wisdom. That's why we call for Financial Prudence in women.
So, what is financial prudence? Or, what needs to be done to achieve financial prudence? To start with a positive note, we admire women's ability to adapt to the situation,be it one with financial bonanza or be it one with financial hardships. It is the woman of the house who takes it in a stride herself first among others. Going beyond, the woman of the house builds confidence in the other members' mind, including school going child and the male partner. The woman can make a budget for the house and stretch it to either side, luxurious or frugal based on the financial context. While this unique characterstic of a woman should be applauded, it must be noted that she lacks in the big picture of finance of a family as a going concern. And that is what we are talking about financial prudence.
We will get into this financial prudence of women with a question and answer style.
Question : What is meant by having financial prudence in myself as a woman?
Answer : Financial Prudence means ability to judge the money position of a family unit (within the circle of influence) and do the cost benefit analysis at a major decision point. There are two parts in this, first 'to judge the money position' and second 'cost benefit analysis'. The money position comprises the income, the outgo, the assets and liabilities. If you know the money position of your family unit, it helps. However, it is also important whether you know the money position as of today. As the four constituents keep changing, it is impractical to know the money position on daily basis. But any information older than a month is not considered as reliable in money matters. The cost benefit analysis simply implies identifying perceived benefits and looking at costs that need to be paid then evaluating if the benefits are worth the costs. This analysis may be done even on a piece of paper, if not in mind.
Question : OK, if I do not have financial prudence, what difference does it make as a woman?
Answer : Mostly women tend to buckle down while taking a significant financial decision. They are unprepared with the money position and unaware of the cost benefit analysis. The risk they see at such incidence is beyond their mental capability to handle. Therefore most women turn to the decision making man, either husband or father or son, in their family unit. Or the woman delegates the job to such man and expects to be informed of the decision only. There is no active participation of the woman in the decision process. As a result, in the next incidence, the woman may not even get to know the decision made by the man. Thus the woman gets relegated slowly to the oblivion in the decision making. On the other hand, if a woman persists to take the decision despite lacking financial prudence, she makes the decision merely on emotional, sentimental basis. Such financial decisions are bound to fail more often than not, thus resulting not only in money loss but also the loss of confidence for that woman.
Question : If there is a trustworthy man in my family, why is it necessary to have financial prudence in myself as a woman?
Answer : True, financial prudence not at the cost of relationships in the family. But if it is just an excuse to skip getting into 'boring' financial matters, the woman must think twice. What if your man is sick in hospital or traveling abroad for business when a decision incidence appears next? What if your man actually expects you to participate actively in financial decisions? What if your man passes off leaving behind money and assets that you will have to manage? In general, you should yearn for equal status in the family by being assertive, not aggressive. This requires you as a woman to have financial prudence.
Question : Give an example, how would a woman with financial prudence deal with a real situation like planning a holiday abroad?
Answer : That's a good example because a family trip abroad is a dream every woman has. The actual trigger happens when you and your spouse realise that you are going to get good bonus this Diwali. Usual scenario is this: you find out the cutest destination from acquaintances; your husband comes up with a different one; the emotional fight resulting in either your choice or cancelling the plan and in case your choice then financial burden. As a financially prudent woman, you decide to take the lead and note down various aspects of such a first time big ticket plan, such as essential costs and descretionary shopping limit, weather and geographical preferences, outdoor activities preferences, air travel and visa considerations, food and cultural preferences. With the knowledge of current money situation and upcoming major expenses including ones after holiday, you discuss with your husband. First you tell him that you would take lead and plan. Then you two discuss over individual preferences of the various aspects and reach a common understanding which includes a range for budget. You keep couple of options for destination to evaluate cost benefit comparatively. Now you ask your acquaintances if anyone has any information about your chosen destinations. You try to find out specific information like visa process and fees or hotel charges from online search. If you are not that savvy, you take help of your knowledgeable kid or husband. You put down the observations in a tabular form on a piece of paper with a rating or a number for the parameters considered. Once all costs are estimated, you work out the total cost of each destination. You also add a contingency amount to accommodate any unknown factors. Now, with the non cost parameters and cost amounts side by side on paper, you discuss with your husband. If the costs are within your preset limit, bingo, you are done. If not, two of you could decide whether to take a personal loan or rework with different set of destinations. Isn't this a practical and logical way and not much difficult? Unless of course you want your emotions run over the logic!
Question : But how do I know the current money situation in my family?
Answer : Knowing current money situation in your family is very important for financial prudence. Though it is boring, it is not rocket science for a woman. Remember money situation comprises income, outgo, assets and liabilities. That is, current income, expected outgo, current assets and expected liabilities. If your husband monitors these on periodic basis, then you make sure to attend his work next time he is going to update. If he doesn't, you two decide a suitable day of month to spend an hour together to assess your money situation. The current income comprises the salaries, interest and dividend received or expected in next month. The expected outgo comprises routine monthly expense and any special expense foreseen in the next month. The current assets include the value of the investments and real estate, gold etc. The expected liabilities comprise your outstanding loan and credit card balance. Knowing this information on an ongoing basis necessitates documenting it every time you work it out. For this you can use an Excel spreadsheet or Google sheets or appropriate app. In your feminine world of imagination, this task is boring but mandatory for having financial prudence.
Question : If I am a home maker, why and how should I ask my earning husband all money details?
Answer : Well, this is a common mind block for majority of women. Why ask if I am not earning? Because you are very much a responsible partner in family. If your husband can ask you about dinner plan and what does he like and what not even if he doesn't fill his glass with water, you can ask him details of income, assets etc. If your husband considers you as an equal partner in family, he won't mind. But if you don't ask, don't expect him to come to you to educate you. If he is an old style super egoistic dominant man, then you have a difficult task of finding out but not impossible one. If you are determined, you can find a tactical way to approach him. This depends upon the chemistry in your relationship. First of all, you should be convinced that your 'home making' is not worthless, it has some monetary value. Secondly, you and your husband must understand that in case he is sick in hospital or traveling abroad for business you will have to handle any financial situation hence you need to know. In fact, you can discuss with your husband to include some respectful amount as your income in the calculation and also put the same amount in outgo part. This will keep unaffected the overall money position but will give you a tremendous confidence in attaining financial prudence and gender equality.
Question : Even if I know the money position, how to do cost benefit analysis? For example, money for major hospitalization.
Answer : Generally women are good at cost benefit analysis in day to day life like buying new crockery or exchanging kid's old cycle for new. When it comes to unusual situation and a large amount involved, a woman lacks confidence. You should not because if you think calmly, you can use the same process in a bit formalized manner. Let's consider the example : your husband has been hospitalized and you need to arrange one lakh rupees. First you need to find money in your hands and then how to make up for whatever short. So, check the bank account balance of all accounts. Think of how much you need to keep as safety in account and remaining amount is available. This is the cheapest money available because there is no penalty for withdrawal and interest loss is lowest. Suppose, you have ₹25,000 available from bank accounts. The shortfall is of 75,000. Next, you look at the assets like fixed deposits, PPF, shares, mutual funds, gold, real estate whatever you have. All of these give you some gains like interest, capital gain, rental income. You need to find out which one can be liquidated to get 75,000 with least impact on gains. Bank fixed deposit liquidation may attract penalty. PPF may be locked in. Shares may give good value but the time to get money may be longer. Thus, think about each asset and zero in on one or more of those to make 75,000 with least impact on gains and faster liquidation. If you can't make the required shortfall from your assets, you will have to borrow. Again, find out various options like loan against fixed deposit, loan against PPF, loan against shares, loan against gold instead of thinking straight of taking personal loan. You might save a lot by simply taking loan against gold. This is nothing but cost benefit analysis. There are no formulas, no processes, no tools required. It just needs you to have confidence and such confidence can come only if you know the money position. Once you go through this process of cost benefit analysis, next time you will not find it as difficult. After going through few times, you will be alert all the time about the money position and be prepared for cost benefit analysis when the situation warrants. This is nothing but financial prudence!
Question : Suppose I have financial prudence, but what if I fail after taking a major financial decision?
Answer : No one can guarantee success in making financial decision. What if your decision goes wrong? Instead, let's consider what if a decision taken by your husband goes wrong. He feels the stress, frustration, anxiety. But you support him. It would be the same way if your decision goes wrong. Why think that the financial decisions made by a man never go wrong? But the man usually takes it in stride, learns from the experience and faces next situation without hesitation. So, a woman - being same human - could also go wrong. But if you declare that you won't get involved into any financial decision henceforth, that is a bigger wrong. Because you would deprive yourself of the learning from experience. Because you would make your husband repent for sharing or delegating to you. Because you would declare that women are incapable of having financial prudence. So, in case your decision goes wrong, admit that it went wrong calmly, ask for moral support and find out what is the learning. Take a deep breath and tell yourself, "I have learnt my lesson, now I am better prepared for next situation."
Question : Ok, that's good enough, how should I keep the essence of this whole discussion in mind for my day to day life?
Answer : Let's wrap this topic of Women's Financial Prudence in four necessary action items you need. Say loudly while reading the following text :
I need to
- Participate actively in financial decisions
- Know the money position of my family
- Analyse costs and benefits objectively without sentiment
- Learn from the outcome of my decision, right or wrong
