Are you a homemaker? Do you want to manage your money like a pro? Here’s what you should know about managing your finances.
Let’s tell you a little about Vani. She was married at 21, had her first child when she was 23 years old and her second when she was 25. She worked for a couple of years in advertising and was earning a good amount of money. However, she realised that she would have to employ a full-time nanny and maid to help if she were to manage both her home and work efficiently.
Vani’s husband was all for her continuing to work. He would often say to her, “You’re a war horse, Vani! Don’t plough the fields.” But Vani had different plans. She made a very conscious decision to focus all her energies on managing her home and raising her son and daughter.
Career woman turned homemaker, Vani now has to think about her finances and how she’s going to manage it all. She has chalked out a financial plan which covers all bases. Here’s what it looks like.
Know your worth
One of the first things that Vani did, and which many people tend to ignore, was to make an estimate of how much money she was saving the family by staying at home and taking care of the house and children. She now had to play the role of cook, nanny, driver, tutor and housekeeper all rolled into one. With some quick math, she arrived at a certain sum. She added to this the cost of feeding a family and all the other bills and fees that she would be responsible for paying and presented her husband with an amount. Suitably impressed, her husband agreed to transfer a fixed amount into her bank account every month.
Additional Reading: Homemaker, Know Your Worth!
Secure yourself financially
The next thing Vani did was to look for Life Insurance plans for both her husband and herself. In the event that he wasn’t around anymore, she wanted to make sure that she and her children wouldn’t suffer financially. They decided that a Term Cover plus a monthly-income plan would be ideal for her husband while a market-linked plan would be the right thing for her. Vani’s husband was especially pleased about the tax benefits his Life Insurance policy would get him under Section 80C of the Income Tax Act.
Are you interested in knowing what insurance plans are available in the market? Click here
Health is wealth
Once the Life Insurance was sorted out, Vani started looking at Health Insurance. “We’re healthy now,” she said. “But what if either we or our children land up in the hospital?” Her husband had to agree that medical bills do tend to skyrocket. So, even though they were covered by her husband’s company insurance, they realised that for a family of four, they needed additional cover. So, they opted to get additional Health Insurance.
Need additional Health Insurance yourself? Click here to explore your options
Big on budgeting
“If the country can have a budget, I should have a budget too!” declared Vani. And we agree with her. Now, what is budgeting? It simply means allocating your financial resources efficiently. Most people tend to have monthly household expenses. But the superstar that Vani was, she had yearly, quarterly and monthly budgets. “Look,” she said to her husband, “there are certain expenses that we know for sure we’re going to have. We can definitely put them into our budget and save up for them too!” She was talking about things like the school fees, Car Insurance, Home Loan EMIs and property tax, among others.
Additional Reading: How To Balance Your Income And Expenditure
Here’s something that Vani realised she was really good at once she started managing her household finances. And that is analysing her expenses. That’s right. She started looking at where the family was spending more and started to find cheaper alternatives that were just as good. For example, instead of eating out eight times a month, they cut this down to four and Vani started experimenting with different cuisines instead. Instead of watching movies at the cinema all the time, they got themselves a Netflix subscription. She even saved on her phone bill by getting herself a plan that gave her unlimited calls every month.
Saving and investing
Vani became such a pro at saving, she found new ways to make the most of her finances. For example, she realised that one could save quite a bit with cashback and rewards Credit Cards. She convinced her husband to get one of each. He also got add-on cards for her. As a result, she was not only able to save on things like restaurant spends, she was also able to get discounts on her groceries and free movie tickets!
Additional Reading: How To Choose The Best Credit Card For You
Something else that Vani would do was to put the money that was allocated for fixed expenses (like Credit Card and utility bills) into short-term Fixed Deposits or liquid funds. This gave her higher interest than she would have got had she left the money lying in her Savings Account.
In addition to this, Vani would religiously put a part of her allowance into investments. She wasn’t entirely comfortable with investing in the stock market and so she put her money into Mutual Funds using the SIP method instead. She knew that she would benefit from rupee cost averaging and that in the long run, the returns from her investments were likely to beat inflation.
Vani could never be accused of letting her money sleep.
Additional Reading: Understanding ‘Systematic Investment Plan’ (SIP)!
Rainy day fund
Being a cautious person, something that Vani insisted on was the creation of an emergency fund. “What if you lose your job?” she said to her husband. “Don’t say things like that,” he glowered at her. Nevertheless, they saved up six months’ worth of his salary and put it into a Fixed Deposit. And this was to be used ONLY in case of an emergency.
Additional Reading: How To Build An Emergency Fund
Finally, Vani did what many homemakers often neglect to do. She created a little corpus for herself to do whatever it was she wanted. Furthermore, just like any person in a professional job, she considered the allowance she got from her husband to be equivalent to a salary. Sometimes, she spent the money from her little fund on frivolous things like a pair of stilettoes that she only wore once. Other times, she’d use the money to invest in the stock market or buy Gold ETFs. The point is, this money was hers, for her to do with as she pleased.
There’s a little bit of Vani in each of us (men included). We all have the ability to plan our finances well. Are we going to make the most of it?
If you need a little help getting started with your investments, we’re right here.