International Women's Day: Financial road map to go from debt to wealth

Despite rising literacy, professional exposure, and financial independence, many young women hesitate to take full control of their finances

Ayesha Singhal (name changed), 25, a single working woman from Delhi, invests. On speaking to a financial advisor, however, she realised that there were several flaws in her approach. “I relied on word of mouth instead of conducting my own research before investing,” she says. Singhal invested in stocks and initial public offerings (IPOs) without fully understanding their risks. Her portfolio lacked diversification, and many decisions were emotional rather than strategic. She also placed funds in insurance-cum-investment products, which yielded low returns, provided inadequate insurance, and lacked liquidity.

 

Rivesha Aggarwal, 28, a married working woman from Mumbai, relied entirely on her mother’s suggestions, limiting her investments to traditional “committees” and gold. She did not explore the benefits of systematic investment plans in mutual funds.

 

Lack of involvement

 

Despite rising literacy, professional exposure, and financial independence, many young people, including women, hesitate to take full control of their finances. This leads to delays in investing and missed opportunities.

 

“This hesitation stems from societal expectations, lack of exposure to financial matters growing up, and prioritising family responsibilities over personal wealth building,” says Sapna Narang, managing partner, Capital League. Many women leave financial decisions to the male members of their family.

 

“Learn about investing and equip yourself to handle your money,” says Nehal Mota, cofounder and chief executive officer (CEO), Finnovate.

 

“Ensure you have assets or a portfolio in your name and are consulted. Understand what is happening to your portfolio. Read, ask questions, and prepare as you would for a work meeting or an interview,” says Shweta Jain, certified financial planner and founder, Investography.

  Absence of a financial plan

 

Investing without putting in place a proper financial plan and a clear road map can lead to the risk of losing direction. “First, understand your financial goals. Next, categorise them by size. Then evaluate your investment options,” says Mota.

 

Spend wisely

 

Making expensive purchases of items like shoes and bags, sometimes on credit, believing these to be “investments”, could be financially unwise. Experts attribute such spending to attitudinal issues. “Many young women overspend due to Fomo (fear of missing out), Yolo (you only live once) mentality, and lifestyle inflation,” says Pooja Bhinde, a certified financial planner. She highlights the importance of expense management.

 

Investography’s Jain recommends focusing on wealth-building assets such as stocks, mutual funds, and real estate.

 

Lack of budgeting and saving

 

Many young individuals fail to budget. “This prevents them from tracking expenses, planning for long-term goals, and making informed financial decisions,” says Narang. Impulsive spending often leads to inadequate savings, leaving them vulnerable during emergencies and retirement.

 

“Follow the 50-30-20 rule: allocate 50 per cent to necessities, 30 per cent to discretionary spending, and 20 per cent to savings. Gradually increase savings to 30 per cent, and reduce discretionary spending to 20 per cent,” says Bhinde. She recommends maintaining an Excel sheet or diary to track cash flow, liabilities, assets, and investments.

 

Lack of an emergency fund

 

An emergency fund prevents financial stress and anxiety. “Build an emergency fund covering 6-9 months of essential expenses,” says Bhinde.

 

It is crucial to allocate money into different buckets based on horizons: emergencies, intermediate goals (car purchase, house down payment), and long-term goals (children’s education, retirement).

 

Inadequate insurance

 

Working women have economic value and must buy term insurance if they have financial dependants or obligations. Experts recommend coverage of at least 10 times their annual income.

 

Health insurance is equally vital. Without it, a medical emergency could wipe out savings. “Buy comprehensive health insurance covering medical expenses, critical illnesses, and maternity. Also buy accident and disability cover,” says Bhinde.

 

Investing: Avoid risk extremes

 

Avoid investing in unfamiliar or excessively risky assets. “Investing in high-risk options like direct stocks, futures & options, or cryptocurrencies without proper knowledge can lead to losses,” says Bhinde. Instead, one should build a diversified portfolio with equity, debt, and gold, and maintain an asset allocation that matches one’s risk profile.

 

“Focus on risk-adjusted returns. Wealth creation depends on how much you save each month, consistency of returns, and investing in the right asset classes,” says Mota.

 

Conversely, women should not rely solely on safe but low-yield fixed-income products. “Explore investment options such as mutual funds, index funds, or retirement plans rather than avoiding risk entirely,” says Narang.

 

Those unsure about investing must seek guidance from a financial advisor.

 

GET SAVVY ABOUT DEBT

 

·         Follow the 50-30-20 rule: Allocate 50% to necessities, 30% to discretionary spending, and 20% to savings

 

·         Distinguish between good loans (taken for asset building, business growth, or education) and bad loans (for personal consumption)

 

·         Focus on paying off high-interest debt first

 

·         Maintain credit card usage at 30% of the total limit to maintain a good credit score