We were out last week with a large group of women travellers. It was a fun trip filled with great stories from the lives of our co-travellers, recounted with great glee. The average age of the group was 65 years. It is amazing how things have changed for these women.
Many of them had worked all their lives and were now enjoying retirement on their own terms. The best stories were told by the widowed women, many of whom said they felt free finally. Such a sad commentary on how they pledged their lives to their men and family, sacrificing many joys. In the not too distant past, these women would have been banished to the background. Not anymore.
These women were spending on clothes and accessories, enjoying their outings and holidays, and laughing and having a good time. It was a joy to find that attitudes about life and more importantly their sense of self-esteem had changed dramatically. Each evening we had conversations about something, led by one of us: children, in-laws, husband, work, men, and food. Here is what I discussed when it was my turn to speak about money.
First, it is wonderful to enjoy financial independence. Do not shortchange that idea of money that you can call your own and allocate to whatever you wish, for anything at all. If you are employed, set a corpus up for yourself; if not, ensure that a portion of the family’s income is invested in your name, for your use. Not all us have the benefit of pension income, but we must have money that is ours to use. Ask for it by all means.
Second, assets serve a limited purpose. Do not overdo assets like real estate, gold, silver and such stuff. Many of these end up being hoards of wealth that are kept locked or used in a limited manner. Once, when girls had to be given their share of the family wealth, they were sent away with gold and jewels to the husband’s home; and to a woman who could not access her husband’s family wealth directly, the streedhan was her security. Today’s women have their education and jobs to secure them. They don’t need gold. Not beyond its ornamental value.
Third, do not obsess about passing wealth over to your children. We live in times of obsessive parenting. Sometimes, our guilt about being working mothers leads to needless generosity with kids using the money we earned. By all means support your children and enable their growth if you so wish, even after you have provided for their well-being and education. But draw the line at some point, when your kids have begun to earn money. They will do much better when they have to fend for themselves.
Fourth, there is nothing complex about investing and finance. Money left idle loses value, while money deployed to work earns an income or grows in value, or both. Every investment option can be understood in terms of where the money is deployed, and what happens to it. Return is what you get by allowing others to use your money; risk is the quality of that promise to give you something for using your money. Ensure that your money is put to use by scrupulous institutions whose promises are valuable. Don’t hand it over to your streetside broker and hope that trading on the screen will magically grow it.
Fifth, do not part with your wealth too easily and too early. One of the women told us the story of how her PF proceeds were used by her brothers to set up businesses that failed. She was lucky enough to inherit the wealth her husband left behind. But her warning that money in the hands of an elder attracts many in the near and extended family evoked resonance. Many dismiss the needs of senior citizens, and generalise they don’t need much money. Whatever is yours should be in your control, so you can decide how to spend, save, and give it away at a time that you deem appropriate.
Sixth, do not assume that all the wealth you have should be hoarded and kept in a place you deem safe, until you are alive. Money as we just learnt, has many uses and there are many institutions who will use your money for their business and pay you for doing so. Only a portion of your wealth might be needed for your routine everyday activity and annual spending. The rest must be invested efficiently to earn an income or grow in value. What you do not need immediately should be allowed to appreciate. Allocate your wealth between growth and income, based on what you have and what you need. Do not allow fear and misinformation to guide your investment decisions.
Seventh, do not provide information about and access to your money to others, however close you deem them to be. Many in the group had “delegated” money management to their children, spouse, financial adviser, or a relative. As long as they got money when they needed it, they did not care much about what was there and how it was being held. This is a lazy, indiscreet and callous attitude towards money. Learn to manage your money and take charge. Secure your bank account, learn Net banking, make those trips to the ATM yourself, and check your accounts from time to time. It takes a few minutes, but places you in complete control.
Eighth, keep the paperwork in order. Pay your taxes and file your returns. Ensure that nominations are completed and in order for all your wealth and investments. Consolidate and hold fewer investments so that acting on them is easier. Close accounts that are not in use or have matured.
We did a quick round of polling that evening, converting these eight pointers into questions, and seeking yes or no as answers from the group. Sadly, our fun loving women scored too low, the average score for yes being three out of eight. It is wonderful to enjoy the powers of money as a currency for fun; it is equally important to acquire a strategic orientation to personal finance.