Women empowerment: Achieve financial freedom March 6, 2009 Komal Shah, 23, who is working as a research analyst, walked into my office to plan her finances. She had just started out on her career and was keen to conduct investments which would ensure that she optimised on taxes and attained financial freedom at the age of 40! Her salary stack is as sketched in Table 1: She filled me in with key details mentioned below:
• Single, stayed in a PG paying a rent of Rs 2,000 per month
• Supported parents by sending Rs 4,000 per month
• At the behest of her father, she had availed of an LIC policy for which she paid a premium of Rs 7,500 per annum
• Currently, she managed to save a decent Rs. 8,000 per month (post-expenses) and was now seeking help to prudently invest the same In the pink of health March 6, 2009 'Health' is often an ignored aspect, especially amongst women, with many role changes and added responsibilities; it becomes all the more necessary to take care of your health. Although for working women, companies would take care of health cover to some extent. Given the cost escalation seen in medical expenses it is pertinent to hold a cover over and above such limit. With the current economic scenario and job uncertainty, it becomes inevitable to have adequate health cover. For Komal, it was advised that she avail a health cover for herself and for her parents (given that they were well within the insurable age). Choosing an appropriate health cover is also equally important, with a host of options, there are plans which will offer health cover for their life time. The overall premium recommended was Rs 15,000 per annum including premiums for herself and her parents.

Tax tip: Although for the current financial year, Komal could well manage optimisation of taxes by claiming her exemptions, going forward, based on her salary stack, the premiums paid towards medical cover for oneself is deductible u/s 80D -- a maximum. of Rs 15,000 per annum and one can also claim the premium paid for parents' insurance u/s 80D (Rs 15,000 per annum) -- this is in addition to the limit available for self. Unglamorous cover March 6, 2009 Human Life Value has predominantly been associated with the male member of the family. But things today are changing and how! Women empowerment starts from evaluating your own importance within the family and the society at large. Evaluation of Human Life Value could be a complex affair. The most common way to evaluate your HLV is to estimate the corpus required to meet your household requirement, incase of any eventuality as of today. This corpus should be evaluated after inclusion of inflation and other expenses that you can anticipate in the long term. Post-this, add the corpus required for your key financial goals and outstanding loan liabilities. From this amount reduce your existing cover and your current net worth. The balance amount is the cover required. For Komal Shah, it was relatively a simple affair, since, she was supporting her parents, her financial goal was categorically limited to herself (retirement at this stage), no loan liabilities, her net worth included only her LIC policy. I suggested that she start with a cover of Rs 15 lakh, the premium of which was around Rs 3,600 per annum. Tax tip: The premium paid towards such life cover can be claimed as a deduction u/s 80C which has an overall limit of Rs 1 lakh. Retirement goal March 6, 2009 Komal wanted to achieve financial freedom by the age 40 so she had 17 years to achieve reach her goal.

As a first step, we had to ascertain the corpus she would require to sustain her life style. A lot many things could change over the years, hence, we deduced that against all odds, she would require about Rs 25,000 per month (as on date) to manage her finances keeping in mind her added responsibilities over the years. With an average future inflation rate of 6 per cent, life expectancy of 90 years and discounting rate at 10per cent the corpus required to sustain her post-retirement years would be Rs 1.74 crore. Investment for goal achievement March 6, 2009 Here is a quick look at various returns scenario and investment patterns which could help her build the required corpus target. The term of investment is held constant at 17 years (number of years prior to her retirement).

The required investment can be achieved in two ways with a starting investment of Rs 8,000 per month:
• An average 10 per cent return, with investment increasing by 20 per cent per annum •
An average 12 per cent return with investment increasing by 18 per cent per annum

Note: The increase in investment is assumed on the savings and not income. Given Komal's age and her risk profile, I suggested that 25 per cent of the amount to be invested into debt options and the balance going directly into equity mutual funds and gold funds via a systematic investment plan. The affinity of women towards gold is well known; I recommended that she invest 15 per cent through a SIP into a gold mining fund. Holding gold in physical form was not devoid of risks and charges and hence it was best to hold gold in virtual form through mutual fund / exchange traded fund. Gold also effectively counters equities, since bullion market moves in the opposite direction of equities. For the balance, she could choose to conduct a SIP arrangement across two to three equity funds, thereby ensuring diversification and optimal returns at risk adjusted levels. But always remember that discipline is the key to achieve any goal, financial or otherwise. Here's wishing all the women a Happy Women's Day! Let's usher in women empowerment and financial freedom in the years to come.