Women and money - that's what we will cover on the show today. It is something really close to our hearts. Why? Because it horrifies us to see the financial illiteracy amongst some of the most educated and intelligent women we interact with on a daily basis.
And we find that women put everything around them ahead of their own needs - kids, family, friends. While that's quite okay, but when they shove money matters on the backseat, that's detrimental to their own health.
Forget about understanding the nuts and bolts of different investments, we find so many women totally clueless even about the basics of money matters. What are your savings? Where are these savings going? In uncertain times, how long can the family survive? Do you have enough contingency funds? Questions every woman should be seeking answers to, but simply does not, because it’s someone else’s job. While they are busy taking care of just about everything else. So the big question we are asking today : Women : Do you know where your money is going?
But first, did you know that women need to take extra care of their financial lives because they have special circumstances? Firstly, we live longer than men and secondly we take career breaks for marriage, child birth, taking care of older people in the family.
Each work break causes a disruption in current income of course, but more insidiously harms the retirement corpus by PF disruption and withdrawal. Getting back to work after a break usually results in lower salary levels.
And not to forget, non-working women specially suffer due to divorce and widowhood. The rates of the former are rising and since women outlive men, the chances of living alone without the financially savvy partner are higher. And do you really want to learn the nut bolts of your money at 65? Do it NOW!
Why do we need to be in control of our money?
#We're getting married later than ever
# We live alone, out of choice
# We take career breaks for marriage, childbirth, parent care
# We could become income-less after separation and widowhood
# We need larger retirement funds, since we outlive men
Let’s start with - Single women. As a single woman you have some special financial needs, specially if you live alone. For one, an emergency. A friend may come over to help you physically, but financially there is no cushion of a life partner. So the need to have a ready to use nest of cash is critical. We're saying, you must keep at least 6-8 months of monthly expenses in a liquid fund or a band fixed deposit. Medical, car and home insurance become essential must-buys for precisely this reason - there is no ready cushion at home. What you definitely don’t need, especially if there is no one dependent on you, like your parents - an insurance policy or even a ULIP or Unit linked insurance policy which clubs investment with insurance Of course all of us have to save for a comfortable retirement. But remember, if you're doing it all by yourself you need to start even earlier and not believe you can splurge it all on clothes and shopping. And last but not the least, if you are closer to 50's and 60s ensure you have a will.
A quick look at all that you need:
# Ensure a larger emergency fund
# Buy your personal mediclaim
# Ensure car, household are insured
# Single women with no dependants -Don't buy life insurance
# Aggressively build a retirement fund
# Make your will
Next we take the case of married working women.
I knew a woman some years back who had a horror story to share. After 4 years of marriage the husband suddenly asked for a divorce citing incompatibility. Of course, there was another woman. But worse, when the friend got over the emotional shock, she realised that she had been taken for a financial ride as well. While she spent her salary on running the house and current expenses, smart spouse build assets - financial and real estate. At the time of divorce, she had nothing in her asset box and he walked with four years of assets.
You know why that happened? The law in India does not recognise community of assets in a marriage - this means that the asset belongs to he who pays for it. So suppose you take a break to bring up the kids or look after the older people, your economic contribution to the marriage is not recognised as 50:50.
But there are simple steps you can take that does not endanger the trust in a marriage, yet makes you a more active participant. They are:
# Living expenses: Split the monthly living bill with spouse. You can have a common pool of money in a joint account that both credit with a pre-decided amount. And both will draw on it to fund groceries, rent, EMI and other expenses.
# Investments in joint names. it is a joint decision, even if you have no view on the asset being bought, you must ensure that it is in joint name and that you know the co-ordinates of the agent/broker.
# Nominee: You must ensure that you are the nominee in the investments and insurance policies. And you should do the same for the husband.
# Location of papers: Last, but not less important, please find out where the papers, account statements, policy documents, agent details, bank account details, locker keys are kept and have access to it.
I am not being unduly paranoid, but these small steps will prevent an emotional loss from becoming a double whammy when it rides a financial disaster as well
Money Mantras For Working Married Women
# Split house running expenses with husband
# Ensure property is bought in joint name
# Be pro-active in investment decisions
# Ensure you are the nominee in all financial investments
# Must know where YOUR money is being invested
# Must know where all papers are kept
It is perhaps a very personal observation, but amongst the women I've interacted with, I find the homemakers the least clued on to investments. They run their homes and house budgets beautifully, BUT when it comes to putting away the well saved money, they end up signing just about any investment form their spouse asks them to. Non-working home makers have to absolutely ensure they and their children are financially secure.
Find out today the details of your partners earnings or income. What are the various sources of income and what comes in hand. Also understand how much debt your spouse has taken for business or property? If salaried, your husband's EPF is a big saving kept aside and sometimes in job changes EPFs are not consolidated. Ensure you ask your husband to get all previous employment EPF's transferred to open account.
You must absolutely know where savings are invested and how much these add up to. Do a once in six month update with your husband. Ensure at least half the savings are in your name and in the other half you are the nominee. Assets of course have to be in join name and insurance has to be enough to take care of you and the kids in case of a mishap.
Money mantras for House Wives
# Know income details of husband
# Ensure husband consolidates EPF
# Know where savings are invested
# Ensure at least half the savings are in your name
# Buy assets like house in joint names
# Ensure you are insured adequately & you are the beneficiary
# Know where the insurance policy documents are kept
Non-earning married women have a secret weapon they can use to ensure that the life insurance proceeds come their way and are not either assigned to somebody else or taken over by other relatives who may be in control of the household finances.
A pure term insurance policy can be secured against creditors by getting the policy on the husband issued under the Married Women Property Act. The aim of this is to secure the wife and kids against claims on the insurance corpus in case of debts that the husband leaves behind. You need to fill a separate form at the time of taking the policy and this Act cannot be invoked after the policy is bought. This is of special significance to entrepreneurs who fear leaving their wife and kids under debt in case of an untimely death.
So we looked out for financial products for women and we found very few that we can talk about. First, three women-only credit cards:
# Citibank Women's Visa Mini Card - lifetime free
# Citibank Women's Card - lifetime free
# HDFC Women's Gold Card - 2,000 joining fee and 500 annual
Most of the features are available on regular cards as well.
We recommend a pure term policy for life cover for women, same as men and a plain vanilla mediclaim. But there are expenses like pregnancy and women specific diseases like breast cancer that are now seeing polices and riders to take care of these expenses. The market is still nascent and I would wait before I buy. Some plans in the market are:
# LIC Jeevan Bharti - Its a money back policy with a critical illness rider
# Bajaj Allianz has two riders on its New Unit Gain Plus Ulip
# Birla SunLife has a women health rider on its Supreme Life Ulip
There is little in terms of value that these riders add today. We'll have to wait for some better products in the women insurance space.
If you have a girl child ready to study ahead, there are education loans that are cheaper by 1 full percentage point.
Most PSU banks do give a 0.5 to 1 percentage point discount, and we find that Bank of Baroda has specific products for foreign education for girls and for professional education.
Last week, we updated you on 4 stocks we had culled out for long term buys. Two more set of numbers are out and this is how the stocks stack up after the December quarter results.
Consumer and lifestyle company Titan reported a mixed set for Quarter 3. While revenue growth has been of 28 per cent, the company's total income has now crossed the Rs.1000 crore mark. Net profits have declined by an almost 62 per cent. We are not terribly worried about this fall in profits. It is on account of a reduction in the discount rate for actuarial valuation of gratuity and leave salary. These are more accounting changes than the company's income from operations falling hugely.
We had earlier recommended Titan because we liked its strong brand positioning and its portfolio of watches, jewellery and eye wear. A closer look tells us, while watches’ sales have been impacted in December quarter, both jewellery and eye wear continue to grow well. Excluding that we also liked Titan for the company's ability to improve its margin for six consecutive quarters. If you look at this quarter, other than the one time loss, EBITDA margins have also improved by 70 basis point but the dip in profits have impacted the stock price.
We recommended the stock at 930. It is currently at 780.
We expect the slowing consumer demand to impact Titan's profitability growth for the next 3-4 quarters but we still like it given its strong balance sheet and high Return on equity. So hold for long term and if it not in your portfolio we think you can buy a small lot. But avoid a big exposure to the stock.
Next, Indraprastha Gas. The stock I liked some months back has almost come to my door step. The road is being dug for the gas pipeline that will bring piped gas to my doorstep. I believe it is cheaper, cleaner and no waiting for the roll of the unwieldy gas cylinder anymore!
Looking at the numbers on a quarter-on-quarter basis, though the turnover is up 20 per cent,
profits are down by 15 per cent and the raw material bill went up 47 per cent.
But it is as if the market is shrugging off this short term blip to look at this company's long term prospects. We had recommended the stock at Rs104 and now it is around Rs107.
We have a strong buy on the stock for both medium and long term; the reasons are:
# The company now has a 3 year marketing monopoly in the NCR region for city gas distribution. So it is like the Buffett toll bridge that he was so fond of.
# The railways are planning to convert 200 diesel run locomotives to CNG, and the supplier - I P Gas
# And the ultimate sweetener, the dividend payout has ranged between 20 to 40 per cent each year, with the last dividend at 40 per cent. At current price, this is a yield of almost 4 per cent. That’s a tax free 4 per cent return in addition to long term wealth creation.
# Net sales / Income from operations 21,944.59 vs 18,273.20
# Net profit after tax (9-10) 3,829.75 vs 4,502.02
# Consumption of raw materials 11,478.58 vs 7,804.09
# EPS is at 2.74 vs 3.22
# We recommended the stock at Rs104 ; it is now at Rs107
And now, it is time for the new product update this week.Two zero risk new products from the RBI owned National Housing Bank. Both schemes has been rated FAAA by CRISIL and tAAA by Fitch indicating highest safety with regard to timely payment of financial obligations. Bonds open till June.
NHB SUNIDHI Term Deposit Scheme
Minimum deposit : Rs 50,000
Term and interest for 1 and 2 years: 9.25 per cent
Term and interest for 3 and 5 years: 9.00 per cent
Interest is taxable and both periodic income and interest reinvestment options are there.
Inflation will be at 2-3 per cent, lock in now for your debt basket. We prefer this over bank deposits for the gilt edged security NHB offers.
BUY
NHB SUVRIDDHI (Tax Saving) Term Deposit Scheme
Comes under 80 C umbrella
Minimum deposit : Rs 10,000
Maximum deposit: Rs 1 lakh
Lock in: 5 years
Interest: 8.75 per cent
Compounded quarterly
DON'T BUY
PPF and PF are better options since interest is taxable in these bonds
That brings us to the end of this show. A lot of what we covered today on our key topic, women and money is pure simple common sense. Things we all know we have to take control of, but keep putting off. Simply because everything else takes priority. Do remember this, there is not a better way of taking care of the people you love than ensuring they are financially secure. So from Mutual funds to making a will, start learning the basics rightaway. And we're here always to answer any of your questions. Thank you and good bye!