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How To Streamline Your Finances as a Working Mom

For working mothers, it is a challenge to juggle multiple roles at home and work. Their financial planning needs are unique. Financial planning for 40-year-olds can be tricky because women need to manage regular expenses of their family, and also plan for goals like their children’s education and retirement.

Mar 2023

8 mins read

Here is how you can streamline your finances as a working mom.

Build an emergency fund:

Emergencies do not come with any prior warning; hence it is important to have an emergency fund in place. How much money should you have in your emergency fund? It is recommended that you have an emergency fund equal to at least six to twelve months of your monthly expenses.

When it comes to where to save for an emergency fund, it is recommended that you park your emergency funds in short term liquid funds as these can be redeemed quickly and can also give higher returns than savings accounts. If you do not yet have an emergency fund, it would be practical to allocate your resources to building one as soon as possible. While you can set aside a certain portion of your income, you can also divert a windfall like a bonus towards your emergency fund. Remember, such a fund is to be used only in emergencies and not otherwise.

Have a budget in place:

As a working mom, it is a challenge to manage household expenses and provide adequately for your family. Also, it is important to know how to manage your expenses and save more. Hence, it is important to have a budget.

Start with listing down all your income and expenses. After factoring all your expenses, which include regular expenses, EMIs and insurance premiums, you need to have a surplus which you can invest. You can use a diary or an excel sheet to list down your expenses. You can also use an app to manage the household expenses. If you are overshooting your budget, you need to see how to reduce living expenses. While it is not possible to cut down much on your regular expenses, you can always trim your lifestyle expenses, if required.

Get adequate insurance:

Covering your risks is among the most important personal finance habits. First it is important to know about life insurance and its benefits. If you are a working mom and have dependants like children and aging parents and in laws, life insurance is crucial. In the event of your untimely demise, the insurance company will make a pay-out to your beneficiaries. You may consider looking for a term insurance plan equal to six to ten times your annual income.

With rising medical costs, it is also important to have adequate health insurance for family. If you are living in a metro city, it is recommended that you have an extra family floater plan of a coverage that suits your financial needs. It is important for either of the spouses to buy a health insurance plan for the family, even if you are covered by employee insurance. You can buy both life and health insurance online after comparing different plans offered by various insurers.

Smart goals financial planning:

You are right now in a stage of life, where some of your life’s major goals are drawing near. It is important to list down your goals clearly and plan for them. If you have already bought a house, some of your short-term goals could include planning a vacation or upgrading your car. Longer term goals would include your child’s higher education which could be a few years away and your retirement, which would be less than 20 years away. Consult a professional financial advisor to get help with personal finances and review your financial goals accordingly.

Focus on child’s education:

Providing the best future to your children is no doubt a top priority. If your child’s higher education is more than seven years away, you could invest a significant portion in equity mutual funds for this type of goal. Investing in equity mutual funds over a longer time period can potentially provide returns that can beat inflation. However, do consider the risk level of these as well as market fluctuations.

If your child’s higher education goal is less than five years away, you may shift your investments to fixed income instruments like fixed deposits and debt mutual funds. These offer a lower rate of returns but have the potential to offer comparatively stable returns. As your child’s higher education goal nears, it is also important to ensure that you invest in liquid assets, so that you can take out the money when required. If you plan well, you will not need to dip into your retirement savings to fund your child’s education.

Investment planning for retirement:

Finally, you have to review your retirement plan with your spouse and see that it is on track. With an increase in life expectancy, it is important to have robust investment planning strategies so that you can lead a comfortable life in your golden years.

With time on your side, you can still continue systematic investment plans (SIP) in equity mutual funds. As mentioned earlier, returns from investing in equity mutual funds can possibly help you beat inflation and build the desired requirement corpus. It is advised that you stay invested longer and hold on to your investments to reap the benefits of equity mutual funds, while being aware of its relatively higher level of risk.

With proper planning and disciplined investments, you can secure your future and that of your loved ones.

Disclaimer: Mutual fund investments are subject to market risks, read all scheme-related documents carefully.

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