Being a mother and entrepreneur together will leave you will little or no time to manage your finances. However, money management is an important part of lives and women generally have the tendency to avoid it or pass it on to a male member.
But to be truly independent, women don’t just need a reliable financial source but also need to upgrade their financial management game.
So, this mother’s day, we share four tips that mompreneurs could keep in mind while investing their money:
Between building your business and managing your home, never ever merge your household and office’s finance.
Priti Rathi Gupta, Founder of LXME and MD of Anand Rathi suggest shepreneurs to keep a Chinese wall between personal and business finance as it is never a good idea to blur the lines between personal and business finance.
She advises women to understand that a business is a separate entity and should not be treated as the extension of one’s personality as differentiating between both offers several tangible advantages such as tax benefits as well as the ability to shield one’s personal assets.
“If one is building a business for a long term, then the finance of the business needs to be in order. If one is considering bringing on board a strategic investor or a stakeholder in the future, then the financial transaction of the company has to be clean. If a business owner ends up taking loans multiple times from her business or keeps using company money for personal expenses, then the prospective collaborator might lose confidence,” she says.
Be it on the personal front or business, none of us can foresee the ups and downs of the future, however, we can prepare for it. Hence, shepreneurs can look at setting up an emergency fund.
Vijay Kuppa, Co-Founder of Orowealth, ideally, an emergency corpus that can cater to the next 6 months of household expenses and EMIs are advisable. Thus if the monthly expenses plus EMI amount to INR 50,000, it is advisable to have an emergency corpus of INR 3 lac at any point of time.
“This not only provides some level of financial security but also helps to manage the emotions if something uncertain is encountered. Park the amount in liquid funds for better liquidity and lower impact cost,” he advised.
Preparations for the Retirement fund
Apart from looking at building an emergency fund, entrepreneurs should also consider setting up a retirement fund which products like insurance, pension schemes or even stocks.
Gupta says investing consistently across stocks and mutual funds, the prospective business owner can begin building a substantial retirement corpus.
“The practice of investing regularly slowly becomes a habit over a period of time. Therefore whenever this individual begins a business, she will continue to invest in her retirement corpus which would stand her in good stead during her senior years irrespective of how the business performs,” he noted.
Diversify Your Basket
Additionally, while investing, ladies mark your goal and allocate according to it. More importantly, diversify your portfolio.
Giving an example, Kuppa says equity as an asset class though can generate higher wealth, is not ideal to plan for a loan repayment scheduled in next 8 months. Thus identifying goals and looking at the volatility of the portfolio aligned to that goal is important. Also once you move closer to the target date, it is advisable to move into less risky assets and stress more on capital protection.
Lastly, he suggests investors review their portfolio at least half yearly and rebalance to the ongoing situations.
“It is advisable to diversify across asset class and products and look into traditional safe instruments and also modern high yielding investment avenues to provide growth as well as relatively lower risk. Also take the help of an advisor, wherever needed,” he pointed out.