Save Smart. Plan for a mid-career break

Many women go on a mid-career break for several reasons; one can be to start a family. Often, people think that once a woman stops working, she can’t get back to work. But many companies are looking to hire women employees.

Even if they plan to resume work soon, it is important for them to plan their finances in case you opt for a mid-career break.

Start saving early As a first step, you should discuss your family expenses with your husband, keeping in mind the sources of income. You should also discuss financial goals as that will help in deciding the asset allocation.

If you are expecting a child, it is important that you plan and invest for the child’s future too. It is also advisable to invest in debt instruments for short term goals (such as food, toys, medicine, etc.); equity instruments may be the ideal investment tool for long-term goals, such as education and marriage.

One should ensure adequate savings for the child’s long-term goals — education and marriage. The earlier you start, the larger the corpus you can save, thanks to the power of compounding. If you start saving early, the investment avenues available to choose from may be more.

Insurance plans Besides investment, you also need to ensure adequate risk cover. This needs to be done on an ongoing basis. You should regularly check the quantum of cover and estimate your current and future needs — be it vehicle, home, life or medical insurance — and, accordingly, revise your sum insured. It is advisable to go in for term plans early on in life as the premiums will be lower, giving the maximum life cover for the minimum premium. Family floater plans will be ideal for health covers.

It is imperative to have an emergency account and keep at least three to six months’ income in a savings account. This should be used only in times of emergency.

One can use this as a fallback option, in the event of any unforeseen situation that may result in loss of monthly income.

It is advisable to invest on a monthly basis (through a systematic investment plan/systematic transfer plan), as this will give one the double benefit of regular investment and compounding as well as save the hassle of timing the market.

Ideally, one should automate this process to avoid any last minute delays in investing. Automating the investment process by a direct ECS transfer to a mutual fund/recurring deposit will not only help you meet life goals but also help you keep a tab on your budget by averting impulsive purchases.

The writer is CEO & Founder, Right Horizons

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