scorecardresearchLearning to ace investing and numbers is a cakewalk. Follow these steps

Learning to ace investing and numbers is a cakewalk. Follow these steps

Updated: 13 May 2023, 11:15 AM IST
TL;DR.

Rather than shying away from financial matters, women should learn the basics of risk and return in financial securities and match their goals and values with the most appropriate solution.

Investments do not begin with trying to understand the features of a financial product, rather it really starts with defining your life’s values and how you want to achieve that.

Investments do not begin with trying to understand the features of a financial product, rather it really starts with defining your life’s values and how you want to achieve that.

When dinner party conversations veer around to money, be rest assured that many from the fairer sex will allude to their inability in understanding investments and numbers, while their male counterparts will go on to discuss the latest stock market happenings.

As personal as money is, we simply don’t like to talk about its role in our lives. Today, it’s commonplace to find both men and women in a family, working and earning as equals and yet, both genders believe that women are ill-equipped to make investment decisions and that most men can do this task all on their own.

Both these beliefs can be very limiting, thus, not allowing the person to make efficient money choices which in turn let them achieve their life’s aspirations. The belief that ‘I’m not good with numbers’ is particularly dangerous because while you work hard to earn your money, the responsibility to make your money work hard for you, is shifted onto another’s shoulder.

Why does one feel unsure with numbers?

While women have started to show up in larger numbers in the workforce and many are seen in senior positions, there is an underlined confidence when it comes to owning decisions around their personal money. In double income families, it is not unusual to find that the wife’s salary is used for household expenses while the husband invests out of his salary.

Could it be that women only understand money and numbers when it comes to budgeting and spending and not investing? Understanding investments, risk, time horizon and value is not rocket science. The mistake is in starting directly with complex numbers. Investments do not begin with trying to understand the features of a financial product, rather it really starts with defining your life’s values and how you want to achieve that. You may need help to articulate that, but understand that it’s not about the numbers to begin with.

Sometimes women shy away from financial matters because they already have a lot on their plate. Being the primary caregiver, home manager and in many cases office manager too, is a lot of responsibility. Plus, these are all highly demanding and emotional roles. After all this, it’s easier just to pass on the personal finance responsibility to your spouse or father.

How can you overcome this?

Firstly, numbers can be learnt and understood. To say that you don’t understand numbers because you’ve never been taught them, outside of the academic chapters of mathematics in school, is a bit like saying that you don’t understand food, fitness and family.

No one is born with all the skills; you have to learn

We learn how to cook a meal for ourselves and feed ourselves, we learn how to be a professional in our line of work, we learn how to become social beings with friends and family. Some of us are better at one aspect of life than others and vice versa. Nevertheless, we do all of these things because we allow ourselves to learn. We absorb learnings from what we see around us and wherever needed we take on formal or informal training.

With personal financial matters you may not have role models as money is not a topic talked about openly, but you can train yourself by seeking out the right information or seeking help from an advisor or a coach.

Understanding numbers is not about becoming a financial wizard, rather it is about knowing what you seek most from life, regardless of how much money you have; then knowing the basics of risk and return in financial securities and matching your needs with the most appropriate solution. If you can understand how to earn money, negotiate salary, spend judiciously and take advantage of all the discounts on offer then, there is no reason why you can’t understand numbers around investments.

A process you can follow

It’s human nature to not ask questions from friends and family about things we are vulnerable about, hence, seeking outside help from qualified professionals when it comes to understanding money and investments is a good idea. This is actually the first step. At this stage you are simply seeking help to understand the nuances of personal finance, not product advice or someone who will sell a financial product to you.

The next step is to then match this knowledge with what you identify as your life’s values and your highest aspirations. Define the risk you are willing to take with your money, the suitable time horizon and the monetary value of your financial choices, within this umbrella of your goals and values.

Once this is done, you will understand better which assets you need to invest in. Then you can start to pick and choose financial products. Any product that does not fit the risk profile, time horizon, flexibility needs and so on, need not be included in your portfolio. The last step is to automate regular investments and review your plan at a frequency you are comfortable with.

When we start with financial products as step one rather than the last step, the outcomes can be confusing because you have not defined what you are seeking from your money.

Set up the process, follow it and keep it simple. Dig a little, find your joy and fit in the numbers.

Lisa Pallavi Barbora is a financial coach and founder of moneypuzzle.in
 

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First Published: 13 May 2023, 11:15 AM IST