Are Women Really Independent To Make Their Financial Decisions?

Financial independence by textbook definitions, is a status of having sufficient income or wealth to pay off the living expenses for the rest of the life without having to be employed or dependent on others. However, it means different things for different people, and for a lot of Indian women financial independence is a concept that seems to be far from their reach.

So while many attain financial freedom in a form where they wouldn't have to work at a job solely for the money, women are either not given the space to earn and manage their own money or, at many times, are unaware of the financial instruments at their disposal.

In recent times, there has been a noticeable increase in women's participation in the workforce. A lot of women have been able to break through the glass ceilings and establish themselves in positions that demand equally competitive pay, but a good ratio among them is still within the shackles of gender pay parity. Apart from these, the societal idea of women having to bear the primary burden of domestic responsibilities have exerted tremendous pressure on women who aspire to come forth in many professional spaces.

Recent Studies Explore Barricades For Women's Participation In Economy

A report published by the Hindustan Times in 2021 quoted the study 'The Financial Agency of Women' conducted by the Gates Foundation, which found that many Indian women depend on their families when they need money. It had understood finances as a domain that men mainly dominated as the society didn't associate women with roles that required earning bread. Thereby, their rights to make financial decisions were somewhat limited.

Following this, a survey published by the State Bank of India this year found that being financially independent fell among the top three priorities for Indian women. Among these, about three in ten women found the cost of living as a major challenge toward achieving financial independence, and one in four women believe social/familial restrictions or lack of guidance from home as the key player towards them remaining financially dependent on external factors.

The survey was conducted with a sample size of 1,000 women aged between 25-45 from cities of tier-I and -II cities across India. It actively attempted to understand how women perceived financial independence and what barricaded them from reaching this goal. Most of them indicated that they do not earn enough to save and deem themselves financially independent.

Unequal pay then comes into play, where the remunerations offered to men and women vary greatly. In India, as the gender ratio nears to an equal, men earn 82 per cent of the labour income, whereas women make barely 18 per cent of it, according to the global earnings presented in the World Inequality Report 2022.

Several data highlighted that the issue has prevalently existed within many sectors but had worsened post-pandemic. During this phase, the work-life balance challenge posed a visible problem. Despite corporate offices providing the options of work-from-home, it turned out to be a growing burden among women in particular.

The International Labour Organisation had deduced that in the organised sector, the pay would be consistent, but the pay gap would be visible in forms of negotiations, the number of women who qualify for promotions with higher pay packages, and so on. The corporate sectors had a considerably viable option for the women workforce in the short-term, but those employed in the unorganised sector were hit the hardest. In South Asia alone, the pandemic induced economic insecurity dragged down 740 million women working in the informal sector and witnessed their income drop by 60 per cent just within the first month of the pandemic.

Low incomes during the pandemic had hit the majority of the population. However, Indian women's restricted access to land, assets, or other financial capital made it harder for them to bounce back from the crisis and took them twice the time to re-establish their financial stability. Some also spiralled into economic turbulence by growing dependent on loans to resolve their debts.

Bringing A Change In The Narrative

A report by the Economic Times stated how having women participate in the workforce benefits the nation as a whole. Supporting this idea further was the statement by International Monetary Fund's chief Christine Lagarde, "India's GDP can expand by a whopping 27 % if the number of female workers increases to the same level as that of men".

With greater dissemination of information, many more women are beginning to identify the necessity of being financially independent. They have begun associating financial independence with an overall aspect of autonomy where they get to lead their life on their terms.

A report by News18 listed the many benefits that played out as game changers in switching to a financially independent way of living,

1) The spending capacity of the family elevates with the financially independent woman being able to contribute to the family. It goes without saying that two people's income would keep the income stable even in the face of inflation, unlike having a sole breadwinner in the family.

2) Women grew a sense of self-respect when they did not have to depend on anyone else for their expenses.

3) Many financially independent women can walk off from scenarios that exploit them. It could be an unfair work environment, or even an abusive household, a financially secure woman has the backup of stepping out of these situations. Women tend to stay in spaces harmful to them, as they may not be able to afford or stand on their own feet when they are taken away from this environment. In a country where more than 70% of women have reported some form of domestic violence, financial independence provides them with an option worth considering.

4) Better decision-making for oneself and those around them. Financial independence, boosts self-confidence and would help in making relevant and significant decisions.

Moving Toward Financial Independence

Moving toward financial independence does not involve just securing high pay, but also being aware of the many available financial tools. It is necessary that one familiarises themself with these tools and utilises the benefits they provide effectively.

This could start from simply saving a portion of the income to establishing a prudent tax planning structure.

Start with paying yourself first. Paying yourself is a popularised idea in personal finances to route a specified amount from each paycheck to savings. This habit of maintaining some amount as savings, would help one stay financially fit and healthy.

This can then be upgraded in the form of investments after gaining a thorough knowledge of the matter. Thoughtful and regular investments can pose long-term benefits. However, it can also backfire if done cluelessly without analysing the risk profiles, financial situation, investment objectives, investment time horizon and so on. Pay heed to all these aspects and the concept would grow on the individual and their bank accounts gradually.

One idea that is consistently propagated in terms of financial independence is to have optimal insurance coverage. Apart from saving and investing, ensure you are insured, by both means of life and health. Healthcare is growingly expensive, and insuring oneself would save them from an attack from simply viewing the medical bills. Similarly, it's safe to secure an adequate amount in terms of Emergency Fund.

Aside from all this, paying the government in the form of taxes should also be planned out prudently. There is more to Section 80C in the tax saving and Income Tax Act, 1961, so consult an appropriate tax consultant if necessary and ensure that tax returns are filed accordingly.

Also Read: Gender Pay Gap: Women In Health Sector Earn 24% Less Than Men, Finds Report