When Padma Ramarathnam was 54-years old, she was dealt a severe blow.
Her husband suffered a paralytic stroke just a few months before he was to retire. From contemplating a laid-back retired life with her partner and friend of decades, she was rudely shoved into the role of a caregiver.
Compounding that turn of events was the fact that she was forced to now take charge of the finances, something he had looked after all their married life.
She presumed that at the end of a lifetime of working in a public sector company, they would have sufficient investments to take care of a modest post-retirement lifestyle. When the final cheque was handed to her, the assumptions disappeared by the wayside.
They had taken a loan on his Provident Fund to purchase a two-bedroom apartment Bangalore. The balance amount would rapidly disappear if she did not take charge instantly.
Padma did not crumble under the pressure. She always had a stoical, "stomp-on-move-forward-regardless" approach to life. So she began by logically answering a few questions.
Q1:What do I want the money to do for me? She arrived at just one single goal. She wanted to be financially independent and not ask her child for monetary support. So she needed regular inflows to run the house.
Q2: What must I avoid? She was keenly aware of her lack of knowledge and people losing money in the stock market. So she steered clear of stock tips. And even equity mutual funds. She did not understand how chit funds were run, so kept her distance.
Q3: Where can I invest? This was in the mid-1990s when government undertakings were issuing bonds to the public at around 15% per annum. And, non-banking financial companies, or NBFCs, were passing on huge commissions to investors who invested in their debt instruments.
She started investing in these bonds, and created a cardinal rule for herself - that she would never touch the principle, and would reinvest as much of the interest as she could. She was able to gradually increase the principle.
When interest rates began to dip, she knew she would have to look elsewhere to ensure that the capital doesn’t get depleted. By now she was much more confident. So she began to invest in mutual funds.
She scheduled her investments to ensure that her cash flow comes from a Systematic Withdrawal Plan (SWP), dividends or interest payments. These inflows enable her to manage her daily expenses. She even manages short holidays with friends and pampers her grandchildren. Larger purchases and expenses are put off till an investment matures.
Her advice for women in her very own words can be summed up as 5 DON'Ts.
DON'T assume that good times are a given
The best time to educate yourself is when the going is good. I sometimes regret that I wasn't this financially aware while we had a regular monthly income. I could have done so much more. Now, I even have an emergency fund in case I require it for a sudden medical expense. That way, I do not have to touch my investments.
DON'T minimize your role as a wife
Don’t assume that finances are only your husband’s problem. It is a partnership. You both are in the marriage together. Even if the woman is just the home maker and the husband is the breadwinner, the fact of the matter is that money decisions affect everyone in the house. Take an interest. Question. Do your research. Offer solutions. Discuss.
DON'T minimize your role as a woman
Society is always feeding us a narrative. You don’t have the mind for finances. You are too young. You are too old. Who is to make that decision for you? Why must age be a barrier? Why must gender be a barrier? Start now, whatever be your age or social status. It could be a recurring deposit or a post office saving scheme. If you husband gives you a monthly budget to run the house, you can even take as little as Rs 1,000 and start a systematic investment plan (SIP) into a mutual fund.
DON'T fear ridicule
Never be afraid to ask questions. Let people laugh. Let them mock. If I am where I am today, it is because of sound advice from well-meaning individuals in the financial fray and a dose of good ol’ fashioned luck.
DON'T think of solutions only in linear terms
When I was handed the cheque, I realized that I needed to attack the problem from various aspects. For one, I had to cut down on wasteful expenditure and adopt a frugal lifestyle. This would help save my corpus from getting depleted. But simultaneously, I had to grow the corpus. Because the erosion of the value of money due to inflation would continue, irrespective of my circumstances. Hence, I had to invest the money and take a call not to touch the principal, and instead add to it when possible. Similarly, good investing is not just about knowing where to invest, but being aware as to what I must avoid. Approach a problem from different angles.
Just because I avoided an investment at one time (equity), doesn’t mean I should continue. Allow yourself to evolve, as an investor and as a woman.
Padma Ramarathnam nursed her ailing husband for 12 years. She is now 81 years old and lives by herself in Bangalore. She is extremely proud of the fact that she has never had to ask her family for financial support.
On March 8 is International Women’s Day. The theme for 2022 is #BreakTheBias.
At the heart of it is the idea that individuals coming together can change the way the world works. So we at Morningstar approached women to talk about their money stories.
There is power in sharing authentic stories from a diverse range of women. Some stories are brief and to the point. Others have a much more descriptive narrative. There is no little story, big story or frivolous story. Our individual actions, behaviours and mindsets have an impact on our larger society. We inspire and empower, and reveal possibilities to those who identify.
A cloak of silence benefits no one. It is time to #BreakTheBias.