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Freelancer on the other side of 40. How do I invest?
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As women get older, it is all the more important for them to start investing wisely.
I am a 45-year-old freelancer with family responsibilities and don’t get monthly payments. How do I plan my investments?
Freelancing is a great option for people, more so for women with family responsibilities who can’t afford to hold down a full time job. As freelancers, women can do anything ranging from working as consultants on projects with companies to running small handicrafts/fashion businesses from home. It allows them the comfort to pick and choose their work timings and projects but the downside to freelancing is that it doesn’t assure a regular sum in the bank account every month.
This is a problem because monthly expenses remain more or less the same but income doesn’t. Freelancers need a better financial and investing plan than regular salaried employees to plan their future. They need to come up with a savings plan and stick to it, especially when they are in their 40s.
Build a 12-month corpus for emergency funds
For regular salaried folks, an emergency fund of six months is usually sufficient. But a freelancer needs to build an emergency corpus for at least 12 months considering how unpredictable the cash inflow can be. This fund should ideally cover monthly bills, medical insurance premiums, children’s education fees (if any), EMIs and any other regular expense. Freelancers can choose between ultra-short-term debt mutual funds or short-term fixed tenure deposits to park their money in. These investments carry very little risk. This can be an emergency cash fund and should be dipped into only when there is a dire need.
Invest lumpsum every quarter instead of SIPs
By definition, an SIP is a Systematic Investment Plan. However, freelancers don’t always get paid on time. Hence, it may prove difficult for them to invest via the SIP route. A better option is to invest lumpsum amounts every quarter after ensuring that they have covered other expenses. The quarterly amount can be anything ranging from Rs. 3,000/- to whatever can be put away. In fact, every time there is an excess sum of Rs. 10,000/- in their bank accounts, freelancers should move it into a mutual fund.
Divide Mutual Fund Savings between Large Cap Mutual Funds and Banking and PSU Debt Funds
Freelancers at the age of 45 should stay away from volatile investments. Investing monies into small-and-mid-cap funds is not a smart idea for them. It is more prudent to split their money between blue-chip companies in large cap mutual funds and government bonds and PSU deposits in Banking and PSU Debt funds. While they get a decent rate of return from large cap mutual funds (9-11%), Banking and PSU Debt funds also limit any downside.
So, if you are a freelancer, go and meet a financial professional at your bank. They will help you choose the right investment strategy to secure your financial future.
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Disclaimer
Mutual Funds are subject to market risk. Please read all scheme related documents carefully before investing. Click here for the detailed investment disclaimer
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