The Indian household has an unwritten rule – that the quintessential home maker is the home minister (and perhaps also the Prime minister) and the bread earner being the default finance minister – the husband or the Karta of the house. Now while this has been as normal for an Indian middle-class household; an aspect that has remained hidden through times old and new is the fact that this home maker has always been juggling amongst many roles that she does with great alacrity is also that of being a finance manager.
This aspect seldom comes out since it has never been the main job of the home maker; her main job has always been to run the operations, human resources, food & beverages, travel & transportation, education, social & media, entertainment, design & development and many more. The one department that is run without much hullabaloo is the finance department since it is the domain of the Karta. Now we are not really stereotyping as modern women have come of age with their finances but generally women financially aware too willingly pass this domain since there is a main rudder to take care.
Having said this, the home maker does a silent function in the domain of finances for any household and the following roles as a finance manager ought to be taken as seriously by persons running their personal finances.
Role of the liquidity manager – in this role the home maker’s ability to manage two types of liquidity challenges, depending upon situations need highlight. The tactical one and the strategic one. In the tactical situation the ability to manage the month end low liquidity by having kept reserve cash from previous month’s surpluses, side pocketing and deep valets needs special mentioning. In the strategic situations, the ability to thus dig for hidden side pockets to tide over immediate high demand for funds by dipping to savings / local chit fund activity and access to peer network for deficit funding are extremely crucial. This role is under appreciated and such techniques though widely known are hardly used by individuals in the households who are in-charge of finances. We would go to the extent of saying many frontline money managers seldom use these basic practices and thus end up becoming sitting ducks. So, pat the home maker for this crucial but underappreciated role.
Role of the Risk manager – this is the supplementary role to the liquidity manager for the family. In fact, the role of being a risk manager is of greater value than being a liquidity manager, since being a risk manager averts major catastrophe that might befall a family. During such critical times, the ability to tide over the financial crises becomes foremost. In this role of the risk manager, the home maker – by methods of side pocketing, hidden box savings and above all, diversifying the savings and investment pattern can significantly control risk. A case in point here might be the penchant of buying physical gold (ornaments and/or coins etc), silver etc. on a recurring basis (festivals / functions) which has been accumulated over a long period adding to significant reserve. This helps to tide over a financial crisis. This apart, the home maker’s ability to stick to basics on managing personal finances are fundamental part of risk management. On this count too, in general, home makers score higher marks on managing financial risk for a family.
Role of the planning and budgeting department – this role come as naturally to home makers as fish take to water. Be it managing finances on a day to day basis, or for functions and special occasions. Planning and managing the budget however tight things might become is one aspect that seasoned finance manages need to learn. How do home makers, plan, anticipate events, the expenses and prepare for the occasions is something that needs to be inculcated by all. However, small or miniscule the cash flow or cash at hand might be, the home maker would fit the expense to suit the budget at hand. Tactics such as bargain hunting, discounting skimming, substituting and many other methods come quite naturally to them. Individual can learn a lot from them in terms of how budget and expense management should be done.
Role of the financial planner – this role therefore is a logical end to all the things that the home maker does on a routine basis. The ability to think strategic when it comes to financial planning are worthy of note. For instance, planning for retirement and keeping dry powder for a rainy day is something could come by instinct we believe. Though home makers might not be consciously planning the goal planning activity but at a sub-conscious level there is always keeping the retirement planning and kitty building or coaxing to do the same. So, don’t ignore that sane advice. Second, the shorter yet important goals like keeping aside money or accumulating the same for her children’s education even if it means doing spending cuts on other expenses are done with purpose.
So, look around you and you will find a home maker who has done all the above and more. It is time to learn the nuances of how and why things are managed and there are over a dozen things to keep in mind while you do your own financial planning and achieve your financial goals. Just remember the two rules. Do the basics just as the home maker does and concentrate on the various roles she does to find out how it is clicking.