Organising your finances- Ignore at your own peril!

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Nowadays, when we are constantly starved for time, our lives are often disarrayed. We have gone to being disorganized and careless about priorities which need attention. In such times, an arena of our life that definitely takes a back seat is our finances. Spread out over a vast area, they become difficult to manage and hence we end up ignoring them altogether. The primary step to ensuring that we have full control of them at all times is arranging and maintaining them in an organized manner.

We at Fpguru.com would like to bring to your notice a few aspects of your finances which should be put in order to have a stress free living.

 

Savings account: People often have numerous savings accounts. This doesn’t count for any advantage but just adds to the confusion. Ideally one savings account does the work. However, sometimes the salary account provided to you may not have all essential features such as debit card, accessibility etc. In such a scenario, an additional account is ideal.  Couples may keep one joint savings account as well.


In case of business owners, an additional current account can be maintained while in case of housewives, one single savings account is best.


Each and every individual must have a bank account as this accounts for financial inclusion, however having more than 2 accounts only leads to confusion, not just for yourself but also your dependents in the event of your unfortunate demise.


Insurance:

Life insurance :One insurance policy of the appropriate cover can do wonders as opposed to several endowment or ULIP policies put together. Purchase one term plan of the appropriate amount or at the most two or three from different companies. Term plans are easy to maintain, easy to understand and most importantly most efficient at achieving their basic purpose – providing pure insurance cover.


Mediclaim: It is ideal to have one good family floater policy covering all members of the family. It is easier to maintain one policy than have different policies for each member.


If you wish to have separate policies for each member, ensure you are all covered by the same company as this can help prevent a lot of hassles. Also ensure the policy covers all the perils and you are well versed with their clauses as during the time of an emergency, this can add to a lot of stress.


Car / householder insurance etc.: Keep records of these together and maintain all documents until a new policy has been issued.


Investments:

Fixed deposits: FD’s play a major role in our investment portfolios. We often have several FD’s with several banks and sometimes maintaining them all can get tricky. Having several FD’s is not necessarily a negative however you must ensure you are availing these FD’s at the best possible rates. Do some research before you put your money into a fixed deposit. Also maintain FD’s in banks which are close to your place of residence as this makes it more accessible. A good alternative to this would be to have a sweeper savings account, which serves your purpose as a savings account as well as a Fixed Deposit.


Share portfolio: Diversification is a must as it can help prevent loses. However over diversification may not be beneficial either. It is best to maintain a balance. You need not have more than 20 stocks in your portfolio. This will provide you with a good balance.


Mutual Funds: Mutual Fund schemes by themselves are diversified and hence investing in several Mutual fund schemes can again lead to over diversification. Ideally maintain around 5 – 6 different mutual funds. These could include 3 equity funds, 2 debt funds and 1 liquid fund. You could add one gold fund to the list.


Property: With prices of property hitting the roof, more and more people are looking at property as an important investment asset. Some may have several properties in many different cities. Some may have several in one city. Either ways owning too many properties is not an ideal situation. It is best to have one or two properties in areas which are in demand than have ten in areas which are useless.


Owning a plot of land makes you the landlord. It is however, very difficult to maintain. You have to keep tabs on issues like encroachment etc which ultimately may turn out more expensive than the plot of land itself. Owning land in some far off place also doesn’t account for much. In the end it might simply become an illiquid asset being of no use to you.


It is most ideal to have an extra property in your city of residence, as this is easier for you to maintain, and also sell. A flat will also fetch you rent as opposed to a plot of land. After a residential property, you can venture into commercial property and lastly if you wish, you could go for a plot of land.


Wills and nominations: A will is the most important piece of document in the event of your unfortunate demise. If you want your hard earned money and assets to be transferred to the beneficiaries of your choice, you must make a will.


You can alter the will at any point in time, however, you must mention the date on your fresh will or change in it and maintain a copy of the applicable will with a trusted person outside of your home such as your lawyer, doctor etc.


Also ensure all your nominations are always up to date. In case of an unfortunate event, it is your nominees who will get first possession of your assets which will then be distributed as per the will. Hence, in order for the wealth to be brought back to the house, a nominee is must.


Consolidating your finances is as important a step as planning them. If they are unorganized and confusing to you, they will be even more confusing for your dependents. So ensure you provide you family with the ease of understanding and spare them the stress that it can bring.


Get started today!

 

By Shalmali Kulkarni.

The writer is working as a para-planner with Fpguru.com


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