Financial Housekeeping

Many times when we sit with clients for financial planning, we observe that their documentation is in a mess. Most of them don’t have written expenditure statements like monthly household expenses including groceries, fruits, vegetables, milk and other purchases. There are many cash outgos for AMCs for various consumer durables, pest control, school fees etc etc. Normally the data given are approximations.

In fact, when you ask for Insurance policies and other investment documents it is observed that they literally start searching for those, at that time. Before they meet a professional Financial Planner they have invested in say Mutual Funds through various outlets and there is no readymade accurate data available. On one occasion I literally made my client search for a LIC policy which was misplaced while shifting from Pune to Thane. The Life coverage was 20 lakhs and nobody had any clue where the policy document was kept. In fact he had to stretch his memory for remembering that quite some time back he had bought that policy.

On another occasion I made my client , who is a doctor to search out all his earlier MF investments from various agents who are not in the business today. He took almost 2 months to search out most of the statement of accounts for various schemes. The amount in consideration was around 27 lakhs! The search for the balance statements is still on.Financial Housekeeping

These are all nothing but what I call as Financial Housekeeping. Here are some tips which can be of help.

  1. Make a separate file for all your insurance policy documents. These will include life insurance, mediclaim and car insurance and so on. For that matter, this one file or couple of files should have all the documents related to insurance. Everyone in the house must know where these files are kept. On the front one can label the files appropriately, for easy identification.
  2. If the client has these kind of files, most of the time very old premium receipts, unwanted communication letters, renewal notices are also filed in it. Remove all these junk papers and keep it neat and tidy.
  3. Separate the policy documents by dividers having policy number on the edge where you can have an access to the document very easily.
  4. Make an Index and give serial numbers to those policy docs so that for any reason it is taken out from the file you will know the missing one by number.
  5. Ensure proper nominations are there for all the policies. I have observed once that a policy belonging to a lady (now in the 8th year of marriage having 2 kids…) has still her mother as nominee. And guess what…? It has been 4 yrs since the mother has passed away!
  6. Thanks to online support given by all the mutual fund houses and brokers, there is no point in filing old mutual fund statements, as old as 2 yrs (?) in a file and creating a mess. Now soft copies are available instantly if one needs.

It is very often observed that when an annual premium is due the client has to run around for making the funds available.

I would suggest one to have a file named say, ITR FILE 2012-13… Talk to your CA. He will give a list of documents he normally needs for smoothly filing your returns such as,
Similar running around for documents is done by many, especially self employed and business people, just before the end of the financial year. Investments for tax saving is the reason.                                     

  1. Premium policy receipts
  2. Housing loan interest statements
  3. If car loan then the interest statement
  4. Bank a/c statements
  5. TDS certificates if any
  6. MF investments P/L ac statement
  7. PPF book update
  8. Receipts of any tax saving investments such as ELSS etc
  9. Major expenses docs such as car insurance, purchases for office etc
  10. Rent receipts if applicable…..

This will certainly avoid your last minute running around.

What we are doing here is improvement in our life related to financial matters. We are very particular at work place where ISO 9000, TQM, KAIZEN are practiced to help improve the productivity of the manager and in turn the company. The Japanese concept of Kaizen has gained currency the world over. The philosophy of Kaizen assumes that our way of life- be it our working life, our social life or our home life deserves to be made continuously better through improvements, whether through technology, training programs or awareness write-ups. And Financial Housekeeping is not an exception to that.

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