My father-in-law belongs to old school. He has retired recently and thought of organising his finances. During the course of this, he came across some fixed deposit receipts that he had started couple of decades ago. When he had started those deposits, he was told that they will be renewed automatically once they mature. To his dismay, when he visited banks, they told him that the money was lying in his dormant account. When he told them that why they were not renewed automatically as was promised, they told they didn’t have any record of this. During this entire period, banks never sent him any communication. Upon several request, emails, they paid saving account interest rate on all the money he thought were earning fixed deposit interest rates of 7-8%.
Fill it,shut it, forget it approach could be costly!
In the above case, the main reason of loss was not being alert and vigilant about finances. Many people, take credit card, open bank accounts, buy insurance policies, buy mutual funds and often forget about them. One of my friend bought mutual funds in early 2000s and apparently it was not required to give pan card number or email. He doesn’t remember if he gave any email id or phone number. He doesn’t have the original purchase documents, he doesn’t remember which mutual fund scheme he bought and what was the amount. Many times, we make financial investments and don’t share this with any family member also. In the unfortunate event of death, this kind of behaviour could land our surviving family meme era in big financial trouble, in addition to the emotional trauma.This could happen with anyone and the main reason is we have cluttered and complicated our financial life.
Let’s declutter our financial life!
I am going to give some pointers on how to make our financial life simple.
- Limit number of bank accounts, credit card to one or two. Whenever we visit a bank brach, we are requested to open a new account. Avoid doing so. Keep one master bank account and use that for investments, insurance , EMIs and all other purposes where you have given direct debit/credit instructions. It will be good if this master bank account is operated jointly with your spouse. In addition to this, you can have one more bank account. We get new credit card offers on a daily basis. Each of these offers come with the promise of amazing features. My simple advise is to say “NO” and limit the number of credit cards, bank accounts to one or two.
- Link your all financial investments to your pan card and always provide your email address. If you give your email address and pan card number, it becomes easy to track investments. You get consolidated statement from CDSL every month. You can also get consolidated statement for mutual funds. Chances of forgetting any financial investment will reduce substantially.
- Always give the name of your “nominee” in all your financial investments. Whether it is fixed deposit, mutual funds, Demat account or insurance, always provide the name of nominee, preferably with additional details so that it becomes easy for your nominee to prove that he or she is the legal heir to your investments.
- Reduce number of mutual funds and insurance policies. Avoid investing in too many mutual fund schemes (not more than 5-7). Avoid having multiple insurance policy for the same purpose (instead of 4 term policy with sum assured of 25 lacs each, have one with sum assured of 1 crore).
- Finally, share your financial life with your life partner. Don’t keep your financial life hidden from your life partner. Many times, we do not share this, not because we want to keep this secret but simply because we don’t want to burden the other person with so many details. We must remember that life in unpredictable. Also, our family members must be able to benefit from all the hard work we put in to secure their future.
In summary:
- Limit number of bank accounts and credit cards to one or two.
- Link your financial investments with your PAN card and email for easy tracking.
- Provide the name of “nominee” in all investments and insurance policies.
- Reduce number of mutual fund investments and insurance policies.
- Share your financial life with your spouse.
Hope this helps!