SIMPLIFY YOUR FINANCIAL LIFE
1. Your bank account
· Recognise the bank account as your primary book
of account in personal finance.
· Streamline your income into one, at the most
two, bank accounts for explaining all income sources, understanding how it has
grown over time, and deciding how to fund expenses and investments.
· It is easier to pay bills, utilities, EMIs,
credit cards, taxes and insurance by giving standing instructions to your bank.
· Take charge of your finances by consolidating
the expenses out of your income in one place.
· Read your bank statement to see how your income
and expenses are apportioned.
· There are tools which can set up your spending
limits for various heads, alert you when you cross the limit, and automate your
monthly budgeting exercise.
2. Your cash life
· Reduce cash in your life.
· When you transact with your debit or credit
card, your expenses are documented for you.
· Your bank statement or credit card bill will
tell you how you have spent your money.
· Cash expenses only show up as withdrawals and
complicate your accounting efforts, even causing mutilation, inconsistency and
incorrect data.
3. Your advisers and
intermediaries
· Reduce the number of advisers and intermediaries
with whom you deal for personal finance.
· These could be brokers, financial advisors,
insurance agents, loan lenders, tax accountants, fund houses, trading and demat
accounts.
· Too many of these will lead to a complicated
financial life with limited control.
4. Your financial
products
· Reduce the number and type of products in your
portfolio.
· Holding too many variants of funds, insurance,
stocks and bonds in multiple folios and certificates seriously undermines the
ability of your holdings to impact your wealth since your portfolio is too
fragmented.
· If you hold more than 30 items across stocks,
bonds, deposits, funds and saving schemes in your portfolio, you have too much
to handle.
· Choose a few reputed firms with good track
records, and they are most likely to have all that you need.
5. Merits of passive
investing
· Choose products that don’t require constant
monitoring by you.
· Pick diversified large-cap stocks, index funds,
bonds of large AAA issuers, government savings schemes or deposits of
well-known banks, which will save you from wrong decisions.
· Choosing simple and time-tested products saves
you the bother of monitoring and grappling with decision-making dilemmas.
· If you have a regular income and are building a
portfolio to generate long-term wealth, pick growth, cumulative, reinvestment
or accumulation options.
· You will save yourself the trouble of monitoring
the flow into your account and making another decision to re-invest them.
· If you buy a tax-saving mutual fund, there is no
need to redeem when the lock-in period is over, and the money can stay
invested.
· It is a good idea to keep the money deployed,
not idle, due to your inaction.
6. Your saving habits
· Align your investments to your saving habits.
· If you spend recklessly and regret not saving,
you can start an auto-debit facility from your bank account, which directs
money to investments before it is available to spend.
· If you have a surplus before the next salary
comes in, deploy the balance at the end of the month.
· Take time to form simple rules on dealing with
your saved money and free a lot of mind space while making financial decisions
and rescue your wealth from procrastination.
7. Your documentation
management
· Make a file where you note the details of all
your documents related to investments.
· Pen down all relevant folio and account numbers.
· Inform your spouse and other family members
about all financial transactions.
· In this way, you will ensure that even if
something happens to you, your family will be able to access your investments
and documents.
· Mention a nominee in all financial investments
to ensure that the funds are transferred to the nominee without any hassle.
· Set up reminders for premium payments and
maturity dates of investments.
· Give ECS mandates for direct credit of
dividends, interest payments and maturity proceeds into your bank account.
· Close down bank accounts you don’t use, transfer
Provident Fund to the new employer and avoid having too many mutual funds and insurance
policies.
· The fewer the investments, the easier they are
to track.