Personal Financial Health Check Up in New Year

After a great bull run for 4 years in the market, sudden volatility has kept everyone guessing what is in store for the new year 2019? Many have lost their gains of about 15-20% gains from the equity market in last few months. But more than predicting the market, we should use the new year as a time to review our personal finance. The following key parameters should cover the review. Also, give a printout of your investments to your spouse(Format at the end of the article)

Emergency Fund

This is reserve money to be kept aside to meet any emergency situation in the family.  If both of you are working, it can be a minimum of 3 months living expenses including loan EMIs.(6 months ideal) If you are the single earning member in the family, the emergency fund should be around 6 months living expenses. If you are in an uncertain job and working overseas, it is better to have 1 year living expenses as emergency fund.  The amount can be kept in savings account linked to a fixed deposit and both you and your spouse should have access to this amount in case of an emergency. 50% of this fund can be kept in a liquid mutual fund. If this amount is not in place, create it immediately as the first step in financial planning. Once this is created, don’t worry about the job loss& related uncertainties.

Health Insurance

You should review the sufficiency of health insurance now. If you are depending on the office provided mediclaim only, better to take a separate health insurance now when you are healthy. This will be useful when you change jobs and for your post retirement days. No insurance company will you a health policy at the age of 60 if the health is not good. I am not seeing a single client aged 45 and above without a life style disease. Buy a health policy with minimum exclusions and sub limits. Also buy a personal accident policy to supplement the health policy.

Also Read: Why should you think beyond office mediclaim

Life Insurance

I am not talking about the ULIP and endowment policies which you already have. Ask this question to yourself. If you are not there, how your spouse will manage the monthly household expenses and other goals like children education, marriage, retirement etc. If you have already made enough liquid assets for these goals, you need not require life insurance. But how many of you can say like this, confidently? Very few would have created assets of that value. Till the time you create enough assets for this, the gap can be managed through a term policy. Buy an online term policy. You can get a 1 Crore policy by paying just 1000 per month. Such policies will ensure that your family will maintain the same standard of living even in your absence! It should be a top priority in your life.

Also Read: ABC of Life Insurance and why term insurance?

Use banks only for banking

Be careful, if you are well received in the bank by a bank employee! He will be interested in selling you a policy or mutual fund NFO. Bank employees are now not keen in banking transactions. They are keen in selling other products to you. Keep only one or two bank accounts. Close all unwanted accounts. As far as possible, do all transactions online. Be careful about the bank staff, they will make you bankrupt.

Also Read: Wealth Managers or Wealth destroyers?

Use Credit Card carefully

If you are holding more than one credit card in your wallet, cancel them. You must have one credit card but not more than that. The credit card should be used as a substitute for carrying cash and not for availing credit. Don’t opt for very high credit limit in the card. Keep it at the required level depending on your spending pattern. Also don’t use more than 50% of your credit limit every month. Pay the full amount due 2-3 days before the due date. If you start paying the minimum amount due, you are welcome to the world of credit card trap and the interest rate of 36% and above.

Check your CIBIL Score

Better check your CIBIL score every year to measure your credit worthiness. If the score is nearing 900, be happy. Please check the records in the report for their correctness. If there is any discrepancy, take it up with the concerned lender and CIBIL.

Start SIPs in Mutual Funds

Are you still happy with bank deposit and postal schemes only? Days are changing and it is high time to adapt to the equity cult and invest in equities for better returns. SIPs have created huge wealth for disciplined investors in the last 20 years. Had you invested 10,000 per month in the last 20 years, you will be now sitting on 2.5 Crores now! Yes, many mutual funds have given CAGR of 18% in the last 20 years. Invest in Direct plans for still better returns.

Also Read: How to start SIPs in direct plans of mutual funds?

Review your Asset Allocation and make changes if necessary

Recent volatility in the equity market would have changed your asset allocation. If it is changed drastically, it requires a rebalancing. Don’t think that the markets will move in only one direction. Make the changes and ensure that your portfolio reaches the targeted return irrespective of the market conditions.

Check This: Sample Financial Plan for Asset Allocation

Ensure tax efficiency

All of us are bothered about the section 80C tax benefits. But it is limited to 1.5 Lakhs only. More important than this is how to invest our money in more tax efficient ways to ensure the minimum tax outgo. With indexation benefits Debts funds are better than fixed deposits, if you can invest for at least 3 years.

I wish you and family a great year ahead. Let’s make wealth.

Keep Investing!! Happy Investing!!

MY DETAILS & MY INVESTMENTS

Purpose of this document:

In case I die prematurely, family needs to know my details, my plans for them, and my wish on:
* My Investments – what to redeem, how to redeem, whom to contact
* various utilities in my name that needs to be closed – mobile, internet, etc
* various utilities where my name needs to be changed – EB bill, Gas cylinder, etc
While the personal separation cannot be compensated, this document should hopefully ease the financial life of my family.

I have given lot of thought and preparation in making this.
You may not agree to many of these, but you MUST follow this document in the interest of our family.

Download the Document Here

Personal Details

Contacts

Bank Accounts

Credit Card Details

Debit Card Details

Bank Locker Details

Life Insurance Details

Health Insurance Details

Vehicle Insurance Details

Property Tax Payment Details

Water Tax Payment Details

Gas Cylinder Details

Phone Numbers and Home Internet Details

Ration Card Details

Electricity – EB Bill Payment Details

House Property Details

Real Estate Investments      

MUTUAL FUNDS

DIRECT EQUITY

My DEBT/LIABILITIES:

• I am guarantor of Mr.

• I have borrowed from:

NO Current Outstanding borrowing as on December 2018.
Only Borrowing in the past were:
Student loan: Paid & closed decades back
Home Loan: Paid & closed years back <give details>

• Other Liabilities:
  
  None as on DEc-2018

MY WISH\INSTRUCTION TO MY WIFE:

FOLLOW THIS ABSOLUTELY

DO NOT CHANGE THIS INSTRUCTION EVER UNDER “ANY” CIRCUMSTANCE.
NEVER, EVER, EVER CHANGE THIS FINANCIAL INSTRUCTION TO YOU

 Dear Wife,
For future investment purpose, consult this <xxx> person only. Trust no one else for financial advice. Keep away from the bank relationship manager always. (Write the name & contact details of your trusted financial planner).