CEO Speak

Financial Hygiene and Housekeeping

It’s been a long haul for all of us in the past 3 months of lockdown and each one of us has swung between doing things that we had been pushing away for some other day, trying out new things, cleaning, organising or just about whining in some fatigue which has seeped into all of us at some point. Yet each one of us has found our own way of re-arranging our lives and doing a pretty good job of it.

Here are some of my reflections of how to use the lockdown productively for financial hygiene and upkeep at the personal front.

  • Prioritise:
    • List: Make a list of all investments across banks, small savings, FD, shares, bonds, mutual funds, real estate, etc.
    • Email id: Ensure that you have a common mail id across all these investments
    • Phone Number: Ensure your updated phone number is recorded against these investments. It is not only for ease of communication for the institutions concerned but also for your own operational ease and security
    • Nomination: Please check and update nomination for all your Bank accounts, locker, investments, demat accounts etc.
  • Health Insurance: Do you have an adequate family floater plan to cover the medical insurance for you and your family. If one is salaried, please re-look at the amount of cover that your employer is providing and get additional cover, if necessary.
  • Term Insurance: Does your term insurance cover not just the liabilities (loans) but leave enough for your family to live a comfortable lifestyle in case of any unfortunate event?
  • Contingency Funds: This is the most discussed and relevant topic today. This has changed from a pre-pandemic 3-6 months of expense to approximately 6 to 9 months of spends as emergency funds, in a post Covid-19 scenario. One may want to relook at this and have as much emergency funds deployed in relatively less risky assets (liquid/overnight funds) wherein one gets the cash back at the earliest.
  • Importance of Asset Allocation: When the markets rise dramatically in a short span or fall like they have done by around 25% since Jan 2020, it’s only the discipline of asset allocation which keeps you away from the greed and fear cycle. Please balance your portfolio of investments into debt and equity.
  • Risk Profile: Depending on risk profile spread equally between debt and equity - you could choose between various mutual funds and invest according to the risk. Understand your own risk taking capacity and the risks associated with various financial instruments.
  • Financial Goal: Have a goal based approach for different objectives which means your asset allocation can change from being more debt oriented for shorter term goals to equity oriented for longer term goals.
  • Review: One must review his portfolio and investments every 6 months. Use a competent advisor/mutual fund distributor to help you in this process.

Volatility is a part of markets and one has to ride the same to ensure that one is financially free. As we stand today, things look uncertain and clearly there is no predictability. But your financial hygiene will give you mental peace and come in as very handy support when you are in need.

Please be safe and take care.

Source: BSE

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