How to keep your financial documents in order?

What is your net worth?" This simple question from a financial advisor totally stumped a highnetworth businessman.

 

He had two cupboards full of papers – documents related to real estate agreements, fixed deposits, insurance policies and premium receipts, income tax filings, mutual fund investments and share certificates.

 

He definitely knew that he was worth something, but he just couldn't put a number to it. He just didn't have any idea of the worth of his investments or his liabilities to arrive at a ballpark figure. The amused advisor gave the businessman six folders, one each for insurance , income tax, real estate, shares, mutual funds and fixed deposits, and asked him to sort the documents accordingly.

 

Yes, finally the businessman figured out his net worth; but only after hours of hard work. According to investment experts, many individuals have documents scattered all over the place, some in office, some at home, some in a locker, some in some drawers. A part of it may be sorted systematically, and the remaining work is left for another day.

 

Such attitude can spoil all the hard work, say financial experts. What is the use of an insurance plan if it doesn't help the dependents to cope with the loss of the breadwinner ? Or what is the use of investments if you can't liquidate just in time? Financial advisors can recall many instances where the family came to know about the existence of an insurance policy or valuable investments accidentally after the death of the head of the family.

 

"Arrange your documents into two sets. One, where you need to store physical documents like PAN card, passport, insurance policies, and physical shares. The other set could include documents like mutual fund statements, bank statements, where retaining physical copies is not important.

 

"Involve your family and keep them informed about your investments so that it can be passed on to them with ease in case there is a need. Check your documents for accurate names tallying with your PAN card and nominate a person if you have not done so

 

SORTING THE DOCUMENTS

 

Keep the originals of documents related to your life insurance policy, medical insurance policy, PAN card, passport, driving licence safely. Not having original copies of these may cause a lot of inconvenience.

 

"Keep these documents in one separate folder. You could also get them scanned and store them in your computer or on a pen drive,".  If you hold physical shares, get them dematerialised immediately through a depository participant like a bank or a broker. "Today you cannot sell physical shares. In case you need the money, you would be stuck. Hence get them dematerialised at the earliest.

 

Having a demat account also helps to take care of your dividend warrants . All the dividends coming in for such shares will electronically be credited to your bank account, and hence there is no risk of losing them. In case of mutual fund investments , there are multiple statements which you receive. There is a quarterly statement from the registrar and an annual statement from the mutual fund you have invested in. Storing all statements in physical form is not essential.

"Your last transaction statement will give you details of all the investments in your folio. If you are comfortable, try storing them electronically. "We suggest investors open a new e-mail ID and register that with mutual funds. Once this is done, all your transaction statements will go to this mail ID, and it will be easier for you to locate them when required

 

While sorting the physical documents , you must also ensure that the documents are in order. For example , ensure that in a mutual fund statement the names of the holders should match that on the PAN cards. In case you have investments in a single name, ensure that you nominate a person. You can also scan important physical documents and store them electronically.

 

Many firms like ICICIDirect , oneassist and Perfios, among others, offer you electronic lockers to store your financial documents. The facility serves as a backup and retrieval tool for important documents . It can be used to store electronically scanned copies of important documents like legal agreements, policy documents, degree certificates and bank statements.

 

"In case you were to lose any physical copy of any document or need a printout and you are not carrying one, you can always access these copies from anywhere in the world

 

KEEP YOUR FAMILY INVOLVED

 

Don't keep your investments and insurance policies as the biggest surprise for your family after your death. Keep at least one member of the family in the loop, so that the person can do the needful. "At least one person close to you should be aware of your finances. In case people are hesitant to talk about numbers with their family or children, we ask them to share details with a close friend or a family member

 

You can also inform your family about these matters without giving them the numbers. For example, you can casually mention that you have a life insurance policy from XYZ company . Or you have invested in some mutual fund schemes.