Atul, age 40, died of a sudden heart attack. He was survived by his wife (age 35 years) and two children (age 10 and 6 years). Atul used to manage finances of the entire family. After his death, his wife had no idea about his finances. She missed out on credit card payments and EMIs were skipped. She was not aware about their stock market investments and about insurance policies Atul had taken.
This is just a hypothetical case, but put yourself in Atul’s shoes. God forbid if something happens to you today, can your family take care of your finances? Do they know everything about your investments, your financial commitments for next one year and insurance policies taken for their benefit in the event of your death?
It is difficult to keep our parents or spouse involved in all financial decisions we take. However, if we maintain proper financial records and share it periodically with a person whom we trust, it becomes much easier for our family to handle finances in our absence. Any type of documentation and record keeping is a mundane job but if maintained diligently, it saves lots of future efforts and hardships for our family.
Benefits of financial record keeping
Beside the above benefit of access to our financial information in our absence, many other benefits accrue by keeping proper financial records:
- It gives an overview of our financial status.
- It comes handy in case we need any financial documents.
- It helps us at the time of making insurance claims.
- Periodically maintaining financial records also gives us an opportunity to review our investments.
I am aware about its importance, but the task of keeping financial records is quite tedious
Keeping proper financial records seems like a herculean task, but once you start maintaining it, it is not as tedious and time consuming as you may think.
First task is to ascertain which all financial records you need to store. Bachhat has listed down later in this article all possible financial records one can have. Ideal approach could be to maintain a separate section / folder for each type of financial records with a summary at the top of each section for the documents contained therein.
For example, all insurance policies and premium receipts can be kept in one section and can be supplemented by summary of insurance policies stating the type of policy, insured amount, insurance company, call centre details, nomination details, claim procedure, agent details, etc.
Listing of financial records
The financial records should include the following:
1. Current copy of will. It is also advisable to keep a copy of a will with your lawyer or trusted person.
2. Personal documents. Such as birth certificate, marriage certificate, death certificate, passport, etc in originals.
3. Insurance policies. It includes original insurance policies and receipts of recent insurance premium paid. In case you have taken a householders’ policy, it is also useful to keep a listing of the valuables covered along with their original bills. It is also advisable to keep pictures of such valuables. The best way is to shoot a video of all the valuables. In case of health insurance policies, you should also maintain list of hospitals covered and the identity card issued by the insurance company handy. The summary incorporating the details about insurance policy, its claim procedure, nominee details, etc can be appended to the top of this section.
4. Tax documents. This includes all your tax returns, receipts of taxes paid, Form 16 in case of salary employees and supporting for your tax calculations. Details of refunds received and notices sent by the tax department should also be included.
5. Employment related. Your employee number and annual salary slips. Annual provident fund statements and annual statement of other retirement benefits available. A summary valuing your year-end benefits and details of contact person in the company should be appended.
6. Bank documents. Nowadays in the age of online banking, one has access to bank account statement anytime. However, most banks provide online access of historical transactions only for 6 months to 1 year. In case one needs to check account activities prior to that period, he needs to apply to bank for a statement. Hence it is advisable to maintain a copy / print out of bank transactions every quarter / six months and stored it. Similarly receipts of open fixed deposits should also be stored. A summary listing the bank accounts, branch information, contact details of relationship manager, call centre details, nomination details, etc should be included in this section.
7. Credit Card. Recent credit card statements and payment proofs. Listing of credit cards alongwith credit card number, issuing bank name, limits on each card, payment due date and their call centre number to be added.
8. Investments. This can include original documents of investment made in shares, mutual funds, debt, PPF, etc. For shares, the document is the latest demat holding statement. For mutual fund investments, it is the annual statement of the mutual funds and latest transaction statement. Further annual statement incorporating transactions carried out in your trading account should also be maintained. This folder should contain the details about your demat and trading account, who is authorized to operate the account, nominee details and details about the relationship manager with whom to get in touch in case of emergency, details about the mutual fund, their call centre details, etc.
9. Property Documents. In case you own a house property, you should keep the original property title, deed of purchase, society membership proof in safe custody. In case you have mortgaged the property or taken a home loan, keep a copy of loan agreement and details about loan, its tenure, interest rates, EMI payment date, details about standing instructions given to debit the bank account for EMI, etc.
10. Loan Documents. In case any loan is outstanding, copy of the loan / borrower’s agreement and the recent statement of loan amount outstanding should be preserve. If any of the loans are fully paid up, retain the final statement showing the loan amount as fully paid up. Also provide a summary listing of loans taken, repayment schedule, interest rates, name of the institution from which the loan is taken, the point of contact at the institution, etc.
11. Utility Bills. List down the utility services for which monthly payments are made. Also state whether any standing instructions are given for payments. Last 12 months utility bills should be adequate for documentation.
12. Vehicle Records. If you own a vehicle, you should keep all the original ownership and registration documents at one place. Details about the dealer from where the vehicle was purchase, nearest servicing centre and details about motor insurance policy should also be kept handy.
In addition to the above, there should be a master listing of all your financial products. It should include all the financial products you have and their brief details. If any of the above documents are stored in a computer, do not forget to password protect your file and ensure regular back-up.
Where to keep financial records?
Bank Locker or a fire-proof safe deposit vault at home should be a good place to store the original documents. Copies of original documents and other papers should be securely kept and its location should be informed to a person you want to be in charge of your finances in your absence. Same applies to files stored on computers and portable drives.
Periodic cleaning and review:
Review of above documents should be done ideally every six months or annually depending on the volume and complexities of your financial transactions. Further it shall be beneficial to regularly sit with a person whom you would like to handle your finances in your absence and shared your financial records with them. This will help them to understand your records and clarify any doubts which they have in their mind.
Proper documentation and periodic review of financial records will go a long way of maintaining your financial records and will reduce the trouble of your loved ones in your absence.
So when are you planning to start maintaining financial records? Whether you have any other ideas about how to keep such records? Any other documents you feel should be included above? Do share your comments and suggestions in the comments section below.
