I have decent skills in cooking from the past. I know a limited set of Indian recipes. However, I make it a point to prepare those limited items well . Plus I never hesitate to learn new things or improvise my cooking "on the go".
I must mention that it has been quite a while since I cooked full-fledged meals.
My wife is a fairly organized person. She takes great pride in keeping the kitchen clean. Despite all that, I still had to wake her up frequently and ask her a lot of questions about where the ingredients were placed in the kitchen. I felt bad to ask her for too many things when she was sick, but I wasn't patient to search also, plus I was making blunders. Although she knew where things were, it was not intuitive to me.
No wonder an impatient newbie like me, couldn't spot things easily in the kitchen (whether it was sugar or cashews or turmeric). Hence I used the marker to put labels on those containers for added clarity, and used certain other organizing hacks to improvise it a little better.
Anyways, within a day, I learnt the ropes and I was buzzing in the kitchen. I couldn't but help appreciate her ingenuity in the placement of groceries based on her need and style. And whether or not it because was my food, my family got well in the next couple of days.
When it comes to Personal Finance , things are no different from a kitchen. The more organized you are, the easier it is for you to focus on important Financial issues without feeling overwhelmed. You will feel a sense of control and purpose. You will feel secure in the belief that you know where you stand on Finances, know what your priorities in life are, where you need to invest your time and money in , where you need to cut down and make realistic decisions that are in your best interests.
You will not make stupid financial mistakes like paying overdraft charges, paying late payment fees, choosing wrong financial products or services. You name it . Above all, when something happens to you (even if temporarily), your loved ones can run the show.
If your Personal Finances are cluttered up, you will find it very uncomfortable and your loved ones will have a hard time sorting things out in your absence (should a need arise). Your bad organization skills will cost you and your family dearly and financially.
What are the essential steps in organizing your finances?
Eliminate : Before you try to organize your Personal Finance , you should really focus on eliminating redundant or unwanted accounts. Too many accounts are overwhelming to maintain. Plus by consolidating them in to 1 or 2 accounts, you are (a) reducing your administrative fees, (b) saving yourselves the pain of reviewing multiple statements and (c) address your minimum balance needs more effectively. You get a better leverage and customer service with the 1 or 2 banks.
Can you cut back to just 2 bank accounts (instead of a dozen that you may have)? Can you keep just 1 or 2 credit cards and close all others? Can you reduce the number of brokerage firms to just 1 and/or see if your bank itself provides investment services? What are other things that you can cut back on without losing the service? Please be ruthless about elimination.
Automate: Make sure to automate your payment infrastructure. When your pay gets deposited on a given date (say 1st of every month), provide online or standing instructions to let the money flow in an automated manner for various savings and expense buckets.
For e.g. Designate and move a certain % to Recurring Deposits meant for various purposes, a certain % to SIP (Systematic Investment Plans). See more in Organize section.
Make sure to schedule online bill payments for your service providers (electricity, water, gas, telephone, maintenance etc.,). You shouldn't be wasting your precious time standing in a line to make payments
Organize and Keep it Simple: Do some basic organizing. Open separate Recurring Deposits within the 1 or 2 banks for various things. As an example, you want an RD A/C each for your home maintenance, for your house construction, for your Personal Provident Fund A/C (for the next year) . Open 1 or more SIPs for a mutual fund and funnel some money in those (monthly) as well. Open Fixed Deposits where you don't need the money for the medium term (2-5 years).
Setup online access to these accounts, that consolidates and shows you all the various types of accounts in 1 portal. As an example, here's how my HDFC Bank portal looks like.
As you can view in the screen shot, this portal shows me my various types of accounts (RD, Fixed, Savings) on the left hand side navigation. My scheduled bill payments, HDFC Credit cards, Mutual Funds and Demat Accounts (for stocks) are available in the various tabs (to the right).
A portal like this, makes the process of getting a snapshot of your stocks, MFs, Savings, Fixed Deposits, RDs, SIPs all in 1 place consolidated. Simple. I believe most Indian banks provide this level of functionality and flexibility.
As another important step, get your statements delivered online to your personal e-mail id, instead of through regular mail.
Create separate folders for the various banks by various months and store the statements in those folders.
While the above will give you a reasonable idea of your Net Worth, it doesn't include your real estate holdings, gold and certain other types of investments like insurance.
If you are old school, then buy the necessary stationery (like folders, binder clips, post it, label maker etc.,) from an Office supply store and organize the physical statements. These statements should be stored in the respective folders, for your reference later, with an index page that states which statements reside in which folder. These come in handy, when you apply for loans, or file Income Tax returns.
In one of the later posts, we'll illustrate a simple spreadsheet that shows an approach on how to go 1 step further, and consolidate all your investments in to a single view. For now, this should be adequate.
As far as your stock, Mutual Funds Portfolios if you are not happy with what is offered by your banks, you can also setup your portfolio in portals like finance.yahoo.com using your yahoo id. The screen shots below show an outline of how to accomplish adding stocks to your portfolio step by step, so that you can easily track the performance of your stocks or MF since you bought them.
Payments:
For your bill payments , if you don't get your bills by e-mail , or get an e-bill, then please setup reminders in your google or yahoo or plain old traditional calendar to alert you for payments. (You can save loads of late payment fees and feel very good about it).
For your investment payments a similar approach will help. Get the reminder early so you can plan for the payment ahead of time.
Receipts:
I personally don't enjoy this much, but it is important for tracking your expenses and for income tax purposes. If you are a tech geek, then you can use a camera or scanner to scan the receipts, and store them electronically (by month). If you are old school, clip and store the physical receipts and retain them atleast for 1 year.
Educate and improvise Continuously: Keep your eyes and ears open for sites, books, people that keep you educated on how to simplify and organize on a continuous basis. If you have a spouse or loved one who may need to be educated on where your holdings are and how to view, access them, you must keep them informed and educated as well.
Remember, all human beings are mortal. It's important for family to move on with financial life after our life.
At the same time, there is not a single system that can fit all our styles. If you don't like to do it the way I outlined above, by all means develop your own. But don't ignore this important aspect of Personal Finance.
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