Clean the Clutter

Chandralekha Mukerji   Delhi     Print Edition: May 2012

Here's how you can reduce the stress caused by too many financial products -

Steps to ease financial stress
1. Eradicate Junk
Let us begin with the easiest part-getting rid of the junk. Close the savings and trading accounts you haven't operated in years, surrender credit cards that do nothing but encumber your wallet and terminate all redundant insurance policies. Also, do not forget the piles of paper you have collected over the years-age-old utility bills, bank statements, policy documents and deposits that have matured, debt papers that have been redeemed, old salary slips, and the like. It's high time you overcome your aversion to dumping financial documents.

Steps to ease financial stress
2. Try to Consolidate
What will you prefer-going to ten different shops for grocery or visiting a big store where you can get all the things you need? The choice is obvious. Then why make the mistake while buying financial products and services? Try to do banking and investing with the same institution, have a single health policy for the whole family, consolidate mutual fund and stock investments with one brokerage and transfer your entire provident fund money in one account. You can also buy telephone, internet and direct-to-home services from one entity. This saves time and paperwork.

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Steps to ease financial stress
3. Build a Contingency Fund
It is important to hedge savings and investments from adversities such as job loss or unexpected expenses. Accidents do not happen daily. However, when they do, they can derail finances. One may say that insurance is sufficient for such situations. But think of a medical emergency where you have to rush to the nearest hospital which isn't part of your insurer's network. You won't get the cashless facility and will have to pay cash. Will you borrow from a friend, break a fixed deposit or redeem mutual fund investments? Is it not much better to have a fund for situations like these?

Steps to ease financial stress
4. Automate Your Accounts
Why bother yourself with monthly chores like utility bill payments, equated monthly instalments, or EMIs, of the loans, insurance premiums, systematic investments you make in mutual fund and brokerage accounts when your bank can make these payments for you. If you fear overbilling, set a limit. Similarly, opt for an overdraft protection facility if you are regularly fined fordishonoured cheques.

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Steps to ease financial stress
5. Go Online, Opt for E-bills and Alerts
By the time you receive your bank statement and find that someone has fiddled with your money, it is too late. These days, monitoring of finances has to be done in real time. Mobile alerts and e-banking not only help you take quick action if you have been defrauded but also save time, are convenient and ensure you don't miss payment deadlines, be it insurance renewal, bill payment, equated monthly instalments or investments. Some companies also encourage e-transactions by giving reward points or discounts. This way you can save money as well.

Steps to ease financial stress
6. Don't Buy Unless You Understand
Would you ever buy tickets for a movie in a language you don't know? Obviously not, unless it comes with subtitles. So, how can you buy a financial product unless you understand its characteristics and terms and conditions? Knowing product features and functioning is a safeguard against mis-selling and helps you judge whether it can help you achieve your goals. Also, do not forget to read the exclusions lists in case of insurance products. This list is more important than the benefits section.

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Steps to ease financial stress
7. Filter Financial Advice
There is no dearth of advice. There is a fair chance of information overload with the result that you miss the big picture. It is important to differentiate the right advice from noise. If you find this difficult, choose reliable sources-a good financial advisor or informative websites, journals and magazines and ignore the rest. It is better to team up with a qualified financial planner who can give you a more holistic advice.

Steps to ease financial stress
8. Abridge Your Investment Mix
Diversification is highly recommended. Just do not get carried away. Too much diversification only complicates things and may lead to duplication as well. Always look at the 'big picture,' that is, your portfolio as a whole rather than managing different investments-debt, equity, real estate, cash and gold-independently. This will help you adopt a more balanced approach and maintain a more accurate investment mix.

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Steps to ease financial stress
9. Have a Financial First-aid Box
Life insurers say in many cases the claim is filed after the family receives the policy premium letter. Reason? It didn't know the insurance existed. Our families hardly know the savings and deposits we have, stocks we hold or insurance policies we have bought. Even if they know, it is impossible to memorise all the details. However, in an emergency, if this information-a list of everything you own, your investments and related documents-is kept at one place and can be accessed by everyone in the family, you'll have an easy time. Also, make a will and keep it at the same place.

Steps to ease financial stress
10. Protect Your Identity
It's important to stay safe, especially when you handle finances electronically. Cyber crimes have become common but the laws aren't strong enough to give you complete protection. So, better build your own firewall against frauds. Install good anti-virus and anti-spyware programmes and update frequently, avoid using public computers for online banking or other e-transactions, keep a watch on phishing mails and transact through secured websites with 'https' instead of 'http', in the address bar. You may also buy credit card protection and online identity theft insurance covers.

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