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How to manage financial transactions efficiently

ET CONTRIBUTORS|
Last Updated: May 25, 2020, 10.25 AM IST
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Summary When you review money matters, focus on evaluating the performance and suitability of your investments to your current need for income, growth and liquidity. Review your insurance needs every time you cover a milestone in life.

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Vivek is happy that he is able to save and invest. He has been managing his money for the past 10 years. However, what concerns him is the way he conducts his financial transactions. While he does try to bring some order to the way his finances are managed, he feels there has to be a system in place for it to be effective. What should Vivek do?

Vivek needs to organise his money matters and set in place a schedule for reviewing his financial decisions. This will give him control over his financial situation. First he has to divide his financial affairs under three categories: investments, insurance (including life, health and other insurance) and financial services including banking, credit cards and loans. The next step will be to schedule periodic reviews for each of these categories so that he can ensure that they are suitable and adequate to meet his requirements.

During the review, Vivek’s focus should be on evaluating the performance and suitability of his investments to his current need for income, growth and liquidity. Based on this, he can decide whether he wants to remain invested, exit or increase holdings. This exercise needs to be done once a year unless it is a shortterm investment or there is a compelling situation that demands an investment decision to be reviewed immediately.

As far as his insurance needs are concerned, Vivek should make sure he is adequately covered and review his insurance needs every time he covers a milestone in his life. This will include marriage, children, taking on liabilities such as home loans, a promotion with an increase in income or reduced obligations. All of these events will require an increase or decrease in his insurance cover. Vivek’s ability to manage his affairs well will also depend upon his ablity to conduct his financial transactions easily and efficiently. Like he should evaluate service providers on the basis of their ability to provide the facilities that are essential to him, in a cost-efficient way.

Another important activity that will make it easier for him to manage his financial matters is to keep the related paperwork updated and organised. He should reduce the clutter by eliminating outdated documents and statements that are not relevant or required to be maintained. Once he has a system in place he will find that he has greater control over his financial affairs, which will help him manage better.

(Content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)

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(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)

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