According to the Central Finance Ministry, our Post Offices hold billions of unclaimed National Saving Certificates & Post Office Saving Bank Accounts. Do you think people don’t want their money? This is because they have lost the document which will remind them that they have money invested. And maybe it’s not their fault also as the original investor did not record it properly and the family is not aware of the investment. So it is important to file, record, and safely keep financial documents as the consequences are inter-generational.
How to Manage Your Financial Documents Normal Process
This is how most people do – We receive a document through the post, we put it on our writing table or worst in the wardrobe and, then forget about it. Actually what happens is that when we received a document we think the purpose of reminding a payment or a due is done and you create a mental note of the last date or actionable. But it is a human tendency to forget as human memory has a non-automatic RAM in place. This is the reason I have seen many of my friends who often forget to deposit their mobile bill because they have not filed it properly or people asking you to pay some bill online as cash and cheque will not be accepted beyond a mentioned date.
Every household must work out their own document management system, but there are some general guidelines that can help you a lot in a long way. The aim of creating a system will be:
1) Ease the process of finding and saving costs on penalties and late payments.
2) Safeguarding documents from wear and tear, misplacing, and accidents like thefts.
3) Assist your financial planner in locating required documents and pass on the relevant to survivors in case of any mishappening.
It is useful to keep the important document in order in all financial consequences. Most financial experts recommend the creation of a comprehensive folder of documents that access by family members easily in case of emergency. Otherwise, they have to search here and there at home and run desperately to banks and life insurance companies. It is advised to use colors to show the importance of the documents. For example, Red for the most valuable files, Blue for the less, and so on.
Do not hold too many documents
Sometimes people hold so many documents that their family members can’t find the important ones easily. So instead of filing all statements of the same folio of mutual fund investment, only file the latest one. File the latest in case the details are available online. For example, Life Insurance receipts, utility bills, stock transaction statements, bank statements, etc. are all available online either by signing up or by mail back request. So what’s the point in preparing bulky files?
Managing documents online is also not easy as these come only when you create accounts/logins by choosing IDs and passwords… You have to remember multiple passwords of your online accounts and then you have to keep changing them for security reasons. And if you lose a password, it is equally tough to reset a password after going through a stressful process of validation and answering secured questions. It is advisable to maintain an excel file containing your IDs and passwords. (maybe 2 separate files one for login another for password) Some precautions to be maintained here. The file has to be password protected – only you and your spouse should know the password. The file should be used only on personal machines (not office systems or cybercafés). Keep a backup of this file preferably on a personal external drive and never put this file on mails or web. Also do not put details of your credit card passwords or CVV numbers. In case you are putting material information, put in a riddle format that only you know.
Important Financial Documents
Below mentioned is the list of important documents that you need to check and keep ready. You should collect all these documents as soon as possible if not in possession and update them every few years as per your need.
Documents related to Asset and Liabilities
One should keep arranging all the documents related to property & land, any document related to the plot, share certificates, registration certificates of vehicles, and a copy of fixed deposits. If your family members have no information about these then in an emergency situation they can never find them on time. If you have lent money in the market and if you have a loan from the market, keep a proper document related to both so that it can be included in your asset & liabilities.
Bank Account Statement
If you are active online no need to keep record, otherwise statements not more than 6 months are to be kept. Shred the old statements and after checking their accuracy. Do file important documents related to nominations made or changed. Cheques books need to be kept in a proper lock.
Income Tax Return
If you are employed somewhere or you are running your own business, you need to document your return very carefully. You can safe keep soft copies if you are filing it online. Whenever you require a bank loan the financial institution will ask for income tax return. Ideally if salaried you should keep copies of last 3 years income tax return all the time and 6 years if in business.
Again, if you have an online account, you need not to file premium receipts. Just file the policy certificates. Private insurers also provide a copy of your proposal form. This should also be filed as it becomes an important document if the claim falls into dispute. The photo ID cards issued by insurers should be at a place where all mature family members are aware and have access.
You should keep your will in a place where your family members can find it easily when required. A will is the most important financial document so you should keep it very carefully so that nobody can misuse it – otherwise, it can create a big mess. You can keep it safely in a bank account locker or a safe deposit box with sharing its combination with other family members so that they can use it when required.
The documents which we have mentioned above are very important hence be prudent in filing them. What else?
Few documents which are used frequently can be scanned so that original is not disturbed. These can be your pan card, passport, and aaadhar card which are required as identity and address proofs while making financial decisions. So scan documents that are frequently required or keep adequate photocopies.
So I hope that after reading the article you have an idea how to record and file these important financial documents. Do share how you have been doing it? Also, share any experiences where absence or presence of filing and proper safekeeping of the documents led to crises or a relief. Waiting for your comments.