Summary:
Diwali is an opportunity to review your financial health. Explore eight essential checks covering KYC, bank accounts, nominations, insurance, mutual funds, portfolio allocation, SIPs and festive bonuses to organise your investments, protect your wealth and plan ahead this festive season.
Diwali is a time of celebration, new clothes, festive delicacies, buying gold and reconnecting with family and friends. It is also the time when we clean our homes, get rid of clutter and make space for new beginnings. Festivals such as Bhai Dhuj remind us of the special bonds we share and, more importantly, the importance of protecting the people we love.
During Diwali, we worship Goddess Lakshmi, the symbol of wealth, prosperity and abundance. According to Hindu tradition, Goddess Lakshmi manifests herself in eight different forms, collectively known as *Ashta Lakshmi*, each representing a distinct dimension of prosperity.
While we prepare to welcome prosperity into our homes, why not extend this tradition into our financial lives as well?
This Diwali, along with your festive shopping list, set aside some time for eight simple but important financial housekeeping exercises. They could go a long way in bringing greater order, security and peace of mind to your financial matters.
1. Give your KYC and contact details a refresh:
Ensure that your KYC information, residential address, mobile number and email ID are updated across all your investments and financial accounts. An outdated phone number or email address could mean missing important alerts, transaction updates or regulatory communications.
2. Ensure consistency in your name across documents:
Check that your name is spelt identically across all your important documents and financial investments. This includes your Aadhaar, PAN, passport, voter ID, mutual fund folios, demat accounts, bank accounts and insurance policies.
What may once have been considered a minor spelling difference or mismatch can today create considerable difficulties when carrying out financial transactions, claiming investments or settling estates. It is far better to identify and rectify these discrepancies now rather than face complications when you need access to your money.
3. Check your linked bank accounts:
Over the years, you may have changed bank accounts, closed dormant bank accounts or moved your banking relationship somewhere else. Some of your investments could still be linked to an old bank account.
Ensure that your active bank account is correctly registered across all your investments. Also check whether changes arising from bank mergers have resulted in a change in your account details or IFSC code. A little attention now can prevent unnecessary delays in receiving redemption proceeds, dividends and other payments.
4. Revisit your nominations:
Your financial assets should ultimately reach the people you intend them to benefit from. Review nominations across your mutual funds, demat accounts, bank deposits, insurance policies and other investments.
Life circumstances change. Marriage, the birth of children, changes in family responsibilities or the unfortunate loss of a loved one may warrant updating your nominations.
Also, make use of the facility for appointing multiple nominees wherever permitted under the applicable financial product rules. Equally important, ensure that your family members know where your important financial documents and investment records are maintained.
Eight Financial Checks to Make This Diwali
5. Reassess your insurance protection:
Insurance requirements are never static. As your income grows, liabilities increase and family responsibilities evolve, your insurance cover may need to be revisited.
Evaluate whether your existing term life and health insurance policies provide adequate protection. Factor in rising medical costs, outstanding loans, your dependents’ future requirements and your family's lifestyle needs.
Remember, insurance is not merely a financial product; it is an important instrument for protecting your family's financial future.
Also, do not mix insurance with investments.
6. Restore balance to your investment portfolio:
Market movements can gradually alter the original asset allocation of your portfolio. An equity-heavy portfolio today may have been more balanced when you first invested.
Review your allocation between equity, debt, gold, real estate and other asset classes to ensure that it continues to reflect your financial goals, investment horizon and risk appetite.
Within equities, take a closer look at your exposure to large cap, mid cap and small cap investments. Do not allow market excitement or short-term performance to dictate your long-term investment strategy.
7. Declutter your investment portfolio:
More investments do not necessarily translate into better wealth creation or diversification.
Take stock of your mutual funds, forgotten investments, dormant holdings and multiple SIPs. You may discover that you own several funds with substantially overlapping portfolios or investments that no longer serve a meaningful purpose.
Every investment should have a clearly defined role in your financial plan. Consolidating where appropriate can make your portfolio easier to monitor and manage.
However, before making any changes, consider the tax implications, exit loads and other costs associated with selling or switching investments.
8. Make your Diwali bonus work for you:
A festive bonus or annual incentive is always welcome. But before getting carried away by the seemingly irresistible discounts, promotional campaigns and festive offers, pause and decide how much of that additional income you really need to spend.
Consider setting aside a portion of your surplus in a liquid mutual fund until you have decided how best to deploy it. This can provide a degree of separation from your regular spending account while allowing the money to potentially earn better returns than a conventional savings account.
Of course, returns are market linked and not guaranteed. The real benefit is developing the discipline of not spending every rupee simply because it is available.
A little financial housekeeping goes a long way!
As you clean your homes, organize your cupboards and prepare to welcome Goddess Lakshmi this Diwali, spare a thought for your financial well-being too.
We often spend considerable time earning, saving and investing our money, but surprisingly little time ensuring that everything is in order. These eight simple checks can help bring greater clarity to your finances, protect your wealth and make life easier for your loved ones.
This Diwali, let prosperity not be just about how much wealth you accumulate, but also about how well you organize, protect and preserve it.
Wishing you and your family a very Happy, Healthy and Prosperous Diwali!
