The importance of taking a timely and well-informed decision

I recently shifted my residence within the same locality. As I was rushed for time (due to my travelling schedules) I had only five days between the day I came back from an outstation visit and the day of the ‘grihapravesh pooja’. The packers and movers had to be organised and all the stuff had to be shifted before the date of the ‘pooja’.

I called for quotes from three packers, selected a new and young (in terms of experience) packer whose quote was quite obviously, the lowest. So far so good (or so I thought).

Shifting day finally arrived and the chaos began. Wherever I was around I got the cartons packed the way I wanted them and marked the boxes with the contents. But since I could not be at all places at the same time, trouble began to get packed. When I enquired what was in the boxes, they said it was ‘mixed’. Basically those boxes got shifted without any marking of the contents.

Worse was to follow. The packers opened up the boxes and piled up the contents into drawers and cupboards at their own will. Since the contents were ‘mixed’ there was no one proper place for the contents to be emptied into. So they just got dumped into the first open drawer. I did not realise it then, but all hell had broken lose.

Within a few days of the shifting, my younger son had to be hospitalised and when the hospital asked me for the health insurance card or policy, I was at sea. I rushed home and searched high and low, but could not track the papers. The reason being, all the contents had been mixed and were lying somewhere. Now where that somewhere was, I had no clue. Anyway, I called the insurance company and they helped me dig up the policy papers from their records. All’s well that ends well, but it was a huge learning for me.

Let me try and co-relate this with my field of work – financial planning. If I had applied the same principles to my shifting I would have been so well off and none of this madness would have occurred.

• We leave all our investments and planning for the last minute because we are in a job or are running a business and are unable to find time. Only when the issue is right upon our head (when the accounts department says show me your tax-saving investments or the taxes will be deducted from your next three-four months’ salary) do we rush to make the investments. As Sophocles (one of the classical Athens’ three great tragic playwrights) said “Quick decisions are unsafe decisions.”
• We start planning or look for a financial planner only when we have been hit by a ‘reality bomb’ – this is when reality strikes you (one fine morning) and we realise that we have no investments to speak of or all the investments are making a loss.
• We then rush to friends, neighbours and colleagues to ask for references. Again, since there is not enough time we cannot do a background check and go with our gut feel.
• The previous decision in most cases is primarily based on the quote or the rate being charged. The cheaper the better. “Why should one waste money on such a mundane activity”. What we do not realise is that there is a price for quality. In my case, the ‘rookie’ packers were cheaper than the established names (who have a track record to show), but they made a complete mess by not labelling and packing stuff haphazardly. Finally, I had to bear the brunt. So much for bargain hunting. Plato has rightly said “A good decision is based on knowledge and not on numbers.”
• Now comes the more serious part of ‘mixing’. Based on the quality of your packer (read: financial advisor), the packing (read: advice given) is based purely on finishing the job at hand (read: getting your signature on the forms) as early as possible with giving as much as a second thought of how you, as a customer, would have to deal with a situation, later on. The idea is to move to the next customer as quickly as possible. So haphazard and unnecessary products are recommended where there is a mix of all kinds (like mixing health insurance and investment returns or life insurance and investment returns). It is only later on when you open the carton (read: policy document) do you realise that you cannot figure out head or tail of the contents. You are not even sure that whether what you are looking for is there in that particular carton.
• In times of emergency, one is at a loss at to which instrument should I redeem or sell, since all the products are ‘mixed investment products’. If only, care had been taken right in the beginning, as to why a product was being purchased and the investments had been clearly marked to each goal, the investor would not be at sea. If each carton had been properly marked with the contents, unpacking becomes so much easier. In other words, clothes are not put in the same carton as office papers.

Life becomes so much easier if we plan properly (be it our shifting or for our future goals) and have sufficient time to evaluate options and select the best-suited rather than rushing decisions. Finally, it is vital that we take well-informed decisions – selecting the right advisor (packer) and clearly demarcating the investments and not mixing the contents.

Simple matters, multiple complications

Most of us are so busy with our daily schedules that we often forget to do some simple things – like informing banks, financial institutions and mutual fund houses that our address has changed, a particular bank account has been closed, or that our nominee needs to be changed. We act on these matters only when we are forced to act upon them. Then we run helter-skelter, use all possible sources to get the work done. Had we not overlooked these seemingly inconsequential but important issues, we would not find ourselves in a mess at the last minute.

In the last two months, I have come across quite a few such issues related to one’s personal finances. Some of them are cleared and some are taking time to be solved, even two months later.

I have listed out a few of them which I feel all of us must check and update, whenever required:

I. Change of address
When you move residence you need to inform a lot of people that your residence has changed. But I have seen that more often than not, people forget to change the addresses in their life insurance policies, mutual funds, National Saving Certificates (NSC), Bonds and bank accounts (especially those which have been around for a number of years and are not so frequently used). The result is that the investor is clueless about regular returns from money back policies, dividends from mutual funds or even getting the money back on maturity of various bonds and insurance policies. So all the hard-earned money that was diligently invested over the last so many years , would not come back to you and would go back to the company.

II. Update your bank details
There are times we rush to close our bank accounts without going into the linkages of the same to our investments. It is only when we redeem the investment or it matures, do we realise that it is linked to a bank account that we have since shut. Then the process of changing the bank account and getting a fresh cheque issued, begins. The whole process could lead to a delay of even 2-3 months in getting your money.

III. Nomination
Make sure every investment has a nominee. One thing I have noticed is that most unmarried men nominate their mother (and not their father, strangely; i have not figured out the reason why). Post-marriage some do change their nominees to their spouses, but again this is quite often forgotten and the mother continues to be the nominee. You also need to change your nominee in the event of death or divorce. People often overlook these matters.

IV. Shut unused bank accounts
I have come across people who hold multiple bank accounts. When I use the term multiple, I mean 8-10 accounts. Three-fourths of these have been lying dormant for quite a while and have probably even got ‘frozen’. Money is lying idle. Ideally, 2-3 accounts are more than enough. More than this just complicates matters. So the idea is to not have too many bank accounts and to close any unused bank accounts.

V. Correct name on your PAN card and other investments
I have come across cases where the spelling on the PAN card is different from that in the bank account and in some cases there is a third spelling in the investment. All this looks fine till the time the investor decides to redeem the investment. Then begins the ordeal of sorting the mess out and arriving at a commonality. The whole affair can be quite painful and time-consuming. So do check this for all your investments and correct any errors when there is still time.

VI. Setting up reminders
A number of times we miss out on our life and health insurance premium payments because we forget the due dates. This is dangerous as your policy could lapse. This means all the money you had invested previously, would be jeopardised. . Mutual fund SIPs, loan EMIs are some of the dates which we need to remember. Apart from this, we also need to know when various investments like life insurance policies, NSCs, Kisan Vikas Patra, Public Provident Fund (PPF) accounts, fixed deposits, recurring deposits are maturing. Setting up reminders on your computer and syncing it with your mobile is the best way to remember these dates.

VII. List all your assets and liabilities
This is the most crucial of all. Make out a complete list of all your assets and liabilities and share it with your close family members – spouse and children (once they are of an age where they can understand financial matters). It is very important for every member of the immediate family to know what and where all the investments are parked. After all the investments are being made by you for the entire family – spouse and children.

Apart from the exercise of making out a financial plan, investing and tracking the investments, these seemingly inconsequential but crucial matters will only help improve you and your family’s financial wellness.