Top 10 financial steps to take before leaving this world

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February 21, 2017 11:18 AM

Although this may sound scary, but the fact is no one has come to live in this world forever. Whoever gets born has to leave this world one day. Therefore, if you want to keep your financial house in order as well as make the financial future of your loved ones secure.

You don’t have to be a millionaire or billionaire to do this. Even common people like us need to take stock of all our assets and liabilities at some point in our lives.

Although this may sound scary, but the fact is no one has come to live in this world forever. Whoever gets born has to leave this world one day. Therefore, if you want to keep your financial house in order as well as make the financial future of your loved ones secure, then you must plan and do certain things in life to ensure that they not only know your financial details, but are also cared for properly in the unlikely event of your departure.

Here are the top 10 financial steps to consider before departing from this world:

1. Make a list of all assets & liabilities

You don’t have to be a millionaire or billionaire to do this. Even common people like us need to take stock of all our assets and liabilities at some point in our lives. But keeping the uncertainties of this world as well as to manage your finances well, the early you do it, the better it would be for you and your family. Also, keep updating the list at least annually so that things are easier on your family in your absence. Your assets may include physical assets like your home, jewellery, etc, and also financial assets like insurance policies, bank accounts, and PF accounts, among others. You also need to include in your list all your outstanding debt and other liabilities.

2. Protect yourself and your loved ones

After taking stock of all your assets and liabilities, you need to protect yourself as well as your loved ones from the uncertainties of life, and make them as much financially secure as possible. “Taking adequate life cover (like term insurance) for yourself is the safest and cheapest way to secure your family’s financial future. This will ensure that your family members and other dependents won’t have to face any financial problem if something untoward happens to you,” says Ashish Kapur, CEO, Invest Shoppe India Ltd.

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3. Cover your assets and liabilities

Another important thing to do is to cover all your assets and liabilities. For example, your home should be covered by a householder’s insurance policy, which is the best bet to safeguard your house because it not only covers the structure of your home but also all its valuable contents from different kinds of perils such as earthquake, terrorism, flood, burglary and house-breaking. Similarly, if you have taken a home loan, then you should have a cover for this also so that your family isn’t forced to clear the outstanding loan amount in your absence.

4. Clear your debt

In the absence of a good debt management strategy, the financial planning for your secured future can not only get topsy-turvy but awfully wobbly as well. Therefore, know the liabilities you have and make some provision to get rid of them at the earliest. “Reduced debt can help you live a stress-free life, increase financial security and have more disposable income to spend on things that you enjoy the most. Paying off your debt early will help you avoid stress and anxiety, and also assist you in planning your investments well to realize your financial goals,” says Dinesh Rohira, Founder and CEO, 5nance.com.
5. Make provisions for lifestyle expenses and goals of family
One’s expenses keep rising day by day and this demands an ongoing income for the family to take care of the same. Investment strategies, therefore, should be made to ensure that a regular payout from the existing investments can be done in case of any requirement. Plan your goals well in time to know what will be required to achieve them in the defined time period. Invest adequate amount to meet the future expenses and goals identified for the family.

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6. Assign nominations

Nomination is the simplest way for your dependents to receive the proceeds of your investments in the event of your untimely death. You can make a nomination at the time of investment, but if you have missed it, then you can assign your nominees later as well. “You need to choose a nominee who is reliable enough to take care of your assets post your lifetime. It is a good way to protect the interests of your family who will stand to benefit from these investments. Also inform your nominees about it and educate them about the rights they can exercise,” says Rohira.

7. Draft a Will

A Will overrides all the nominations made by an individual. You can ensure that your property and financial assets go to the desired beneficiaries through the medium of Will. It will help in reducing the potential friction amongst your loved ones by outlining how you would like certain assets to be used in the future and by whom. Appoint an executor you can trust to carry out the disposition in an unbiased manner. By drafting a Will you make a clear path of succession and the assets can be distributed as per your desire to the chosen ones.

8. Tell your family about the estate

Financial decisions are generally taken by one family member. Therefore, these decisions are not known to the rest of the family members and it becomes very difficult for them to track the investments spread across various instruments. “The members of the family, therefore, should be educated about the investments done, nominations made and the claiming process of the same. Make a list of all your investments, loans, credit cards, demat accounts, Will and other relevant information along with the details of an individual who can help in times of crisis,” says Rohira.

9. Protect your important docs

Every penny that you save and invest needs to be documented both from the taxation purpose as well as a ready reckoner for the family members. These documents should be kept in a secured place and at the same time should be accessible by the family members as and when required. Use the facility of digital lockers to do the needful. Ensure that these documents contain the entire list of your holdings, nominations, claiming process and legal documents like PAN and Aadhaar Card etc.

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10. Teach your kids what mistakes to avoid

We learn with our experiences over a period of time. What not to do is an important lesson to learn when it comes to money matters. It is of an utmost importance to teach your kids about managing finance as the same is rarely taught in school days. “Financial education to your kids should be a part of your regular discussion with them as it helps them learn the importance of money management,” advises Rohira.

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