FINANCIAL EDUCATION: Tool to Financial Success- Record Keeping

Case Study :

Ram's’s bike, which was parked on the road, was hit accidentally by a tanker. It got damaged and Ram found that repairing it would cost a lot of money. So he thought of claiming insurance to lessen his financial burden in repairing the damaged bike. He had bought the vehicle three years back. He then got so busy with his job that he just forgot where the insurance policy papers were. Then one weekend, he searched his entire room and finally discovered the insurance papers, only to find that the insurance policy has lapsed as he had not paid the premium on last year. A simple negligence, cost Ram his half month’s pay.

Benefits of Record keeping

An up to date record keeping will enable you to:

1. Track your money— income (where it comes from) and expenses (where it goes)

2. Provide you an easy reference of your wealth—assets (savings, investment, insurance etc) and liabilities (credit card debt, home loan, educational/ vehicle loan).

3. Organize financial activities like budgeting, saving/investment, tax-paying.

4. Provide an evidence of a financial transaction—repayment of loan, depositing money in bank account, purchase of an asset, etc. This is especially important in case any discrepancy arises over it.

5. Simplify the claim process in case of an emergency (insurance) or damaged good (warranty card).

6. Provide evidence for your entitlement to an after-sales service or other benefits.

7. Keep some faithful person informed about your financial transactions

How to Do the Record Keeping :-

An efficient record keeping can be done by following 2 steps:

1. Identifying important records: Dig out all the papers and records that you may have collected over a period of time. Begin sorting. Not all records that you have are necessary to retain over a longer term. Identify the records that are critical from the point of view of them saving you time and money in future, if need be. (Refer to a suggested list of records mentioned on the next page).

2. Develop a method to organize them: The records should be organised in such a way that they become available just when you need them. You may want to use paper filing system, safe boxes or briefcase to store your physical records. Records of your expenses, savings, investments and a handy summary of where all the other records are, can be maintained on a paper or in electronic format on a computer.

Make sure that you keep updating the records, adding new relevant ones and disposing ones which have lost their value like the 1-year warranties.

Also keeping a simple calendar of payments due (like credit card bills, insurance premiums, savings deposit, loan repayment, etc.) will prove a very worthy financial habit.

Financial Records which require Record Keeping :-

Financial records and important financial papers that need to be kept safe is given below. It can be used as a starting point to create a personalized record keeping list for yourself/your household. Use basic filing system—paper or electronic—to maintain and access these records easily.

1. An Account Book - A month wise record of day-to day expenses and income. This is important for planning future spending and for financial analysis. (For maintaining your accounts, refer the worksheets in this section.)

2. Income/Employment Records - Salary slips, payment slips, experience certificate.

3 Income Tax Records - Tax Deducted at source certificate, acknowledgement of filed returns/ tax paid, tax exemption documents.

4. Insurance Policies and Receipts of Premiums Paid.

5. Bank Records - Bank statements/updated passbooks, Deposit slips, Cheque books. Also ATM/debit cards and their PIN.

6. Debt Records - Credit terms, repayment proof.

7. Credit Card Records - The card itself, bills paid on credit card will prove helpful to check any discrepancy in the credit card statement.

8. Purchase Records - Bills (especially of high value items) warranty cards, service commitments.

9. Record of Investments and Assets Purchased.

10. Your Financial Goals, Budgets and Plans.

Format for Recording your assets and liabilities

Assets	Amount	Liabilities	Amount
Total Savings in all		Borrowings
the Savings Accounts
		Home Loan

Investment		Educational Loan
Real estate/Land		Personal Loan
Gold		Vehicle Loan
FDs/NSC/ RD etc.		Business Loan
Mutual Fund		Credit card debt
Bonds/ Debt		Other bills on credit
Shares
Others

Insurance
Life
Health

Retirement Plan
Pension fund
PF/PPF
Others

Others		Others

Total of Assets	Amount A	Total of Liabilities	Amount L