Managing finances becomes difficult as it entails a lot of paperwork. But you need to do the mundane work
One cannot space paperwork while investing. It also involves keeping a track of lot of details. As the size of your investment portfolio grows, the amount of paperwork and data too increase substantially.
Confirmation for every equity and mutual fund transaction, every deposit or withdrawal from your bank. Besides, there are intimations regarding dividends received or interest credited to your account.Investing using dividend reinvestment plans, or systematic investment plans (SIP) will mean another set of statements. In case of interest liable for TDS deduction, one needs to keep track of the amount deducted and if the TDS certificates for the same have been received.
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The minimum that a good record keeping system should do is to list all money that comes into your possession and all money that leaves your possession. Not only should it include the time and the amount of investment but also the details of recipient, likely date of benefits to be received, date of maturity and so on.
Doing so will help you while filing tax returns. Details about what we earned and when helps determine the tax payable. A delay in paying taxes results in both interest and penalty to the IT department.
It will also help us track our investment performance. We need to review our returns with respect to the period of investment. For instance, a gain of Rs 1,500 by selling shares worth Rs 10,000 after holding it for two years means absolute return of 15 per cent. However, the annual return is only 7.5 per cent if one considers the time.
Good record keeping also helps in monitoring financial goals. One can take corrective action by portfolio balancing and rejigging, in case certain investment do not deliver as per expectation.
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With money being credited by Electronic Clearing System (ECS) or NEFT/RTGS, out funds could remain idle in our bank account . Keeping track will ensure that we don’t let and lose out on another suitable avenues.
Maintaining proper and comprehensive details is essential.The record keeping may be in a physical format or electronically. Nowadays a lot of software is available for same. You can also store the data in certain portals like money control.com, persoalfn.com and so on. Some of these sites are free while some come at a nominal cost.
Ensure that you have quick accessibility to the data. Also have a back copy in place. But this will be difficult if you use a paper-based system. It is the prospect of recoverability that makes software-based solutions the most effective and comprehensive.
Ideally, your records should be giving you a clear picture of your financial situation at that point in time. Again, paper based systems fall short regarding this since any projection into the future requires a monumental amount of manual computation. On the other hand, software solutions can quickly and easily give a picture of your financial situation at any point in the future or the past.
This attribute alone should convince you to use a software-based system.
A record system involves not only the tracking of money but also the safety and preservation of documents that are vital to your financial well being. Property documents, loan papers, fixed deposit receipts, demat statements, bank statements are important documents to store properly.
One may consider the purchase of fireproof safety storage box and place all their important financial documents within this box.
Remember, only by knowing where your money has been invested, can you track it properly.
The writer is a certified financial planner