Kalyani Narayanan, CEO and Principal Officer says

Most families do not have the discipline of analyzing their financial portfolio and discussing where they are, what they need to do, how to go about, etc. If you are one of those, I am sure you are not alone.

I urge you to please set aside some time, at least once a year, where you and your spouse need to do some serious portfolio analysis. To help you get started, here is a check list of what you should be discussing.

What are the assets you own under various categories – Total it up – this is Total Assets

• First Home, Second house, third house, etc - take current market value

• Any vacant lands – take current market value

• Shares – take current market value

• What is money left in PF

• What is the money invested through Mutual Funds

• What is the money invested in Insurance (this is NOT policy value – this is money if you have saved up over and above your premium for life cover)

• Any Fixed Deposits you have

• Value of gold/silver you may have (usually diamonds and other precious stones are not taken into consideration)

• Any long term bonds, etc.

• Other minor assets like furniture and fixture, car, etc. – put depreciated value

What are the liabilities you have – Total it up – this is Total Liabilities

• Money you owe to pay for the loan towards purchase of apartment, home

• Money you owe towards purchase of car, furniture, or other

• Money you owe to credit card company

• Money you owe to other people (may be borrowed from friends and family)

Total Assets minus Total liabilities = Net Worth.

You need to know if this ‘Net Worth’ is enough. You need to answer the following questions.

• Are you saving enough money for your children’s ‘big expenses’ like college education, and marriage expenses? How much time you have till you hit ‘big expense’?

• Are you saving enough for life after retirement? Plan for at least till you and your spouse are 85 years old

• Can one of you afford to take early retirement and still enjoy the same lifestyle?

• Is there any other ‘Big ticket’ expense that you foresee?

• The most difficult question to ask - What if something happens to you (or your spouse)? Either death or permanently disabled? In such a case,

  • Do you have enough ‘net worth’ to run the family without borrowing?

  • Do you have enough life insurance cover which would give you the money required to run the family?

  • Will you be able to pay for ‘big expenses’ like children’s education and marriage?

You and your spouse need to do this exercise together so that responsibilities can be jointly taken

Good Signals - The following are considered good signals indicating sound financial position

• You have life insurance cover that is at least 10 times the annual gross earning with disability rider

• You are saving at least 30% of your post tax money

• Your investments are diversified into stocks, bonds, gold, insurance, real estate, etc.

• You have health insurance along with critical illness cover for you and your family

Bad Signals – If you have any of the following, you need to do serious financial planning

• You owe money to the credit card company

• You owe money to your friends and family

• Your overall money owed is more than 30% of your post tax earning

• You DO NOT have life insurance cover that is at least 7 times your annual gross earning

• You DO NOT have money saved up for ‘big ticket’ expenses like children education or marriage

Our site www.easyinsuranceindia.com has the following calculators to help you plan your finance better.

Retirement Calculator – Helps you to calculate how much money you should be saving to have a comfortable retired life

Human value Calculator – Helps you calculate how much life insurance cover you should have at any time

Inflation Calculator – Lets you calculate how much money you would need in future given the amount in today’s value.

Compounded Fund Calculator – Lets you calculate how much your investment today would grow in future at a certain interest rate

EMI Calculator – Lets you calculate the equal monthly installment on borrowings

May your portfolio be filled with good signals.

If you have any questions, write me back.

www.easyinsuranceindia.com