Family Finance Diary

Most people work hard to create wealth. They invest in bank deposits, mutual funds, stocks, insurance policies, real estate, gold, bonds and other assets. But one important question is often ignored: does your family know about all this? This question has become even more important today. Recently, our Prime Minister Narendra Modi highlighted that Indian banks are holding around Rs. 78,000 crore of unclaimed deposits, insurance companies have nearly Rs. 14,000 crore lying unclaimed, mutual...

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Most people work hard to create wealth. They invest in bank deposits, mutual funds, stocks, insurance policies, real estate, gold, bonds and other assets. But one important question is often ignored: does your family know about all this? This question has become even more important today. Recently, our Prime Minister Narendra Modi highlighted that Indian banks are holding around Rs. 78,000 crore of unclaimed deposits, insurance companies have nearly Rs. 14,000 crore lying unclaimed, mutual fund companies have around Rs. 3,000 crore, and dividends worth around Rs. 9,000 crore are also unclaimed. The government’s “Your Money, Your Right” initiative was launched to help citizens trace and claim such forgotten financial assets. These numbers tell us something very important. Many families do not lose money because of bad investments. They lose access to money because investments are scattered, undocumented or unknown to the next generation. Easy to Locate Personal finance is not only about creating wealth. It is also about ensuring that your family can locate, understand and access that wealth when required. Every family should maintain one proper financial book. Not just a password-protected file on a laptop. Not just a folder in email. Not just a WhatsApp message. Technology can fail. Phones can get locked. Passwords can be forgotten. Emails can become difficult to search. Excel sheets, links and soft copies can have multiple versions. During difficult times, the family should not be confused about which file is the latest and where to find what. Hardcopy Book A simple hardcopy book with proper pages, sections and annexures can become extremely useful. This book should give a bird’s eye view of your complete financial life. It should mention your bank accounts, fixed deposits, mutual funds, demat accounts, insurance policies, loans, property details, gold holdings, important documents, nominations and advisor contacts. Wherever necessary, annexures can be attached for policy copies, account statements, property papers and other important records. The idea is to create a clear roadmap for the family. They should know what exists, where it exists and whom to contact. Liabilities, Nominations Your family should also know about your liabilities. Home loans, business loans, credit card dues, personal loans or guarantees given should be clearly recorded. Wealth planning is incomplete without liability awareness. Nominations must also be checked and updated across all investments. Many people assume that old nominations are still correct, but life changes. NRI Families This becomes even more important when children live abroad. Many families today have NRI children who may not know which bank their parents use, where the property documents are kept, who the financial advisor is, or whether any old insurance policy exists. In such situations, one well-maintained financial book can save the family from confusion, delays and unnecessary stress. Regular Review Finally, review this financial book once or twice a year. Updating it is as important as creating it. A good financial plan should not only grow your money. It should also make sure that your family can find it, claim it and use it. Wealth should not become a mystery after you. It should become security, clarity and peace of mind for the people who matter most. (The author is Chartered Accountant and CFA (USA). Financial advisor. Vies personal. He could be reached on 9833133605)

The Three Bucket Rule

Kaustubh Kale
Mar 21
2 min read

As we start the new financial year, this is a good time to pause and look at how your monthly income is being used. Let me try and help you rationalise your expenses, EMIs, and savings in a simple and practical manner. If you do not consciously divide your income, it quietly disappears into expenses, EMIs, and lifestyle leakages. The solution is simple: divide your monthly income into three buckets.

The three-bucket approach

For ease of understanding, think of these as three roughly equal parts of one-third each. This may not be mathematically perfect for every person, but it is a very practical framework that creates discipline and clarity in money management.

Bucket 1: Monthly expenses

This includes routine household expenses, bills, groceries, fuel, dining out, lifestyle spending, and other regular outflows. In short, this bucket is meant for your present life and present needs. Ideally, you should try to restrict these expenses to one-third of your monthly income.

Bucket 2: Loan repayments and EMIs

This includes home loans, car loans, personal loans, education loans, and even credit card dues. While debt may sometimes be necessary, it must remain within control. As a broad thumb rule, this bucket too should not exceed one-third of your monthly income. If your EMI burden regularly crosses this level, it is usually a sign that you are over-leveraged.

The more disciplined you are in Bucket 1 and 2, the more room you create for wealth creation.

Bucket 3: Investments for long-term goals

This is the bucket of delayed gratification, also something that most people neglect. Saving money is not the same as investing money. Investments should be made with the right asset allocation and with clear long-term goals in mind - children’s education, marriage, buying a dream home, a dream car, dream vacation and your retirement. These are goals that cannot usually be met from one month’s income alone. They require regular and purposeful investing.

What if you have no EMIs?

If you do not have loans or EMIs, it becomes even easier. You may be able to invest 40%, 50%, or even more of your income. That is excellent, because the more you direct towards investments, the stronger your future financial position becomes.

Use three bank accounts

A very effective way to implement this system is to maintain three separate bank accounts. The first is the Income Account, where your salary or business income is received. The second is the Expenses and EMIs Account, from which all regular spending and loan repayments are made. The third is the Investments Account, the most important one, from which long-term investments are made.

Present self vs future self

Seen differently, the Expenses Account is for your present self, while the Investments Account is for your future self. Over time, this simple habit creates clarity, discipline, and control. And that is the real goal of personal finance: to ensure that you command your money, instead of letting money rule you.

(The author is a Chartered Accountant and CFA (USA). Financial Advisor. Views personal. He could be reached on 9833133605.)

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