Certain and Uncertain

As the financial year has ended most people would be contemplating over the tax deducted or paid. Many would be complaining about the high tax deducted by the employer. Some would have failed to do the required tax saving investment or would have failed to submit the investment proofs before the deadline. Some would have bought new life insurance policies, health insurance policies, ELSS etc. to save the tax outgo.

Whatever might be the case one thing is certain that the next financial year will end on 31st March next year. It is also certain that your employer would ask for investment proofs next year. You would certainly have a fair idea of the income that you will earn from April to March. Still I fail to understand why many taxpayers rush to make investments only between January to March of every financial year.

Online calculators are available which help to calculate the tax outgo according to your income. The calculator helps you to decide the investment amount that will be required to save on the tax. What would be required, beyond the inputs to the calculator, would be you embracing the idea that you need to save first and spend later. This saving in PPF, ELSS, VPF etc. or buying of required insurance policies should not be necessary in April. You can stagger it from April to December so that you are not burdened at the end of the financial year. The fact that I have suggested December and not March is to save you from the hassle of rushing at the end of February/March to gather and submit the investment proofs. Also starting early and staggering your investments will help to select products judiciously. My earlier blog ‘Look beyond 80C’ (click here) will help you understand why it is necessary to select right product/products.

To summarize, if you take advantage of these certain things in life, positively you will be benefitted -

1) Better product selection by December
2) Lesser cash outflow in January, February & March
3) Reduced possibility of bigger chunk of tax deduction in January, February & March

This was about the certainty. Now something about the uncertain part of life. Most of us have bought life insurance and health insurance policies. Some will have made fixed deposits, bought mutual funds, company deposits etc. Basically, everyone would have bought and/or invested into some or the other financial product. This could be in digital form or physical form. When you have made these arrangements for your dependents to fight in the uncertain phase of life; are your dependents aware of all of these arrangements?

What if the need arises to raise a claim with the insurer? Medical expenses can be settled cashless through network hospitals. What if a non-network hospital needs to be opted in an emergency situation? How would the bills be settled in such a case? If the breadwinner of a family meets with an accident, how would the family respond to such a situation? What if the sole earner of the family dies an untimely death? Do his/her dependents know about the policy details and the claim settlement process?

All these situations will cause a scare among the dependents. This can be avoided by making the family aware of the insurance policies and investments. It will take some time and efforts to compile all the details and to educate your dependents about these. But it would be worth the effort as it will keep your family ready to face the emergencies.

Following the below steps will help in uncertain situations:

1) Keep your family updated about the financial products you have invested in.
2) Check nominees and share of the nominees in insurance policies.
3) Have a joint account with your spouse/children for emergency fund.
4) Keep details of health insurance policies, personal accident insurance policies handy. 

5) Usually insurers provide cards along with policy documents which can be used for cashless settlements. Carry those cards with you, especially while on a vacation.
6) Maintain a list of network hospitals in your area.
7) Educate your family about the settlement process of insurance policies.
8) As far as possible pay your utility bills, credit card bills, policy premiums using the direct debit mode. This will ensure that those are paid on time in your absence.

Now if your heart has already skipped a beat reading about implications of uncertainty of life, follow me through my upcoming blog.

P.S. One more thing is certain. On your way back home you will buy some groceries, snacks, fruits, milk etc. So please do carry a cloth bag with you.

Prasad Patwardhan

Qualified Personal Finance Professional