Banking

Managing your Bank Account/s

30 Jan, 2014

When was the last time you visited your bank? For many of you this must be so long back that you don't even remember when!

Thanks to the advantages of modern banking, most of our banking requirements are met by way of ATMs, online and now even phones. Having said that there are still some things for you to consider and follow to be able to manage your bank account so that it works for you rather than the other way around.

1. Multiple accounts only create and add to the confusion with bounced cheques, multiple minimum balances to be maintained and a general mismanagement of funds. One salary account, another which you use for expenses or investments and that's it - you don't really need more than this. List out all the accounts you have and close all the ones you don't need, now. If you have an account to which your home loan is linked, then just change it with a simple request form and a cancelled cheque of the bank account that you want it to be linked to.

2.Managing your funds so that expenses are met, minimum balance is maintained and funds don't remain idle can be a challenge. So follow a simple rule of thumb - keep only one month's expenses idle in a savings account, not more, not less. If you don't know what your monthly expenses are, then take an average of the last 6 months expenses using you bank statement. Don't include any non-recurring income like equity dividends, annual bonus, gift from spouse etc or non- recurring expense like jewellery purchase or vacations.

3. Now over and above the one month's expenses whatever surplus gets accumulated should be invested in this order
- 2 months to 3 months expenses in a liquid fund to be available in times of emergency like a medical one.
- Any expenses/goals you have coming up over the next 18-24 months in short term debt instruments.
- The rest in long term debt and equity depending on your asset allocation.

Do this to ensure a stress free and effective banking!

The author, Lovaii Navlakhi, CFP is the CEO of International Money Matters and The Financial Alphabet.