Experts advise educating all the family members about investment plans. It helps if husband and wife sit together and do the filing of all papers related to banks, investments and policies. Image Credit: Supplied

Dubai: One of Mike Gilbey's clients who was paying for an endowment plan in the UK before he moved to Dubai five years ago had completely forgotten about it. Gilbey, while managing his finances, found a regular payment of £37 (Dh224) per month to Friends Provident on his bank statement and tracked it down to the investment firm who told him that they had lost track of his client when he moved. The savings plan was now worth more than £45,000 and was close to maturity.

Being disorganised about one's own finances is not so uncommon among intelligent and successful people in different walks of life — you name it, business, sports, media, and yes, even qualified management accountants, says Gilbey, a chartered financial analyst at Dubai-based Holborn Assets.

There are others who are absolutely the opposite, making sure they know where every penny is spent.

No idea

"We come across a wide variety of people from those who have absolutely no idea what they have where and go along month to month without knowing what is coming out of their accounts to those who have everything carefully compartmentalised combined with an overview of total net worth and liabilities," says Darren Ashley, managing director of Candour Consultancy.

But most people fall somewhere in between — some of their files are in order while others are not, says James Thomas, managing director of Acuma Wealth Management. One area that is usually addressed is tax filings, as these cannot be ignored, or one can be fined. However more general financial paperwork can get misplaced.

"The easiest way is to simply file paperwork when you receive it," adds Thomas. "That way you do not end up with a pile of papers and then have to sort them out.

Setting aside half an hour a week is better than an a couple of hours a month or a couple of days a year, says Gilbey. "This keeps everything fresh and allows you to take timely action and keep on top of matters. Another secret is to have a place for everything and everything in its rightful place."

Gilbey says he has seen some people who are cavalier even with regard to tax filings, especially those who had thought they were not going to return to their home country any time soon. But unforeseen circumstances such as job loss can intervene and force one to return, springing a nasty surprise in the form of hefty fines.

Tax returns

For example, returning to the UK after living abroad for several years in Dubai during which one had been careless about tax returns could result in problems. With the UK government recently introducing several pieces of retrospective legislation, people who have been less than diligent about their financial obligations have to sort their finances out before embarking on the journey back home.

Sudden death or even severe paralysis are among other reasons to be disciplined about finances, so that family members don't have to scramble looking for the relevant papers.

"Keeping records up to date will be a great boon for executors should one die pre-maturely," says Gilbey. "For that matter it is always a good idea to make a note of where one's personal accounts can be found and keep the note in the same place as the will."

For all his UK domiciled clients he advises them to keep a little black book to record when they gave any significant amounts of money to their children, charity or anyone. This provides them an audit trail for Inheritance Tax planning.

"One of the main benefits of keeping track of your finances is to provide an audit trail for your family and heirs. Don't forget you won't be here to explain things and collect in debts to your estate or rebuff anyone claiming against your estate. Good records will help in such cases," Gilbey says.

It is also useful to prepare a summary of your policies and investments and email them to any family or friends that would help in the even of your death, advises Thomas.

Experts say it is important not to just have nominees for each account and investment in accordance with the law of the home country, duly attested by the authorities there, but also sharing information about them on a regular basis with the family members.

Nomination

K.V. Shamsudheen, director at Barjeel Geojit Securities catering to non-resident Indian investors and also a volunteer financial adviser for low income workers in the UAE, stresses the importance of having a nominee's name in all investments and bank accounts.

"I have come across a lot of problems to get ownership of the asset in the absence of nominee after the death of initial investor," says Shamsudheen. "One bank manager of a small branch of a prominent bank told him that his branch had more than Rs500 million unclaimed fixed deposit. It is not just about having a nominee's name but the nominee must be aware of it also."

Those expatriates who are living without family must take home one set of papers related to his various investment and let his wife know about it, he says.

He goes one step further — that of educating the wife and even asking her to take responsibility. And that is more for a cultural reason peculiar to Indians. In most Indian families it is the man of the household — a husband and a father — who usually decides on investments and policies, though the household expenses are managed by the woman. He insists that educating family members about all investment plans — in what schemes, how much — is important. It is better if it's a joint exercise — where the man and his wife sit together and do the filing of all papers related to banks, investments and policies.

In several cases, after the death of the father, the children and the mother came to him seeking guidance They didn't have much clue about all the papers left behind. In some cases, unscrupulous people, even relatives, can cheat them if they don't have much idea of finances.

Shamsudheen advises that the husband should guide his wife and then give her the responsibility to organise all investment matters, keeping track of returns — dividends, interests, maturing of children's plans, periodically.

In addition it is important that she learns to attach some remarks about the investments in the file.

"That is what I have done with my wife," he says. "A periodic analysing of all investments with your wife is always beneficial."

Systematic filing

Ashley's wife does the same. "My wife looks after our finances — the last thing I would want to do after looking at other peoples all week," he says in a lighter vein.

She has, he says, concertina folders which segregate bank statements, investment details, mortgage statements, insurance documents, life assurance documents and wills.

She also keeps all the receipts and, each month, ticks off the entries on the statement against the receipts before throwing these away and "this ensures we are not charged for anything we have not purchased ourselves, which may happen once a year or so!"

Keeping receipts is an excellent discipline, says Gilbey, and may be useful if you are being investigated by a tax man at some point in the future.

"Checking receipts, payments and deposits against bank statements and credit card statements can also help prevent identity fraud but more importantly will help correct errors and mistakes quicker and easier," he says.

Also, being offshore, it can be quite easy to let your disciplines slip as there appears little need to keep detailed records to satisfy the tax man, which seems to be occurring increasingly frequently throughout the world as governments feel the need to increase their tax take, Gilbey says.

A son expresses gratitude for his father's support

Leaving the planning to a family member could make it difficult in the event of the person's demise

Dubai: My father died on November 27, 2010. I not only lost my father, but I also lost my financial planner. He was always worried I was not saving enough. Even after becoming an independent adult, it was not me but my dad who took care of my finances back home in India — making sure that I had money in the bank account to pay for my insurance policies and contribution to a pension fund. For that he kept a regular tab on my two non-resident bank accounts: NRE and NRO, each meant for different purposes, and making sure that the balance did not fall below the minimum required. He also guided me in buying shares and investing in mutual funds.

He gave me reminders on the due dates for payment towards different plans and policies, and every week called me to share how the stock portfolio performed. He gathered his knowledge reading financial newspapers, watching experts on television programmes such as CNBC India and passed on the information and let me decide. He always said "Ask your experts in Dubai and you yourself analyse and then decide on my suggestions." He never forced me to accept what he said.

In January 2010, he and my mother visited me in Dubai. He brought along two files, one which contained detailed notes and receipts of my investments in stocks and funds and the other which had my bank details and insurance policy papers. These were photocopies of the original documents. He kept the originals at home in India.

All throughout his life he, who was an engineer, had managed the family's finances meticulously, especially when it came to keeping track of bank accounts, joint or single, insurance policies, which he had bought in each of our names, and investments in mutual funds and stocks. He had my mother as a nominee in all investments and the two bank accounts were jointly held by him and mum. And he had file folder for each aspect of the finances.

And all along he kept my mother, my elder brother and me in the loop, going through the items and receipts stored in them and the updates he made.

Summary

Those showed stocks he bought and sold, the amounts against each, the reinvesting of dividends and matured plans. And on each he made notes — kind of summary for each change he made and how it affected the total — with his clear and beautiful handwriting.

Several times he told me over the phone about the altercations he had with the officials of the banks and brokerage companies in failing to send the receipts on time or updating information or in some cases, failing to pass information.

So when he died, we weren't worried at all with regard to finances. We knew everything would be in order. He in fact had kept a sum aside for his funeral and religious rites that followed. He had told us about it. The ATM card he used came in handy for the expenses. Because he had shared the ATM PIN with my mother, everything went off smoothly when it came to organising and paying for the religious rites. And later my mother visited the banks and the stock broker to submit the death certificate along with fresh forms with new nominee(s).

My brother has been managing his finances for many years now. I depended on my father. Looking at the files he gave me, I know it will be hard to match him. But the files show me the way on how to organise and be on top of my money and investments. I have yet to start.

Software: Organise your money matters electronically

Though there are different software packages available these days to organise one's finances, the importance of keeping original documents and receipts and certificates in a safe place remains, experts agree.

K.V. Shamsudheen, director at Barjeel Geojit Securities acknowledges that digital preservation of important papers — scanning them and keeping them in a system — is a benefit in case of loss of the originals.

For those who prefer paper files then a separate file for each investment and a summary sheet on an Excel file can be very effective, says Mike Gilbey, chartered financial planner at Holborn Assets.

"Most of the modern computer software such as Microsoft Word and Excel have good basic templates to keep track of and manage your finances at no extra cost. There are also many specific software programs available to buy that can calculate taxation as well as keep track of your finances if that is all you want to do," he says.

According to Darren Ashley, managing director of Candour Consultancy, some software packages available can:

  • Put all your accounts in one place — most automatically download the bank account, credit card, personal loan, mortgage, car loan, statements directly from the banks
  • See where you are spending — most automatically categorise your expenses so you do not have to enter these manually. You can then see how much you have spent in a period and how much of this was on loans, food, utilities, clothing and leisure
  • Helps you stay on top of bills to avoid late payment fees and pay off debts quicker (again saving you money)
  • Set budgets and help you stick to these goals

"Such packages should be usable anywhere, though there may not be the facility to automatically download bank statements with the local banks," says Ashley.

But as advised in any sphere dealing with computer these days, there should be back up of the materials stored in the hard drive of your computer.

Of course there are those who opt for financial planner to keep track of all aspects their finances.