Buying a house: Plan for additional costs

If you are planning to buy a house then you must keep yourself ready to open the Pandora box called ‘Cost of house’. Very likely everyone, the seller, the real estate agent or the builder, will tell you about the basic cost of the house only. But once you make up your mind or sign up for the deal, the nonstop demand for the additional costs can leave you frustrated. Therefore in order to avoid any rude shock of bearing these extra costs in future, it is better that you budget for them while planning for your house purchase.

Most of the additional cost are either percentage of the basic price or are calculated on per square foot area. Hence higher the area or the basic price, higher will be your additional costs. The various additional costs can increase your total outflow on the house purchase by 25% to 30%.

Your initial house cost = BSP (basic price per square foot) * Super area in square foot

The various other costs keep on adding to it as purchase process continues. Here is the list of such costs:

At the time of purchase of house property:

A. Down payment:

It is upfront payment to the builder while buying under construction or ready to move in property directly from the builder. It could be anywhere around 10-20% of the BSP.

B. Token money:

It is upfront payment when you are buying resale property. Ideally, It seals the deal stating the agreed upon purchase price and terms and conditions of the sale.

C. Loan

If you are applying for loan from banks then apart from EMIs (equated monthly installments) you will be required to pay the following charges.

1. Loan processing fee

Banks charge processing fees for every home loan application. It is a non refundable and used by banks to complete various formalities during the loan process which includes documentation, service charges etc. It may vary from bank to bank and is generally between 0.25% to 0.5% of the loan amount.

2. Other charges

It includes advocate’s charges for property search and the title investigation report, valuer’s fee for valuation report, stamp duty for loan agreement. The charges are generally on the actual basis.

2. Loan insurance charges and premium

Home loan is a financial burden. It is recommended that the loanee and co-loanee should get themselves insured against this liability. They can either take insurance directly from insurance company or can take home loan insurance along with the loan from the banks. Premium depends upon age of applicant, amount of insurance and additional benefits.

3. Prepayment or foreclosure charges

Pre-payment penalty on the floating rate loans has been abolished. Banks may charge only processing fee. Whereas on fixed rate loans it can vary from Nil to 2% of the outstanding loan amount, depending upon the lender.

D. Title and Valuation check

Once you have narrowed down the property, it is necessary to carry out a thorough search to verify all claims regarding the property. It includes encumbrance certificate, title deed, No objection certificates from various government authorities, other ownership documents, approved layout and building plans, background check of the builder or the society. There have incidents of same property being sold to different people. Hence it is always advisable to take professional legal help to verify and validate the documents.

The charges may differ depending upon the type of consulting service, type of property, city etc. It can be anywhere between Rs. 1000/- to Rs. 30,000/- and may be more in some cases.

E. Additional charges on infrastructure of the house

1. EDC: External development charges

Builder will add this cost to your basic price while calculating the total purchase price. It includes charges for creation of utilities, costs incurred in developing water and electricity supply, sewerage, roads, street lighting, community halls, etc. It is calculated on per square foot area. This may vary from Rs. 25/- to Rs. 150/- per square foot.

2. IDC: Internal development charges

Like EDC, IDC will also be part of your total purchase price and will be demanded at the time of payment. It includes charges for facilities inside the housing complex/ society like garden, internal roads, lifts, fire fighting equipments. It is calculated on per square foot area.

3. IFMS: Interest Free Maintenance security and CD (Contingency deposit)

Builders ask for this deposit to cover maintenance costs for initial years before RWA (Residents Welfare Association) is formed or take over the maintenance work upon itself.

Contingency deposit is demanded by the builder to cover any future price escalations like labour costs.

Both are refundable charges. It can vary between Rs.20/- to Rs. 100/-.

4. Car parking

If you want reserved car parking area allotted to you, you may be required to borne this one time charge. Mostly one car parking is mandatory with the apartments even if you may not wish to buy it. It may vary as per various parking options like open parking, covered parking or basement parking. It may vary from Rs. 50,000/- to Rs. 4,00,000/-.

5. One time club charges

If the housing complex is providing a community hall or club, you may be required to bear the charges. It is a one time charge for the building and equipments of the club. It can be some fixed amount decided by the builder or society. It may vary from Rs. 20,000/- to Rs. 2,00,000/- .

6. PLC: Preferential location charges

It can vary as per your choice of location of house with in the housing complex/ society. Some commonly preferred locations are Garden facing, higher or lower floors, Corner flat etc. To give you an idea, it can be anywhere between Rs.10/- to Rs. 200/- per square feet.

7. Utility connection charges

These are one time charges for utility connection like Gas connection, water, electricity meter connection. It varies as per the builder or society.

8. Cost of fittings and customization

It is usually possible in under construction properties. Outer layout of the house cannot be changed but sometimes builder can customize interiors for you like flooring or changing colour of tiles.

At the time of Registration of house property:

1. Stamp duty and Registration charges

Registration means registration of the documents of ownership with the government office. Unless the process is complete, you do not possess the full ownership of the property. And stamp duty is the tax to the government.

Registration charges could be 1% to 2% of the total value of property. And Stamp duty can be anywhere between 3% to 10% of the market value/circle rate of the property. In India different states levied different stamp duties. Also it will be different if the owner is male, female, joint or senior citizen.

2. Legal Fees

You will be needed to take services of a lawyer for registering the property in the court. Lawyer’s can charge anywhere between 0.25% to 1.5% of the value of property. They may also charge nominal fees for various documentations at times.  

Recurring charges after buying the house property:

The recurring charges after the possession of house will include:

1. Maintenance charges, usually on per square foot area basis.

2. Electricity charges, including both regular power supply from authorities and Generator Running by the society. It will be on the actual usage basis. The cost of power supply generated using DG or Generator by the society can be much higher than the regular power supply.

3. Other charges will include water and gas supply on the actual usage basis, monthly Club charges and yearly property tax.

Buying under construction house property:

1. Service tax

If you are buying under construction property from the builder, you are liable to pay service tax on the purchase price. It may range anywhere between 3.09% to 3.71% of the purchase price.

2. VAT

Recently Supreme Court has levied VAT on the under construction properties. VAT is over and above the service tax. It is very likely that builders will pass on this cost to buyers. It may be any where between 1% to 5% of the purchase price. More is yet to be made clear in this regard, hence it is advisable to ask the builder upfront about the charges and get it in writing.

Buying resale house property:

1. Transfer charges 

Builders and societies charge transfer charges when the original buyer wants to sell it to the third party. Such charges are to be borne by the seller but in several cases the seller tries to pass it on to the buyer. The charges could be anywhere between Rs.50/- to Rs. 1000/- per square foot.

2. Voluntary contribution or premium on transfer charges

If you are planning to buy house from co-operative societies then it will be advisable to check the list of their bylaws. They may sometime expect some voluntary contribution towards the society funds which can come as a surprise after the purchase.

Buying through a real estate agent:

            1. Brokerage + VAT

If you are taking services of a real estate agent, then you must ask for the brokerage and other charges upfront. They may charge any where between 1% to 2% of the purchase price excluding VAT.

During possession of the house property:

            If you plan to shift to the house after the purchase, you must plan to incur further costs.

1. Pure Shifting charges

Shifting charges depend upon the distance, amount and weight of load to be transferred, location of flat like higher or lower floors. Charges for intercity and intra city transfer will be different. You can choose for options like packing, loading, unloading, unpacking and rearranging. It may vary between Rs. 3000/- to Rs. 50,000/-.

            2. Fitments

To make your house livable some more after shifting costs become necessary like cable TV, Phone, internet connections, Electrical equipment fittings, gas connection. Overall they may cost you additional few thousand rupees.

            3. Interiors

Cost of interiors will depend upon the condition of the house and your needs. Many builders provide basic plumbing, flooring and painting. But other additions like wood work, window dressing, accessories for kitchen and bathrooms are to be borne by the buyer. Also if you plan to buy new furniture and home accessories, then it is advisable to budget for them in advance. If you plan to hire a professional interior designer, you need to plan for their fees too. The whole cost of interiors can add few lakhs to your house purchase budget.

Note: All the charges are indicative; you are advised to check the actual charges before taking any decision.

Finally:  Buying a house or investing in Real estate can be a big financial commitment for the buyer. It not only affects immediate financial resources but can also impact future financial resources. It is always advisable to look into all financial commitments as well as study the personal, professional, health, financial as well as psychological situation before committing yourself to such a purchase. Comprehensive Financial Planning exercise can help you understand your situation thoroughly. House Purchase or Real Estate planning is an integral part of Comprehensive Financial Planning exercise.

You may also like to read the following articles on house purchase, home loan and real estate investing.

http://shilpijohri.blogspot.com/2012/04/road-to-buy-your-dream-house.html

http://shilpijohri.blogspot.com/2012/04/tame-your-home-loan-strategies-to.html

http://shilpijohri.blogspot.com/2012/08/what-is-your-real-reason-for-investing.html

Should we plan?

The article is also published by personal finance website 'Myiris'. http://www.myiris.com/financial/storyShow.php?fileR=20130128120127715&dir=2013/01/28

Who doesn’t like surprises? But won’t we like them more if they are pleasant ones! What about the unpleasant ones? Our wish would be to know of them in advance and have them changed into pleasant ones. It is the fear of unknown, unpleasant events and results that makes us worried. That is why we plan…we plan ahead to think of what-if scenarios and hope to take care of unpredictable ones from our lives. Our need for planning is evident in all facets of our life. Each day we get up in the morning with thoughts full of planning our day like when to start work, how to travel, where to eat or who to meet. On a larger scale we plan our prospects for college, projects at work, holiday tours or family life.

While planning our life activities, whatever or whenever we are planning, from buying toys in childhood to pursuing our interests after retirement, we are not able to get away from planning ‘Money or Financial’ side of these aspects. When we plan where to eat, we can’t avoid thinking how much will it cost? When we say which route to travel, aren’t we thinking about how much can we save by doing so? Going to a good college increases our prospects to earn good money and successful completion of projects at work ensures handsome bonus! Money is an integral part of our life planning. Through various activities we are either planning to save money, to earn more money, to get value for money or to avoid loss of money. Apparently ‘Life planning’ and ‘Financial Planning’ become synonymous in our lives!

Seemingly ‘planning’ or ‘financial planning’ should be easy, as we know our streams of income, streams of expenditure, rate of savings, capacity to build assets and extent of taking risks. We are aware of insuring ourselves against any odds in life and safeguarding our future with sound investments. Hence the process of planning should be uncomplicated and straightforward. And as a result all of us should be living a predictable, confident and stress-free life and which is why we plan. But are we able to plan?  Isn’t it astonishing to see that only few of us will be able to say ‘Yes’ to this question!

Why? Are the results mostly unexpected which makes the whole process of planning unreliable? Are we not able to influence the outcomes as we thought and planning seems unnecessary and useless?

 If this is so then ‘should we plan’?

The Process of Planning

Situations---Our Understanding of the situation---Our reaction to the situation---Outcome

Next three points may help us understand some aspects of planning process. Our understanding of these aspects will be our guide to finding answer.

1.     The Random events: (Unusual situations)

Planning refines our decision making and takes away randomness from our lives. It forces us to retrospect various forthcoming situations and define our reactions to them. As a result we feel more confident of the outcome. But as the saying goes ‘Man proposes, God disposes’…a lot of time situations and events are unpredictable and sometimes even incomprehensible. These are the ‘Random Events’ in life. Random events are the rare events whose affect on our lives can be compelling and are to be taken seriously.

There are rare and unpredictable events like Tsunami and Sandy, 26/11 firing in Mumbai or 9/11 in New York that can shake our confidence in being able to live a long life. And there are less than rare events like accidents and illness which cannot be predicted. If we are fortunate to be safe and sound our life planning or financial planning can be severely affected by the booms and dooms of economy.

Who could have predicted dotcom bust of 2001 where several people lost their jobs? Who could have foreseen downturn of 2008 where several people lost their hard earned savings? Or who could have known that subprime was lurking around the corner when several people lost their homes to debt? Within one decade a lot of people not only lose their jobs, savings and homes, they also lost faith in the system! No amount of future predictions could have paid their bills, college fees and loan EMIs. As an individual /family who were busy earning their living most of us were unaware of the changing economic conditions, we trusted the complex scientific analysis and advice given by experts and based our future planning on these forecast. But some ‘random’ events threw whole planning out of gear leaving us with a question ‘is it possible to plan’?

2.     The Mental blocks: (Biases against our understanding of situations)

Planning proposes the optimum solutions to any situation through an objective analysis and understanding of various related paradigms. The whole concept of planning process expects us to perceive and interpret all information rationally without inhibitions. But in reality we are influenced by the biases. These biases are ‘mental blocks’. Mental blocks are our feelings, motives, knowledge, experiences, social and emotional influences which prevent us from unprejudiced understating of any situation.

Young adults who are just starting career or a family are less likely to worry themselves about retirement planning or college fees for their kids than middle aged adults. Their new found financial independence and peer influence encourages them to spend and enjoy rather than save. Such feelings are type of mental block which prevents them to see beyond current life. The needs which are 25-30 years ahead seem to be too far to them. However in reality there are only 30 years available to earn, to save and to invest for entire the lifetime of 55-60 years starting from young adulthood. Not to forget that the earnings of these 30 years are to be used for current expenditure, lifestyle enhancement, vacations, future responsibilities, emergencies and illness along with preparing for the 25-30 nonearning years. Unfortunately even the magic of compounding interest cannot make up for small rate of savings!

Likewise we need to keep asking ourselves if we are getting trapped in the emotional spiral of worrying too much about future. This emotional spiral is a mental block which does not let us enjoy our present. Sacrificing all our present pleasures and keep worrying about our retirement plan is not wise. Who knows if we will be alive and kicking to see that day? We know that random events do happen! Activities like going on vacations with our children are more relevant when they are young and need our time rather than when they are grown-ups and are capable to have their own holiday plans. Now the question arises that how can we overcome mental blocks and plan?

3.     The Impulsive decision: (Hindering our rational reactions to situations)

Planning helps us in taking rational decisions. While planning is a process, decision making is a momentary task. It is the moment when we decide to act or not to act. However contrary to the rationale of planning the very moment of deciding may not always be thorough and vigilant. The aberrations are ‘Impulsive decisions’. These impulsive decisions prohibit the best possible outcome to favour us.

Unplanned purchases through credit cards are classic example of impulsive decisions. Each time we use credit cards for discretionary purchases we get closer to debt trap. We are fully caught into the web of paying high interest on this credit when we start rolling the debt instead of paying it off.  As a rational human being all of us know that being in debt is not a happy situation but the urge and satisfaction of fulfilling our dreams force us to take this step. The interest rate seems to be a small cost to pay for what is seemingly unaffordable for us. Who would like to wait when dreams are just a card away!

Should we plan?

Should we plan? Above points are good enough reasons to think otherwise. After all why we should waste our time and energy on planning when we have no control over situations, when we are unable to objectively analyze them and when we take emotional decisions as opposed to rational ones. And that’s exactly where lies answer!

Since there are random events in life we want to think of what-if scenarios and plan for them. Also as humans, we tend to get emotional and unreasonable at times. Objectivity and rationality in planning process keeps reminding us of unfavorable results of being emotional. In addition to that planning keeps us disciplined so that we do not take impulsive decisions. We may not be able to plan everything but with regular situation analysis, monitoring and discipline we can get desirable results to large extent.

We cannot fight what is truly unknown. We cannot know future but through planning we can keep ourselves ready for any hardships. So, of course we should plan and since life minus money is almost impossible to think of, we should acknowledge financial planning as part of our lives.

Happy Financial Planning!

Shake up your dreams and Wake up for reality checks!

You can also read this article on personal finance website 'MyIris'. http://www.myiris.com/financial/storyShow.php?fileR=20121018090239715&secID=finan&secTitle=Financial&dir=2012/10/18

Ever saw an accident victim or met with someone who has lost his job? You may have felt sad for them. At the same time how much you wished and believed that this will not and can’t happen to you! More often than not you would wish to live in dreams where every wish of yours is successful and everyone around you is in good health. Life, however, is full of both pleasant and unpleasant surprises. In your dreamland, you may choose to deny and run away from the unfortunate incidents but in the real world they may catch you sooner than you think of. Surprises can’t be avoided but you can definitely prepare yourselves to face them when they happen. The best way is to do regular Reality checks.

Reality checks “question”everything what you believe will come true. They compel you to deliberate upon possible favorable and unfavorable outcomes of the developments happening in all aspects of your life i.e. be it personal, professional, medical or financial.

Here are some of the dreams and their financial aspects that need reality check!

1. Fortune of good health

When was the last time you went for a health check up?

Some people avoid it because they believe that nothing shall go wrong with their health. Some avoid them as they are too afraid of the results and wouldn’t want to face the doomsday. Both type of people are in state of constant denials. Doctors are concerned about how stress alone is causing to worsening health reports every year. Regular checkups can help you track your health and take corrective measures before small problems turn into bigger issues.  The amount of money you will spend on them will be much smaller than what you will be required to spend should they become large problems.

If you are in a corporate job, you can join the regular health camps covered inyour HR policies. You will be motivated by seeing your colleagues around and your family will be motivated to see you doing it. You can buy an insurance plan that reimburses preventive checkups at least once a year. Also allocate some part of your monthly budget for medical purposes. If it is not used, it will accumulateto build towards medical emergency fund. Always renew your medical insurance. Critical Illness like heart attack or cancer can completely drain you financially.Buy exclusive insurance policy covering critical illness. Try to get maximum coverage possible depending on your age and premium paying capacity. After all “Health is Wealth”.

2. Bliss of double income

As professionally qualified working couples do you think none of you will ever take a career break?

Women often take career breaks when they want to bring up children. Even men take sabbaticals to reflect upon their career progress or to deliberate upon possible career shifts. Some may be willing to take a break for pursuing entrepreneurial instincts. In all of these cases some part of family income gets discontinued. Obviously your lifestyle gets a jolt if one source of income dries up. This has a strain on personal finances, makes you anxious and compels you to mull over your decision again and again. By carefully planning your finances you can save a lot of trouble.

The important point to note is…’Plan your finances before you take the decision of career break’. Be able to visualize your life after the break has happened. Now write down all sources of income and expenditure both before and after the break. Differentiate between discretionary and non-discretionary expenses. Expenses like house rent, loan EMIs, school fees, regular household expenditure can’t be avoided. Also insurance premiums like life insurance, medical insurance, home insurance are unavoidable. You must prepare everyone in the family for some lifestyle modifications like reducing the number of outings and vacations, restriction on gifts, postponing purchase of high value items. The circumstances may force you to cut down on your yearly investments. In such cases allocate your investments as per your reduced risk taking ability. Also, your cash flow should include forthcoming expenditure in case of new additions in the family.

3. Ladder of continuous promotions

Are you sure of getting regular raises, bonuses and promotions in your career?

Tough economic conditions are making it difficult for the companies to match thebonuses and raises they used to give in the past. Promotions are slow and even deserving candidates are being left out. It becomes even more difficult when you climb up the corporate ladder. There are a too few positions for too many. It will be wise to keep a backup plan ready to handle disappointments.

The most important aspect of your financial back up plan is to avoid extrapolating your income on the basis of the highest raise you ever got. Rather take a conservative approach and make assumptions as per the industry average. Keep in touch with the job market to evaluate your financial worth. Even the entrepreneurs and freelancers should do it in case their venture does not turn out to be as profitable as expected by them. Examine if you will be able to amass enough wealth to take care of your retirement or children’s education and settlement. If not, then you should be mentally prepared to postpone your retirement or think of a way to generate secondary income.

4. Magic of affectionate relationships

Do you wonder why family court and relationship counselors exist?

Cases in family courts are rising every year and money is the major reason for it. A lot of married couples have disagreements about spending habits. Some even hide their full income and investments from each other because theybelieve their spouse to be unreasonably extravagant. There are some who assumes full responsibility of home finances and do not share issues like debt or financial losses. Such actions jeopardize the very foundation of the relationship i.e. Trust! It eventually leads to increasing number of arguments and fights. They land up with counselors and in extreme cases with the family courts. An open all inclusive communication on money matters can save a lot of troubles.

The key is to take all family members in confidence, which includes even your children! Everyone should be encouraged to participate in the budget planning every month. It will give them a chance to understand the financial situation of the family and adjust their expenses accordingly. Financial health checkups every year are the best way to avoid surprises. Such checkups are comprehensive in nature and detail out everything from your assets to liabilities, sources of income to reasons of expenditure, investments and insurances. Also regular ‘Financial Get together’ can simplify matters like inheritance as everyone will know ‘what to expect’ in advance.

5. Heaven of ever growing investments

Would you be shocked to see the actual monetary value that you can realize from your investments?

As an investor some people are firm believer of ‘long term investments’ and hardly revise their investments till the long term arrives! Some feel ‘magic of compounding’ will keep working for them and they will be rewarded with a huge sum of money for keeping patience. Patience is virtue but it alone cannot help you when it comes to finances. A carefully planned strategy is important to achieve your goals through your investments.

Always define the purpose, time horizon and return expectations of your investments. Revisit them at least once every three months. It is imperative to align your investments with your goals like kids college admission fees, down payment for buying house, vacations, retirement and the like. Purpose will help you formulate the entry and exit strategy and timing for your investments. Since everyone has unique situation and money psychology, invest only in those avenues which can give you a good night’s sleep. Stay away from becoming victim of fashion in personal finance.

Finally:

Reality checks will keep your dreams real!

Comprehensive Financial Planning exercise can help you inquire and investigate your dreams. It is a reality check which encompasses all of the above suggestions and much more. It is in-depth study of your overall situation. You will be required to write down your dreams and convert them into quantifiable goals. The action plans thus prepared will take you closer to your goals and hence to your dreams. Let all your dreams come true!

Traveling for work? Help your family cope with it!

Travelling for work may be unavoidable at times. Apart from work pressure there is pressure to adjust with the new surroundings and to fix the derailed personal routines. While you are yearning for the companionship of your spouse, laughter of your children and home cooked food, your family is missing you too. Your spouse is left alone to take care of the house and children along with their own professional commitments. There is tremendous emotional and physical pressure to keep everything up and running for them.

A frantic call from an anxious spouse and the wailing face of your child on a video call can give you sleepless night. You are left wondering as to how to ease their burden and release them from their woes as you need to be physically away to earn the living. Physical workload cannot be shared! Your spouse will have to take the children to school, get the things fixed up at home or entertain the guest alone. You may be an emotional support by communicating with them more often. However there are few more fronts to be taken care of, like, home finance. Assuming that you are the one responsible for the financial aspect of home management, here are few points as to how you can help your family even while being away.

You may already be doing your bit but answering the following questions before your travel can put everyone at ease.

1. Are your financial documents in order?

Your spouse need to open a bank account or your washing machine has broken down…what is the next step? Bank will demand ID proof and residence proof. As for your washing machine, warranty card and helpline numbers will be needed. What if your spouse could not dig out these important papers?

You could have helped your family by organizing various documents and keeping them up to date. For ease make a list of all your important documents like house and car registry papers, passports, voter ID cards, certificates of education, income tax returns, Insurance policy documents, medical insurance cards, pan cards, warranty cards for all major purchases. Scanned copy of these documents can be stored in Google docs and the like with no or nominal fees. Also one or two set of photocopies endorsed by concerned authorities can be useful.

2. Have you made all the payments?

Your son was watching his favorite cartoon when ‘services terminated because of non payment of dues’ popped up on the television screen and your spouse received a stern reminder about the maintenance bill of the house…why did this happen?

It happened because you kept on postponing the payments till the last date and between your crazy work schedules you forgot to pay them before going away. To avoid such delays, set monthly reminders on your mobile. Online or mobile payment options can be very convenient. High priority payments like Loan EMIs and insurance premiums can be done through ECS (electronic clearing service). Always leave few blank cheques signed by you at home if you are the one who signs the cheques. Blank cheques can be useful in cases like payment of insurance premiums which are to be done only by life assured or changes like amounts and dates.

3. Does your family have all required insurance covers?

Your father has fallen ill and has to be hospitalized or your car has met with an accident…How to tackle these emergencies? Medical treatment can be expensive more than you thought.  Accident has to be reported to the police and insurance company who will demand documents like car registration and car insurance.

Insurances are the assurance to reduce your monetary burden in case of mishappenings like death, accidents, illness or theft. However unlikely it may seem but such emergencies can happen to anyone anytime. It is always good to be prepared so ensure that your family has adequate life insurance, medical insurance, accidental insurance, professional indemnity insurance etc. Insure your house against calamities like earthquake or fire. Keep our vehicle insurances up to date. Most importantly, ensure that everyone in the family knows about them even your school going children. This can be one of the ways to educate them in home finance and also as they can play a crucial role in your absence.

4. How will you do your banking transactions?

Your wife has tried to access the locker jointly held by both of you but was denied the operation or you want to make prepayment for your house loan and bank has demanded your presence…can this be avoided?

Banks strictly follow the guidelines regarding customer identity, be it matching photographs or signatures. They do it to safeguard their customers against identity theft. In the cases where the customer cannot be present him/ herself, banks accept letter of authority issued in favour of relatives. The letter allows the bearer to operate in absence or in place of the customer. If you travel frequently such a letter can be of great help. Also if you are travelling for duration above a month or so, try to visit all your banks along with your spouse for better understanding of the transactions to be done in your absence.

5. Can they make purchases easily?

Your family decided to surprise you with an international vacation instead you get a call from them brimming with frustration…what would have gone wrong? They could not make the payment because of the lack of access to the desired sum (more than usual purchase routines) and their plan to surprise you was jeopardized.

It happens when one person handles all money and takes all big financial decisions at home. First and foremost, ensure that all sources of income, investments, expenses and liabilities are known to the adults (particularly spouse) in the family. Secondly they should have access, understanding and freedom to do monetary transactions in your absence, howsoever uninterested any of you may be! A credit card with a good purchase limit will ease their life. Nevertheless get a debit card instead of credit card, issued for the extravagant shoppers in your family! Handover all your membership cards like retail chain memberships or brand exclusive memberships to ascertain that you are still gaining the reward points and making your family happy.

6. Is your family travel ready?

Duration of your work got extended. Your family wanted to join you and you could not get them shipped to where you are working…who is to be blamed? Travel was not possible because your wife could not get visa approval just because your name was not endorsed on her passport.

The two most important documents for an international travel are passport and visa. Visa approvals are easy if your passports, identity proofs, resident proofs are in order. It is always helpful if you get name of husband / wife endorsed on your passport after marriage. Also documents like marriage certificate and birth certificate of your child can be crucial at times.

Finally:

Positive answers to the above questions can put you at ease. Even though it can be very exhaustive check list and a lot of work on your part, it is worthwhile, as everyone in the family will get to understand the financial management and will be allowed to play their roles.

All of the above points and much more are addressed during comprehensive financial planning exercise. A Comprehensive Financial Plan can help you organize your finances, analyze your current situation and plan for your future. The various checklists prepared during the development of the financial plan can act as references as each plan is as unique as your situation.