3. Do you have inadequate life insurance?

This one is critical, not only for you, but for your family, too.

Imagine this: You have taken a home loan and have not covered the same. Your death will devolve the debt on your family, which may not have adequate assets.

Result: They will be left without a roof over their head because the bank will exercise its rights to take over your home.

It is your worst nightmare come true. Insure your life with an adequate amount to help your family maintain their lifestyle.

4. Have you forgotten your piggy bank?

There is a reason your mother taught you about savings using that little plastic piggy bank: to make you understand the importance of having an emergency fund so that you are never caught unawares. Sudden illness in the family, an accident or a temporary loss of job are realities of life that creep up on you when you least expect them.

Here are two reckoners:

i. If you are in the lower tax bracket, you need to have around six months of your monthly expenses in fixed deposits.

ii. If you are in the higher tax bracket, give a thought to floating rate funds/liquid funds.

5. Are you a guarantor to too may of your friends' loans?

You may value your friend, but are you willing to go bankrupt for him/her?

If not, it would be a good idea to release yourself from the position of guarantor. Advocate Nirupama Kar warns: “All your personal assets could be attached, including bank balances, property and investments, leaving you bankrupt."

If you are pushed into this, Amar Pandit suggests that you keep up to 35 per cent of your gross income safe. Debt exposure beyond this figure can mean financial disaster.

Okay, how many times while reading this did you pat your back?

a. Five pats make you God.
b. Anything between three and four means you need to watch out.
c. Less than two means you are already bankrupt but just don’t know it yet!

Photograph courtesy Vipurva Parikh

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