By MARSHA BARNES, financial literacy coach
How many of us can say with confidence that our financial documents are safeguarded, neat and within arm’s reach? Or are you a part of the other group with trails of bank statements, a years’ worth of paycheck stubs and aged credit reports crumbled in the bottom of your purse?
Many of us lack having a financial packet that contains the necessary documents we need in the case that our loved ones would need to retrieve them if we were unable to do so? Ask yourself, these three simple questions:
- Who knows where my financial or legal documents are located?
- If an emergency were to arise, who would I trust to handle my financial affairs?
- Do I really want to be digging out old statements or charity receipts at tax time?
How common is it that at one period or another we have all heard the horror stories of families that have met the results of lack of planning, lack of communication and lack of preparation at the most unfortunate times? Chances are there are quite a few documents that each of us know we should have, but just haven’t gotten around to making it happen yet. Provide yourself with a bit of comfort and your family with a peek inside your financial life by making the following documents readily available. Trust me you’ll be glad you did.
Financial Accounts (Personal and Business)
Obtaining your bank statements twice a year and storing them within a packet is a great rule of thumb for consistency purposes. Your list of documents should include your personal or business accounts bank statement, a 401k or retirement summary, an overview of any investment funds, stocks, or bonds, and the last three years of your tax returns.
A basic balance sheet of what you own and its worth will suffice. Assets are considered as anything of value or monetary earnings that you have in your possession, with the hope of providing a future benefit. Tangible assets include but are not limited to cash, certificates of deposit, land, or equipment.
Financial liabilities are defined as an obligation to pay money to another party-arising from borrowing funds or a legal action. Common examples would be mortgage(s), personal or business loans, car loans, student loans, personal or property taxes, credit card bills, and monthly utility bills. A one to two-page document outlining the name, account number and where appropriate the outstanding balance is an effective tracking method. Very similar to your financial accounts, an updated version of this document should be placed in your packet every six months.
Regardless of how uncomfortable the conversation may be, we are all aware that one of the primary goals of having life insurance is to provide us with a peace of mind that our debts and particular family members will be taken care of when we are no longer here. Rather than following a specific rule of thumb, measure the amount of debt you have and ensure you have adequate coverage to pay off those obligations. All insurance policies (including life insurance, auto insurance, and if applicable home owners insurance) should also remain in your financial packet for safekeeping.
Power of Attorney
In short, a power of attorney is naming someone that will be responsible for handling all of the above in your absence. It is a written authorization to represent or act on another’s behalf in private affairs, business, or any legal matters. The paperwork involved in having a POE documented is minimal however, having this document in place holds great significance.
To avoid having your prized possessions and there future whereabouts handled by your residing state, it is important to have a well written will. While there is a plethora of software available that will allow you to create a DIY will, there is great knowledge to be gained in consulting with a professional to address and confirm any state laws.
There are no limits to being overly prepared. As you consider additional documents that would be helpful in your planning phase (medical cards, dental records, and proof of ID) locate an area within your packet and insert them where you see fit.
As you continue to collect and check these must have documents off your list, develop an easy to manage organizational system by finding an approach that works best for you.
What is your go to method of certifying that you have the appropriate financial records in place?