As I sit with my family marveling at how instantly life can change, I'm also watching one of my dearest relatives struggle with the financial realities of this terrible event. We always say we'll plan for the eventualities…we'll get the will together, we'll make sure the life insurance is up-to-date, we'll pay attention to where our money's going, we'll clean up the filing cabinet…but life tends to get in the way. The urgent pulls our attention away from the important. We get busy. Usually, it all works out.
But sometimes it doesn't.
My cousin's friend, a retired financial planner and stock broker, is helping her through this by tackling the unopened statements and unanswered questions and hopefully making sense of it all. In the process, we've been talking about simple preventative measures everyone should take to avoid such a mess themselves.
Share the responsibility for financial matters.
The simplest, most important thing you can do is to talk to each other about your money. If one person is responsible for the bill paying and record keeping (or the insurance levels, or the investment plans, etc.), imagine what would happen if that person suddenly went away?
Sit down together (possibly with a glass of wine) and talk about where you are financially and where you want to go. Each of you should have a sense of how much is in the various accounts, how much you pay for utilities, and how much you owe on your credit cards. If necessary, hire a financial planner to help you have these conversations. Things sometimes go more smoothly while sitting a nice office in the presence of a objective party.
Put recurring payments on autopay.
There is no reason to ever forget an insurance or mortgage payment. Set up automatic payment of those bills, either via direct withdrawal from your bank, or through autopay via your online banking system. Last resort: pay your bills automatically using your credit card. If cash flow is an issue (you're not sure if you have enough in your account every month to pay all of the bills), at least put your life, disability, and car insurance on autopay. The consequences of letting them lapse are dire.
Buy life insurance.
Everyone with a family needs life insurance. Term life insurance is CHEAP. Get some and put it on autopay. Your financial planner will help you with amounts. If the main breadwinner were to die, the surviving family would rest a lot easier knowing the house/the debt/college/whatever were paid off. If the person responsible for most of the child care were to die, the surviving family could pay for good-quality day care and (if necessary) housekeeping and gardening help. If breadwinning and child care are shared, life insurance makes sure that a death in the family doesn't also mean a massive shift in lifestyle.
Get a will.
Everyone needs one. Pay a lawyer or a paralegal a few hundred bucks to do it for you, or use software such as Nolo Press's Quicken Willmaker. Get it done now.
[Note: Until May 28, 2011, Willmaker is 71% off the regular price of $69.99. Quicken Willmaker Plus 2011, $19.99]
Co-sign on the safe deposit box so each spouse can access it.
If you've been putting off this 10-minute job, do it as soon as the bank opens. Consider putting a third trusted signer on the list in case you both die at the same time.
Consolidate your financial records.
Spend 15 minutes a day cleaning up your file system. Create a master list of contact and account numbers so anyone can have it all at their fingertips. The master list should contain:
- Account numbers for all bank accounts, investment accounts, and retirement accounts.
- Account numbers for all credit cards and loans.
- Account numbers for all insurance policies.
- Contact information for all financial and legal advisors.
- Contact information for each person's workplace benefits department.
- Social security numbers for everyone in the family.
- Location of the safe deposit box.
- Passwords, maiden names, mailing addresses and other secret keys to accessing information about these accounts on the phone or online.
Keep copies of this list in sealed envelopes in the safe deposit box, in a locked file, and with a trusted family member (ideally the executor of your will), and update it as details change. Be careful to keep this list accessible but secure — it's a crib sheet for identity theft.
Update beneficiary information.
Whenever there is a birth or death in your family, update the beneficiary information on your accounts and investments. If you have a will or trust, check with your lawyer; in some cases, the primary or contingent beneficiary should be "estate."
Don't put off the conversation.
If there's anything this last week has shown me, it's that everything can change instantly. Set aside time this week to get started on these steps, whether with your spouse, your parents, or on your own.
By the way, we're talking about the death of a spouse, but this list works just as well for the loss of a job or any other sudden life change. It takes much less than a death to knock you off your rational feet for a while, and knowing the money matters are squared away removes an incredible amount of stress.
I know this stuff can be uncomfortable, but once it's done, it's done. You owe yourself and your family that peace of mind.
Have I missed anything? Any other financial housekeeping suggestions to offer?