The Shoe Box Financial System

28 Apr 2017

Have you ever heard of the “Shoe-Box” financial system?  People who utilize this system come in all shapes and sizes.  Chances are, you have one in your family.  God help you if you are the executor of their estate.  I am of course talking about the people who have everything stored in a shoe box, somewhere in their house.  Well, maybe it’s everything.  Depends on how big their feet are and how many pairs of shoes they have.  Here is the problem. It isn’t an organization system.  It is a dumping ground.  Anytime there was financial paperwork, important or not, it was put into the shoe box to deal with…someday.

There is really only one way to deal with the Shoe Box Financial system.  Two if you count a match and gasoline.  This is to organize your finances in a cohesive and understandable format.  This will give you peace of mind understanding where everything is.  It will also be a blessing to your heirs and those who take care of your future estate if something were to happen to you.  By having a cohesive organization system, you eliminate unnecessary time and expense in settling your estate or building your financial plan.

Gather your documents

The first step to organizing your financial life is understanding what documents you need to have on hand.  There is a relatively easy way to determine if you need a document or not.  See if you have duplicates or documents that look nearly identical for the same account.  For example, you don’t need to keep every monthly statement for an account.  The Year-End Statement will suffice.  Keep a copy of a statement for each bank account you own, as well as all insurance policies, and investment accounts.

Insurance Companies will typically issue some sort of a policy statement on a minimum of an annual basis.  Keep the original contracts in a safe place, and keep the most recent Policy Statement with your most recent account statements.

Keep a copy of your will, power of attorney, trust documents, and medical directives in a safe place.  Also be sure that those individuals who are named as the power of attorney know where and how to access the documents in case of emergency.  If your financial advisor asks to be your power of attorney, this is fine.  Only after you have fired them and found someone else to manage your assets. Never add your financial advisor as your power of attorney.  This creates conflicts of interest and is illegal for them to do.

It would be wise to provide your financial advisor a copy of your Power of Attorney documents so that in the event that you are incapacitated, they will be able to speak to the named individual.  Depending on the company, they may require the named agent to complete an affidavit if the documents are several years old.  They may also have their own documentation that allows them to provide information on accounts to various individuals.

Organize your documents

The most effective way I’ve seen this done is in a three ring binder.  Even for those folks who like eStatements, it isn’t a bad idea to have a paper copy with all of the accounts.  This will allow your executor or financial power of attorney to quickly be able to locate funds and accounts.  You may want to consider keeping a list of website user names and passwords.  Do not limit this to just the financial stuff.  Include social media websites such as Facebook and Twitter.  An updated Will in this day and age will include a provision about digital assets such as these.  This ensures that your heirs will have access to photos and other items stored digitally.

Typically, investment accounts do not have details regarding beneficiaries on the statements. Create a document showing the beneficiaries set up on each account.  Don’t over complicate this.  It can be as simple as an excel spreadsheet or a handwritten note listing the account number, and the percentage to each primary beneficiary and contingent beneficiary.  If there isn’t a Payable on Death or Transfer on Death listed for Non-Qualified Assets, write in N/A or Provisions Under Will.  When beneficiaries are added or subtracted from accounts, a confirmation is typically sent.

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Keep it Up to Date

I cannot express the importance of this last step.  I’m not suggesting that you need to change things out on a daily basis.  As your life goes, you will make changes to your plan.  You may close down an account and open a new one.  Maybe you find out you hate your bank.  You might delete a social media account.  I would suggest reviewing the information in your notebook at a minimum of once per year.  This will allow you to change out last years statements with the updated versions.  You can also make sure that the password updates are reflected, and correct any beneficiary updates that have occurred as well.  And of course, make sure to keep everything in a safe place.

I cannot tell you the anger and angst that I have seen due to shoe boxes.  The issue is that the person who is left behind is dealing with a situation they have never seen before.  They are also doing so at the peak of an emotionally sensitive time.  Having your finances laid out in an easy to follow format can be the greatest gift that you give your family.

If need some help, give us a call.  This is what we do.

Today is the day, make it count!

Casey

 

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Casey Mushrush

Have a question or want to see a post written about a specific subject? Send me an e-mail at casey.mushrush@premieriowa.com. I am involved in many of the educational elements of Premier Investments of Iowa, including appearances on WMT Radio, WHO Radio, KXEL Radio, and KCRG Television. In addition, I am a frequent guest host of the Premier Pulse, a personal finance education video blog. I partner with my clients to develop a specific set of financial goals based on their personal situation. We analyze their state of affairs, map out a course of action, and implement a written financial plan based on their own circumstances. We design and implement a long term investment strategy guided by the principles of asset allocation and based on personal risk tolerance. I utilize behavior coaching to help clients deal with the emotional aspects of investing and stick to their long term plan. Additionally, I am responsible for the practice management of an Office of Supervisory Jurisdiction. I aid our advisors by ensuring they are running their businesses in a compliant manner, as well as providing direction and suggestions on process improvement and implementation.