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Money Basics Series – Part 6: Protect Assets and Your Future Nest Egg

Personal Finance Fundamentals Every Adult Should Know

Your financial journey doesn’t end once you’ve figured out your budget and eliminated your debt. After you’ve secured some wealth, and you’re in a stable financial position, your most important goal is to protect assets you do have, and to build your nest egg for retirement.

This series won’t go into the basics of investing your money for retirement, as that is an enormous topic that includes stocks, bonds, ETFs (exchange traded funds), venture capital, private equity, real estate and other alternative assets.  Instead, we’ll talk about how to protect your wealth in more general terms.

To Protect Assets, You Need to Know Your Assets

First, make a plan to have at least six basic “money dates” with your partner or yourself.  Plan for the money dates to be at fixed times (maybe the first Thursday of every month), and limit them to 30 minutes. Grab a three-ring binder to hold all the information, and toast with a glass of wine to celebrate your assets.

Date 1: Expense Accounts

The first meeting might focus on expense accounts and passwords.

The money handler should, prior to the meeting, gather all of the expense account information. This should include all of the household accounts, with usernames and passwords, account numbers and any other relevant information. At the date, the money handler should identify and explain each account and how it is addressed.

For example:

  1. We have three credit card accounts that are paid online on the first of every month.
  2. We have the following monthly utility and household expenses that are paid by mail on the first of every month.
  3. We pay your parents’ monthly rent on fifth of every month, but there is no statement, so here is the address where the payment is sent and this is the memo to include with the payment.

After the meeting, place the lists (with passwords and account information generated) into a three-ring binder and keep it in a safe or fire-proof lock box.  Make sure your partner also has the combination to the safe (and that the combination is kept in a separate, safe place) and/or the key to the lock box.

Date 2: Insurance and Expenses

The second meeting might focus on insurance policies and expenses.

The money handler should prepare a listing of all insurance policies along with the current billing cycles, accompanied by a calendar showing when to expect to make premium payments. For example:

  1. We pay automobile insurance every six months and unless you notify the insurance carrier to the contrary, an automatic draft will come out of the ABC Bank checking account on the fifth of January and July.
  2. We pay for our life insurance policies annually from the DEF Bank and you should expect to see an automatic debit every February 15th.
  3. We have disability policies with GHI insurance and those premiums are paid by check in June.

Laying out the dates of anticipated payments and the accounts from which the funds are to be drawn will be crucial to ensuring that things still run smoothly when the money handler is not available. In the event of an emergency, you do not want to risk losing any of the policy benefits that you have been likely paying into for years; a missed payment may result in a cancellation of the policy when it is needed most.

Date 3: Family Legal Documents and Wills

The third meeting might be dedicated to ensuring that both parties know where to find the family legal documents. These documents may include living wills, powers of attorney, wills, trust agreements and any informal estate planning documents. It is important to review these documents together and make sure that your current wishes are aligned with those stated in the documents at the time they were drafted.

Date 4: Savings, Investments and Your 401(k)

The fourth meeting might focus on your savings, retirement and investment accounts.  Prepare a simple listing of all of your joint and individual accounts, with the respective account numbers, contact information for your personal representatives (or institutions) and the balances. If you have college savings accounts or other accounts set up for family members, be sure to include those as well.

If either or both parties have private, individual accounts or accounts where one is a custodian (holding money for another party) with a fiduciary responsibility to keep that information private, consider preparing a sealed envelope with any necessary information written on the outside.

Date 5: Real Estate Assets

The fifth meeting might focus on your real estate assets, if any. Prepare a listing of all real property owned, along with the related deeds, mortgages, recent tax statements and rental agreements, if applicable. Prepare an analysis to clearly identify the current equity position of each property.

Date 6: Personal Property Assets

The sixth meeting might focus on your personal property assets. Prepare a listing of your valuable personal property, along with any titles to ownership and locations of the assets. This list should include savings bonds and tangible assets, such as automobiles, jewelry, collector items, art work, etc.

There is no need to list your furniture and daily living items, rather, this is an opportunity to prepare and discuss the value attached to items that have significant value. If there is a safe deposit box, make sure to identify the location and related information necessary to gain access to that as well.

Protect Assets with Insurance

Now you know how to record your assets, but how do you protect assets, such as your home?

Learn from Becky’s story:

Becky’s house was hit by lightning a month ago. The thunderbolt and surge of power infiltrated in a flash through the chimney, blowing the bolted iron doors off the facing of her fireplace, discharging soot and projecting shards of glass everywhere. The strike fractured the concrete foundation, fried the electrical wiring, and tore through Becky’s keepsakes and collectibles. While the immediate scare slightly unhinged her, the secondary shock came in the way of tremendous financial repercussions.

Becky’s family was forced out of their home for almost two full weeks. During that time thousands of dollars went directly to hotels and meals out, repairs, house-wide rewiring and multiple internal power-washings. Appliances, antique and modern furniture, floorings and clothing were instantly demolished. Artwork and framed portraits, irreplaceable family heirlooms and shelves of Becky’s home were gone. All of the groceries purchased that week, and the food stored in the extra freezer, were lost. You get the picture.

Ah, but the picture is really what you need to get!

In 2015, it was reported that “43 percent of U.S. homes and condos – that’s a total of 35.8 million homes – are at a high risk or very high risk of at least one type of natural disaster.” In 2019, there were a total of 14 natural disasters that cost the nation over $1 billion. Since 1980, there have been 258. And to drive the point further, 60% of all hurricane damage takes place in the U.S.

Those statistics are alarming by any standard.

While Becky did have homeowner’s insurance, she had never fully read her policy and did not know what costs would be recoverable, or how she was going to prove to the insurance company the scope of the damages she had suffered.

Today there are a myriad of options for homeowners (and renters) to take to protect and prepare for in the event of such potential devastation. Mainly, if you do have insurance, you want to make sure you will be entitled to collect on your claim. Thus, you must (1) know what your insurance policy provides (replacement or current value), and (2) have a full and complete inventory of your assets.

While there are professional companies that provide this service, you can protect yourself by making your own record of your household assets today, and providing a copy of that record to your insurance company on a thumb drive today, while keeping a copy in the cloud.

When you know how to record assets, you know how to protect assets, and therefore, can continue to grow your assets into retirement.

[Editor’s Note: To learn more about this and related topics, you may want to attend the following webinars: Basic Investment Principles 101 – From Asset Allocation to Zero Coupon Bonds and Goal Based Investing – Planning for Key Life Events.]

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About Michelle Gershfeld

I’m a debt settlement and bankruptcy attorney who negotiates resolutions between clients and their creditors. I am also a real estate attorney involved in both sides of purchasing and selling distressed real property. I am passionate about teaching people about money and helping individuals of all ages achieve financial independence and success in a "no…

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