What happens if you or your spouse were to die or be seriously injured? Would you know how to handle the finances or know where to find all your important documents? Would you have a clear picture of all your financial accounts? Would either spouse be able to carry on managing the finances without input from the other?
For most people, the answer is a simple, “I don’t know.”
Why Create a Financial Inventory?
Doing a periodic financial inventory is a great way to get a big picture view of your financial situation, as well as a detailed view of all your accounts. A financial inventory is essential in the event of the death of a loved one, catastrophic natural disaster, fire, flood, theft, etc. You want to be able to resume your financial life with as little stress as possible.
My wife and I have been refining our finances over the three years we have been married. While they aren’t perfect, we have done a lot to simplify and organize our finances so we know where to find basic account information and either one of us should be able to handle the finances individually.
How to Create a Financial Inventory
Creating a financial inventory isn’t a difficult task, but it can be very time consuming. I recommend setting aside a large block of time where you can gather information, documents, and other pertinent information. In the process you may also find areas where you can streamline and simplify your finances. Take notes and make the changes later, otherwise you will split your efforts and double the time it takes to accomplish both tasks.
In your financial inventory you will want to create a list of all your financial accounts, including assets and debts, real estate holdings, titles, deeds, valuable property such as artwork or jewelry, insurance policies, retirement accounts, legal documents such as will and trusts, and contact information for important people involved in your finances, including your financial planner, accountant, or lawyer. Many of these items should also be included in your home inventory. Below are some of the steps you can take to create your personalized financial inventory.
List All Your Financial Accounts (Assets)
Your account list should include the contact information, address, account number, website address, user name, password, and other information necessary to access your account. This document will contain sensitive information, so you will need to protect it by keeping it in a safe deposit box, in a safe, or encrypted on your computer or external hard drive. Also consider keeping an encrypted file online. You can also keep the account number and password list separate – just make sure each is in a safe location and they are not stored together. You account list should include:
- Bank accounts: high yield savings, checking accounts, money market, credit unions, etc.
- Investment accounts: brokerages, mutual funds, etc.
- Retirement accounts: 401(k), 403(b), Roth or Traditional IRA, Thrift Savings Plan, pensions, annuities, etc.
- Education accounts: 529 college Savings Accounts, Coverdell ESAs, etc.
- Real estate: Deeds and titles
List Liabilities and Credit Accounts
This list should include lender contact information, account numbers, and a rough estimate of amount owed for each loan in your name. You want a rough estimate of how much you owe to make it easier for any survivors to get an accurate sense of your affairs.
- Credit cards: list card issuer, number, and contact information.
- Mortgage: lender information, escrow company contact info, purchase price, recent valuation estimate.
- Personal loans: Auto loan, student loans, other loans.
Insurance and Other Financial Accounts
You will need to keep a copy if your insurance policies. If they are too bulky to print, then consider saving a pdf file to your hard drive or a portable thumb drive.
- Health insurance and/or health savings accounts
- Homeowner’s or renter’s insurance
- car insurance
- life insurance
- disability insurance
- long-term care insurance
Wills, Estate Plans, and Other Legal Personal Documents
- Wills: Living will, last will and testament
- Durable power of attorney (financial)
- Durable power of attorney (medical)
- Beneficiary designations for bank accounts, retirement accounts, life insurance, etc.
- Legal business documents, such as letters of incorporation
- landlord-tenant contract
- other legal forms or estate planning documents
Other Important Personal Documents
Your situation may include items not listed above, so be sure to include other important documents that you will need. Some examples are listed below:
- Tax records, receipts, and related documents
- Military record, such as DD form 214.
- Medical records
- Next of kin and close friends
- financial advisor
- insurance agent
A Financial Inventory Helps you Pick Up the Pieces
Doing a financial inventory will help give you or your survivors a complete picture of your financial situation, and make it easier to continue in the event the unthinkable happens. I recommend creating a financial inventory annually, or every time you have a major life event, such as a birth/death in the family, moving, new job, purchase a new home, start/sell a business, etc. Your financial inventory is also useful for creating a will or a financial continuation plan.