March is here! Spring is around the corner! As the snow finally melts and we see more sun – and days are getting longer! – I see people out and about with a little more pep in their step. The arrival of spring is re-energizing and can get those motivation juices flowing. There is a reason why it’s call “Spring Cleaning” after all. But Spring Cleaning doesn’t just relate to our physical surroundings. It can relate to our mental well-being by ridding ourselves of negativity as well as the nagging anxiety of that seemingly never-ending “to-do” list. One clean-up task I find many of clients have procrastinated on is cleaning out that financial “junk drawer”. Let’s face it, we all have one. It’s that cabinet, drawer, shoebox, pile, what have you that contains all those financial documents we have accumulated over the years: insurance policies, legal and tax documents, financial statements, etc. If it’s anything like most junk drawers, you probably aren’t sure exactly what’s in there. You may have things in there that have expired, no longer necessary, outdated, or you’ve just plain forgotten about. Here are some tips for cleaning up that junk drawer.
1) If you don’t have one spot for all of your important documents, you need one! You should also have one or two trusted individuals who know where it is and what’s in it in case of emergency. Designate a drawer, file folder (physical or cloud storage), a binder, heck even an actual shoebox will do. Just get everything together in one place.
2) Make sure you have, at minimum, an annual review of your documents with your financial, legal, and tax professionals to make sure everything is up to date with your life. You would be surprised how many clients I have worked with who have not updated a will since their children were born, haven’t updated beneficiaries on life insurance or other financial accounts after major life changes (birth, adoption, death, divorce, etc). And please, if you have minor children (under the age of 18) listed as beneficiaries, we need to talk ASAP! Minors don’t have legal capacity to receive funds and this will cause major problems as the funds will become subject to probate court.
3) While you are reviewing documents for accuracy and making sure they are up to date, it’s also a good time to review your coverage. As your life changes, your needs change and you owe it to your loved ones to make sure they are taken care of properly. The life insurance policy you took out as a newlywed may be insufficient now if you have children, increases in salaries, became a homeowner, and so on. Remember that life insurance is to protect the ones you love and keep your income going so they can pursue their goals if you are not here to help them.
4) Assess the allocations of your savings for different goals. Someone recently asked me if they should save for college funds for their kids or save for retirement. I told them it doesn’t have to be an either/or proposition. You can save for multiple goals and shift the balances as life changes. For example, if your kids are young and retirement is 20 or 30 years on the horizon, maybe place more emphasis on the college saving but still allocate some toward retirement. As your kids enter college, the balance can start to shift with more emphasis on retirement.
Now that you’ve tidied up, put a reminder on your calendar to do a review of your drawer AT LEAST on an annual basis (your birthday or an important anniversary are some options) and whenever you experience a major life change (marital status, job change, children, etc). If you’re a client of mine, I send out reminders a few times a year. If you haven't talked with your insurance professional in a while, I'm happy to provide a complimentary review. Schedule some time with me here: https://www.fearlessrs.com/book-online
Now go outside, take a deep breath of fresh air and enjoy some sunshine and the knowledge you have checked off one item on your “to-do” list!