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Bill & Rose recently moved to Nevada County from the Bay Area. They had experienced their share of earthquakes there, and knew they could, someday, be facing a new danger… fire. They had always been “physically” prepared with “go-bags”, home protection techniques, evacuation plans, etc. Should that day come. They asked us what might be the most important steps to take, to be best “financially” prepared. They did not want to be dependent upon the government for their financial security. Our suggestions follow:
Have an emergency fund.
Have, or establish, a 3-6 month “emergency fund”, in liquid (not necessarily cash) investments (have access to by phone, check, or electronic transfer). If you have a significant other, title the accounts so that either of you has access at any time.
Create and maintain a “spending plan” (aka “budget”).
Understand what expenses could be cut in the case of a job loss, or any financial catastrophe. Fully understand the details of your fixed/variable/discretionary/nondiscretionary expenses, and have a plan in place to account for lost wages or unexpected increases in expenditures. Contact a “certified financial planner” (cfp®) to provide you with a personalized “cash flow analysis” to meet specific emergency goals.
“Manage” your insurance protection.
Life/homeowner/long-term care/personal liability/umbrella insurances can be daunting. Ask your insurance agent to provide you an “annual written summary” of your coverages/account numbers/how your premiums are paid. Check whether it may be prudent to add a “building code upgrade rider” to your property insurance. Your home may have been properly insured for the way it was originally built, but not would it have to be re-built with today’s updated building codes. Ask your “certified financial planner” to confirm whether your insurances/coverages are consistent with your overall financial plan.
Review documents regularly.
Have your financial, investment, insurance, and medical history documents reviewed at least annually. Have your estate planning documents reviewed at least every 5 years by an estate planning attorney. Examples of important estate planning documents would be your “durable powers of attorneys for healthcare/directive to physicians”, “financial durable powers of attorneys”, wills (including guardianships for children), trust, etc. Have your “certified financial planner” check that the titling of all of your assets are consistent with your documents. We have seen more money lost to poor estate planning, than any markets’ movements. Make certain that your “cfp®” is teamed with your estate planning attorney and tax preparer and together they have worked to avoid any unnecessary cost or time burden of probate in the case of an unexpected death. Carefully review with your “cfp®” the beneficiaries and contingent beneficiaries on all retirement plans and insurance policies. Set up pod “payable upon death”, or to “transfer upon death” accounts, or “joint tenancy with rights of survivorship” accounts for all others.
Store important documents wisely.
Store all important documents offsite, safety deposit box, or in the “cloud”, not in a fireproof box buried under your home. We had an experience in the Oakland Hills fire, where everything buried under the home in a fireproof box that was either melted or turned to ashes. Start with a video inventory of your home, garage, tools, collectibles, firearms, jewelry, gold/silver, etc. Videotape or photograph all important documents, such as insurance policies/broker name & number, investment/bank statements/broker name & number, credit card account numbers/contact #800 numbers, medical history/medical prescriptions, passports, title to property, driver’s license, most recent income taxes, birth certificate, etc. Place these documents on a flash drive. Place the flash drive in a safety deposit box (maybe itemizable on your tax return). Most important of all is communication. Share this with your spouse, family or significant friend/neighbor and “cfp®” where this information may be found. Discuss a hypothetical catastrophe with them at least once a year, pray it never happens, and thank your fire/law “first responders” every chance you get!
Allen Ostrofe, MBA, CFP®, Accredited Investment Fiduciary® is President of Ostrofe Financial Consultants, Inc., an S.E.C. Fee-Based Registered Investment Advisor, managing over $208 million in assets, with clients in 31 states. Advisory services provided by Ostrofe Financial Consultants, Inc., a Registered Investment Advisor. Separate advisory and securities services may be provided by National Planning Corporation (NPC), member FINRA/SIPC, and an S.E.C. Registered Investment Advisor. Ostrofe Financial Consultants, Inc. and NPC are independent and unrelated companies. Please consult with your representative to confirm on which company’s behalf services are being provided. For questions or suggestions, visit ostrofefinancial.com. Branch Address: 565 Brunswick Road, Ste. 15, Grass Valley. The opinions voiced are for general information only. They are not intended to provide specific advice or recommendations for any individual and do not constitute an endorsement by NPC. To determine which investments may be appropriate for you, consult with your financial professional. Please remember that investment decisions should be based on an individual’s goals, time horizon, and tolerance for risk.