If you experienced a temporary illness or needed someone to quickly step in to pay your bills, would your finances be organized enough for them to handle?
Disruptions to daily life can happen at any time, and experts say our finances are particularly vulnerable to life’s twists and turns if we don’t have a backup plan for emergencies.
“The importance of having organized finances on a scale of one to 10 is a 15,” says Cameron Burskey , managing director at Cornerstone Financial Services in Southfield, Michigan.
It might not matter so much if your phone bill is a month late, but if you miss a life insurance premium payment and you’re 80 years old, you policy may lapse, making it hard to get a new one, Burskey says.
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When your finances are organized to the point where you can hand them off if you’re in a bind, it brings peace of mind, says Amy Tokos, an Omaha, Nebraska-based certified professional organizer and incoming president of the National Association of Productivity and Organizing Professionals. “You can go on vacation and if by chance you get sick you can have someone walk in the door and not be overwhelmed by all the stuff that needs to be taken care of,” she says.
Whether you have a financial system only you understand or your finances are in a state of disarray, here are some steps for getting started.
Take care of the legalities
A financial power of attorney gives someone the legal authority to take financial actions on your behalf. The person you give this responsibility to should be someone you trust, Burskey says. Once you decide who you will give this responsibility to, let them know you’ve done so and what you expect from them, Burskey adds.
Observe and document your routine
We often handle daily and monthly tasks on autopilot, Tokos sats. That means you may do what needs to be done without thinking about it. As a result, “you’re not immediately going to be able to say, ‘This is everything that somebody needs to know,’ because you’re going to miss something,” she says. Take a notepad or your smartphone and document every financial task you complete in a given month so you have an up-to-date list of monthly responsibilities.
Have a place for important papers
Daily money managers help consumers manage their monthly expenses and handle their bills all the time, says Barbara Boustead, a board member of the American Association of Daily Money Managers. One of the first things Boustead instructs clients to do is to create a folder or file with all important financial documents such as insurance policies and investment accounts. Other information to have on hand includes online passwords and loan accounts. “I call it an emergency preparedness kit, where I’m making sure all my important documents are in one place,” Boustead says.
Simplify your bill payment routine
When Courtney Keene, 34, from Gainesville, Florida, had to step in to handle her mother’s finances “the biggest problem I ran into was the fact that she didn’t have an easy-to-see system for bills,” she says. Keene, a director of operations for home improvement site MyRoofingPal, says “some were on auto-pay from the bank, some through whoever she owed the bill to, and there was one she was still paying by phone every month.” To make things easier, Keene recommends consolidating bill pay, if possible, “or at least have a record of what all comes out and from where, as well as the amount and due date.”
Tackle the job in chunks
The idea of organizing your finances can be overwhelming. “If you’re overwhelmed with any kind of project, it’s best to break it into small pieces,” says Tokos. “The first step could just be getting the notepad and creating a couple of categories. The second day, you can spend 15 minutes and start listing some of your accounts.”
Keep your financial emergency kit updated
Organizing your finances to hand off is not a one-time event. Not only do our financial lives change with time, but the people who we’ve designated to handle our finances in an emergency could sometimes use a refresher. “Schedule a time to do a yearly review and update the information,” Tokos suggests.