Test Your Financial Resilience

There’s more to being financially resilient than simply saving enough money for a rainy day.

A part of being financially responsible is maintaining good financial records – and making sure people who need access to your records know where to find them if something happens to you.

Here are some ideas for your consideration.

Communicating your goals
 
Too many families spend little to no time talking about money, and this habit lowers the financial literacy of everyone in the household. Do you know what goals each of your family members have around money?
 
Talking about money – more than what bill is due when – will strengthen everyone’s financial resilience in your family. You may want to set family goals as well as encourage everyone to set individual financial goals. This may or may not include preparing a budget and agreeing on plans, including a savings plan, a debt reduction plan, and others.    
 
Systems and lists
 
Do you use an accounting system to store your financial records?  Or do you have Excel worksheets? Is it clear where they are located on your computer? Do your loved ones know how to find these items if something happens to you? 
 
Now that so many things are digitized, it’s not as easy as it has been in the past. You can’t just label a filing cabinet drawer and say “everything is in here that you need.” Your financial records might be in a hundred different places on your computer. Being organized and planning for a smooth financial future for your loved ones means making a list of instructions on how to access all of your financially-related digital assets.  
 
Your list might include:
 

1. URL, login, and password to your accounting systems.
2. List of bank, brokerage, and retirement accounts and their login information.
3. List of credit card accounts and their login information.
4. List of government-related accounts, such as social security and irs.gov, and their login information.
5. List of regular monthly bills, such as utility, credit cards, and rent, and their login information.
6. Details of regular monthly income received.
7. Where to find financial files on your computer, such as tax returns, bank statements, and real estate closing documents, just to mention a few, and how to access them.

 
And that’s just a start. You may not want to share your passwords with certain family members. If this is the case, you can still record your instructions and store them away for safekeeping, providing access information later. 
 
Backups
 
If your computer crashes, will you be able to recover your financial files? Taking periodic backups will prevent a loss of records. 
 
What to keep in case of an audit
 
You hope it will never happen, but if it does, are you prepared for an audit with the IRS or a state agency? Do you know what records to keep and for how many years?  
 
Financial confidence
 
Having good documentation, sharing financial knowledge and goals, and making a backup plan will boost your financial confidence. You will be more prepared than most households when it comes to financial safety.   
 
How financially resilient do you feel? Taking into consideration the above ideas will help you stay one step ahead.  If you need assistance implementing these, please feel free to schedule a consultation.

This is general information and should not be acted upon without first determining its application to your specific situation. Please contact us, your CPA or tax adviser for additional details.

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