How (and why) to create a financial plan

A few weeks ago, I celebrated another birthday. For whatever reason, birthdays always make me think about how many more birthdays I have to celebrate. And eventually, I think about how my husband would handle the finances in the event of my death.

Happy birthday, huh?

Although I am unlikely to die anytime soon, you never know. When thinking about my earthly exit, I am bothered most by the practical things that would affect my family. In the middle of grief and loss, I don’t want my husband to be struggling to know which bills are on autopay, how much we contribute to our IRAs each month, or what the passwords are to important accounts. So, in my opinion, the most loving thing I could do is make sure he can keep our family’s financial life together. It’s time to create a Financial Plan.

A financial plan

I drew inspiration for this plan from, of all places, my job. My program is required to have something called a “Master Plan,” a manual that covers all the policies, tasks, and projects associated with the program. If I became incapacitated on Friday, someone could figure out how to keep the program running on Monday.

Something like that is necessary (and required) for good reason: At work, I’m the only one who knows how to do some things. I’m also the one in our marriage who does everything with our finances.

But it’s more than just my husband now. By the time you read this article, if all goes as planned, we will have custody of our (almost) adopted children in their country.

Adding children to our family changes everything. Last year, a family in our community lost both parents in a car accident. I talked to the oldest daughter, and she told me how her parents had been very open with her about their finances. I don’t know if their plan was as extensive as this, but they communicated their income and debts.

As I have watched this family grieve the loss of both parents, I want to do everything I can to make it easier for someone else to step in and take care of our children’s medical and financial needs if the worst would happen.

Creating the plan

I first learned about Erik Dewey’s free Big Book of Everything from an old GRS post. His planner is full of information, more than I needed. But I pulled what I wanted from his plan and from doing other research as well.

  1. Personal information. The first section in our plan has a list of our names, Social Security numbers, contact information, and dates of birth.
  2. Address and previous addresses. Along with your address, include your most recent address or two and how long you’ve lived at each place.
  3. Employment history. List current and previous jobs, as well as employment dates. Include contact information for the HR department at your current job.
  4. Medical information. For each member of your family, include medical histories, surgeries, hospitalizations, prescriptions, and allergies. Extended family medical history is also important. Contact information for physicians, specialists, eye doctors, and dentists is also crucial.
  5. Usernames and passwords. Include a list of log-in information to all the necessary online accounts. Facebook, Linked In, online photo albums, bank accounts, credit cards, frequent flier information, and email are all examples of accounts that would be useful.
  6. Bank accounts. Keep a list of all bank accounts (checking, savings, etc.) along with contact information for each bank.
  7. Automatic payments. List all automatic payments, from which account, how much, when, and to whom.
  8. Retirement/investments accounts. Don’t forget pension plans, 401(k)s, IRAs, and any other investment accounts. Include the balances and beneficiaries.
  9. Insurance policies. For health, disability, life, car, and home/renters insurance information, list the company/agent contact information, premium costs, beneficiary information, deductibles, policy holder names, and amount of benefit, if applicable.
  10. Real estate. Document all real estate values, mortgage holders, real estate tax information, and mortgage company contact information. This is also a good place to list major home improvements and who you’ve used for home and appliance repairs.
  11. Credit cards. Don’t forget credit cards. The balance, interest rate, issuing bank, log-in information, as well as rewards, if applicable.
  12. Tax records. Explain how prior years’ tax records can be accessed as well as your tax preparer’s contact information.
  13. Lawyer. Who is your lawyer? Where is your will?
  14. Debt obligations. List all debts, including amount owed, interest rates, and payoff dates.
  15. Who owes you. If anyone owes you money, include amount owed, interest rates, payment schedule, and payoff date.
  16. Important contacts in case of death.These companies are probably found elsewhere in this plan, but the Social Security Administration, credit card companies, insurance companies, and the employer benefit department all need to be notified.
  17. Inventory of valuables. Do you store any valuables in a storage unit? Safe? Safety deposit box? Don’t forget to list cars, boats, RVs, and motorcycles (include make, model, VIN, etc.). My sister will be the executor of our estate if both my husband and I die. This section will also include a list of who we want to get our stuff.
  18. Data backup plans. Where is your data backed up? In a paper file? Dropbox?
  19. Funeral costs. If you have requests for your final burial, you can list them here. Include the company in charge of arrangements.
  20. Personal letters. My father, as I’ve mentioned before, died at a young age. He wrote each of his kids a letter that was given to us the day after he died. It continues to be one of my most treasured possessions, something I want to give to my husband and children as well.

Creating a plan like this requires a lot of work upfront. Maybe you can take a financial health day to complete this. Once the initial work is done, it will be easy to update it. I update my Master Plan at work about once per year, and it takes just an hour or so. I will do the same with our Financial Plan, adding information or updating bank account balances.

The end result of a Financial Plan

One of the best reader stories I’ve read was a story of a woman whose father prepared her amazingly well for his death. Throughout the post, she explained how he introduced her to various key financial people while he was still living.

My husband and I don’t communicate as well on financial matters as I’d like. Our system works: I organize the financial stuff and give him a financial report every now and then. Having a Financial Plan in place could help facilitate conversation while I’m living — and give my family peace of mind when I’m no longer here.

More about...Planning

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