When I started my working life many years ago at age 16 – I found myself working at McDonalds learning various skills related to running a fast-food restaurant. Unfortunately, my older brother was assistant manager (age 20), and he regularly requested his sister do the clean-up in the restaurant which mostly required a mop bucket and wash cloth.
As I round the 37th year in financial services, I find the analogy of “clean up crew” representative of many things we improve upon with our financial planning and advisor engagement. Some most common areas of cleaning up are listed below.
- Inventory of all your financial accounts – this can include small 401Ks from past employment that you have not reviewed or accessed for years, to custodial accounts for children, to Health Savings Accounts rarely reviewed. Even small bank accounts with annual fees that could be consolidated.
- We also review overlap or duplication of areas of investment such as US Large co. Index funds that carry larger concentrations of a handful of stocks.
- Confirm cash and emergency funds and rationale of balance – on the eve of possible declining rates, this becomes more relevant.
- Confirming asset/liability matching. Planned spending and investment in various parts of your financial inventory helps to keep balance in risk with investment. Too much cash and too little growth in retirement accounts and too much stock in emergency accounts – this was commented on in a recent WSJ article saying many individuals rolled their 401K balance into an IRA and then sat in cash for many years.
- Risk and Insurance - reviewing your insurance policy inventory and gaps or excess coverage or incorrect policy coverage– life, disability, liability, long term care, identity, property, and casualty. Review what and why of coverage can make meaningful changes that improve the nature of needed coverage and lower costs. Understanding of rationale of coverage based on current life situation. For example, life and disability insurance may be vital with mortgages, family financial support at age 40 but may not be as significant later in life.
- Estate planning
- How, what, who and clarifying titling and disbursement at your death and the work assigned to your personal representative (executor)
- How and who for disability. Springing powers vs. standing powers.
- How parts of your estate planning documents work from revocable living trusts to powers of attorney and appointment – the functions are important to clarify as well as the person(s) you appoint.
We could create even more on this checklist for passwords, tax reporting, etc. but the essence of what and why and how is an important part of what we suggest we all do regularly.
For us, clean up is part of our goal to simplify and streamline your future reviews. It’s difficult to improve financial messes immediately, so cleaning up may take a few months or years. While I value the lessons learned of hard work and perseverance from my days mopping the McDonalds floor for my brother, I get a lot more satisfaction from helping all of you achieve your sparkling clean financial picture!
Jean, Kurt, Anders, Maggie & Molly