Updated: Sep 14
Give your financial self a chance at success by capturing the moment and overcoming procrastination. The simple tools and tips in this article will provide you the needed insight and digital framework needed to start developing the perfect financial plan.
Create ‘Financial Filing Cabinet’
A master filing system seems like a pretty obvious yet essential starting point. Clean up your ‘junk drawer’ mentality of financial management and figure out what's actually required to be remembered, readily accessible, and for what accounts you simply just need login access.
The best organizational systems will have secure and swift access to frequently used documents and are accessible on an ongoing basis with as little time as possible actually sourcing new information. A good system will largely eliminate the ongoing gathering of items such as monthly investment statements. If you need a statement, then you can always login and access it. Instead of keeping it in the folder just delete it and login again later if you need a fresh report.
Another tip is to place a .txt file with a list of the URLs of banks for all your accounts and how an approved user can securely gain access via your chosen password manager. Anyone who may need to pick the file up in your footsteps will greatly appreciate providing a simplified roadmap and framework to obtain passwords in a secure manner.
Everyone should have an organized system for login information. As a licensed fiduciary, I have a duty to be responsible with client data. As such I know a good password management system reduces my risk. The same consideration should be made by the individual client. Other than procrastination there really is no excuse, inexpensive password services utilize Two-Factor Authentication, random password generation, encrypted storage, and even printable one-time key-code vault access (for the safe).
Information such as investment statements are now secured behind some kind of gated infrastructure. Thankfully that eliminates a lot of paper hoarding. Those systems work well for items that change frequently such as bank account balances and investment statements. However, with items such as Insurance, having the actual policy on hand is essential.
For your Car, Home, and Umbrella Insurance you’ll certainly want to have the actual and most updated physical policy on hand. Why? It’s no secret that many of the car and home insurance companies are not going to make detailed policy documents readily accessible online should a claim occur. While a declaration page may be readily available, many insurance carriers will require policy documents to be mailed directly to you, often delaying insight into what’s exactly covered by a potential claim. When trying to evaluate a claim, it’s a good idea to have those policy details readily available for when you need them.
Life, Disability and Long-Term care policies are also good to have on hand, but I find those need to be reviewed and updated less frequently. It’s a good idea for clients to understand the dynamics of how these companies work as opposed to trying to understand them 'in the moment'. That’s not really a well-thought-through and methodical decision-making process.
An Outline as a Financial Plan's Framework
The financial plan itself can benefit from having a basic framework. Think of the plan as a house. Prior to putting up the drapes and painting the walls, you need to pour the concrete and put up the framing. The best way to help a client to work through a plan is by using an outline. The outline acts as a framework to avoid getting into the weeds too quickly and going off track. Additional benefits include organization & conciseness.
An outline also establishes a sound maintenance process. Often just a client’s focus is all that’s needed to see the big picture. An outline helps focus the client and advisor’s attention on what matters most. It helps both determine what areas to explore further. It offers a roadmap from start to finish.
Finally, it’s a lot easier to communicate with a workflow of information over a page or two than with a 50-page report. The key is a system that is both usable and simple.
Take advantage of the simplistic framework to quickly and easily remind you of upkeep. Log notes about potential changes, updates, or questions. The print out when connecting with the various professionals.
Not Going Overboard on Data Retention
A financial file should not be a 'junk drawer'. Having unnecessary or outdated data is a privacy risk. Understand what you should have on hand and what information is likely not needed and more updated information can be readily pulled from the web. When organizing your files, the focus should be on what is actually needed to have immediately on hand and where and how to readily and easily find those items not on hand in a secure manner. The process should be gather, update, archive, and purge.
I try NOT to keep client data. Having terabytes of information on hand is an unnecessary privacy risk. If I need a client’s sensitive documents, then I will ask for them. It’s really not a big deal to make a call or upload something securely - and then delete it. I actually don't want your data!
Detail & Completeness
Using an outline is a much easier process to review for gaping holes. You can look at the topics and subtopics to ensure you have covered everything. Remember a financial plan that has the possibility of multiple events to derail planning, is not really a financial plan.
An example might be the upgrades and adjustments to personal possessions which were not initially communicated to the insurance company. A detailed financial plan file will have an ongoing list of items and their approximate value for reference in the event of a loss. The metadata in the file will track when the file was created, and you should update with detail any adjustments over time. Uploading a video walkthrough of the house once every few years is a simple way to archive your life possessions for the off chance a claim surfaces one day.