There’s always something new to learn in the world of investments and personal finance. Recently, one of our clients alerted us to a practice we think everyone should try—the financial fire drill.
This client is incredibly organized with his finances, but he realized that even the most organized system would be of limited use if he was the only person who understood it. So he put his system to the test—he ran a “financial fire drill” with his family.
What is a financial fire drill?
A financial fire drill is when you challenge a trusted contact like a spouse or family member to go through the steps that would need to be taken in a financial emergency. Often one person in a couple is more engaged with the day-to-day details of the family finances than the other. That is completely fine. A financial fire drill should answer the question: if the person who normally handles the finances was unable to do so…what would happen? If you are single, who would be the one to handle these decisions if you were unable?
Just like a fire drill, it is far better to learn what to do in a financial emergency before it actually occurs. Your system needs to be simple to follow, yet comprehensive enough to be useful in different scenarios.
How to Set up a Financial Fire Drill
Organize ahead of time so it is easy to find important documents. However you decide to organize your financial life, make sure information is readily “findable” for your spouse or other trusted person.
- Have a list of professionals. In the case of death or cognitive incapacity, it is critical to contact your financial advisor fairly quickly. We can give guidance on our areas of expertise, including contacting Social Security, implementing the estate plan, and transferring assets to beneficiaries. However, you likely have many other professionals in your life. List the contact information for professionals ranging from the landscaper to the estate attorney in a designated place. (Note that Halpern Financial will coordinate your financial plan with your estate attorney and CPA.)
- Keep financial and legal documents organized. Whether you use a paper filing system or you prefer to scan and save documents digitally (or both!), your spouse or trusted contact should know where to look for critical documents. Remember that as a client of Halpern Financial, you have access to secure, encrypted file storage via Bridge.
- Are your bills on autopay with electronic statements? We often recommend setting up automatic billpay and saving to streamline your monthly cashflow. If you were unable to do so, would someone you trust be able to access money and ensure the monthly billpay occurs as intended?
- Ensure your trusted contact can access important accounts. Would your family be able to access your email, bank accounts, and pay bills in your absence? Do they know the password to get into your computer? Consider writing down passwords in a secure place or using password management software. (Of course, you need to share the master password if you use a digital solution!)
How to Do a Financial Fire Drill
Once you have the base level of organization set up (or you think you do), challenge your spouse or other trusted person to complete certain tasks that you usually do. Ask how they would handle various emergency scenarios. Here are a few ideas:
- If I were to pass away…who would be the first person to contact after family?
- How would you check to make sure all the bills are paid?
- Where can important phone numbers be found?
- How would you gain access to online accounts?
- If I was traveling abroad and my wallet was stolen, what are the next steps?
While talking about some of these things might seem a bit morbid, consider it to be an investment in peace of mind for yourself and your family. Hope for the best, but prepare for the worst. If any of these scenarios were to occur, you will thank yourself for sharing important information with your family and having a plan.
Your team at Halpern Financial is happy to help get you started with your financial fire drill. Let us know if you have questions about any of these steps!