The last few weeks have been unprecedented in so many ways. We’ve seen what the ravages of a viral pandemic can mean for our health, our economy and our very way of life. Nearly every aspect of our lives has been disrupted and none of us knows when or what “getting back to normal” looks like. As a wealth manager, I’m spending large chunks of time with investors who are experiencing the full range of emotions as they face the uncertainties of a world with COVID-19. While many are cautious, some are opportunistic. Others have expressed fear and a few are downright angry at the recent turn of events.
One thing they all have in common though is that they can use this time to organize their financial affairs. The study of behavioral finance tells us that people want to feel “in control” of a situation. The greater the sense of control a person (in this case an investor) has, the better they will feel about creating a positive outcome. So, what can investors be doing right now to organize their financial lives and create that positive outcome?
For starters, this is a GREAT time to review your financial plan. You do have a plan, right? I’m sure you’ve heard the saying, “If you don’t have a plan, you plan to fail”. While that may not be entirely true of every situation, creating a singular, cohesive and comprehensive financial plan can save you from a multitude of mistakes and ensure nothing in your financial life gets overlooked or left to chance. A comprehensive plan should address current and expected needs around each area of wealth management: Investments, Insurance, Cash Flow, Taxes, Estate Planning, and Charitable Gifting. It’s common to have addressed one or two of those areas while neglecting others. If so, use this time to add to the pieces of your existing plan.
For those of you who have a well-written plan, when was the last time it was updated? I recommend at least annually and, certainly, every time there is a material change or transition in your life. It could be a job change, a move, or perhaps you’ve recently married. Even just the recent fluctuation in the stock market may be enough reason to review your plan. Are your investments performing how they are supposed to? Since the purpose of any plan is to keep one on track to meet certain goals, do you know your next steps if you discover you have strayed from your plan? This is the perfect time to answer questions like that.
What else can you do to organize your financial affairs? Make sure your beneficiary designations are up to date. You may want to leave your ex-spouse your 401(k) but my guess is you probably don’t. While that’s the classic example of *oops*, the action of matching an account to the correct beneficiary also serves the purpose of making sure all accounts have beneficiary designations. Among other things, it might keep your estate out of probate. Also, don’t forget many accounts will allow for both primary and contingent beneficiaries in case you want to name your children or charitable organizations. In conjunction with the beneficiary information, you’ll want to make sure your will and/or trusts have been updated and reflect your wishes.
Finally, as you think about organizing your finances, you may even want to consider using online services where all your documents can be stored safely and securely. Companies like Everplans allow you to digitally store wills, trusts, passwords to accounts, insurance policies and anything else you’d like to place in a centralized location for you or other family members. This can be a real time saver, as well as provide protection for identity theft, ease of transfer to other parties, and serve as a storehouse for both personal and business affairs items.
If you have time on your hands now, make the most of it to get your financial lives in order. Some of the suggestions I’ve made can be implemented on your own, while others may require the assistance of a trusted professional. When seeking help, always find a fiduciary who will put your interests first! At TWM, we do just that.