This is a reprint of an article I wrote for Being Frugal a few days ago…
When I was about 14 years old, my uncle suddenly and unexpectedly went home to be with the Lord. He had meticulously taken care of the finances for their family and left my aunt on a very solid financial foundation. Obviously, this didn’t take away the pain of him being gone, but his preparation eliminated additional stress that would have been present without it.
It’s one of those things we all prefer not to think about, but it is always better to be prepared. My aunt is still reaping from what my uncle sowed by having his things in order.
My FLOP
Being impacted by my uncle’s premature death and wanting to do everything I can do to help my wife, I decided to create a system for keeping things organized.
It has been a work in progress over the last few years, but has evolved into a very helpful tool. Simply put, it is a single file or location for all your financial account details. I call it a FLOP (Financial Life on One Page). FLOP sounds a little cooler than FLOOP, but not much 
In adding to it over the last few years it has come to have three main purposes. The first being that it is a:
1. Balance Sheet
One of the best pieces of advice I received about 5 years ago, when I started my journey to clean up my finances was to keep a balance sheet. I didn’t really understand why at the time, but I did it anyway. I have updated it twice a year since I started it and it has been a great source of encouragement as I have fought to get out of debt.
The reason it has been such a source of encouragement is because a balance sheet not only takes into account the debt you have been paying off, but all of your good financial decisions. So increasing your savings, paying down debt, making wise purchases all will affect your balance sheet in a positive way.
Also, looking at the size of your debts or assets does not necessarily give an accurate report of your financial condition. To get a accurate picture of your financial situation you need a balance sheet to calculate your net worth. It is very easy to do and is just a big subtraction problem:
Assets - Liabilities = Net Worth
If you have never started a balance sheet, I recommend doing it. It is a simple way to track your financial progress as you move towards your goals. For most people it shouldn’t take more than an hour to gather up all your account balances and asset values.
And as with most things, you are either moving forward, or you are going backwards. If you are increasing your assets or minimizing debts your net worth should be growing. If your net worth is getting smaller, then it is an indication that you should re-evaluate how you are spending your money. And even if your situation is not very encouraging, it will force you to see the financial truth so you can make adjustments as needed.
How to create a balance sheet
- Use Excel, Google docs, or some other spreadsheet software.
- List every Asset you can possibly think of from cars to stocks to jewelry for the amount that you could quickly sell it for. (To save time, you can lump together smaller assets like “misc. household items”) Total these items up to get a subtotal of your assets.
- Below the Assets total, list every debt or liability that you have. Mortgages, credit cards, student loans, they all apply. Total your debts to get your liability total.
- Subtract your liability total from your asset total to get your Net Worth.
2. Organize all my login information
Another piece of good advice I got a few years back was to create an extremely unique login ID and use it for every website that I had an ID for. I followed the advice and it has helped, but it is not a fail-proof system. Some sites require your email address, some want more than 8 characters, some want less, etc. And in this day in age, where you just about need to login to open your refrigerator, it can be difficult keeping track of all your login information.
After adding all your accounts in the balance sheet section above, you should have all your account information listed already and you can just add a column to add your login for that company. If you use various passwords you could list them in another column as well, but consider using a password hint rather than the actual password. I still come back to my FLOP at least once a week to figure out a login that I forgot about.
3. Financial roadmap for my wife
The third and most important reason for my FLOP is for my wife. In most families, one person manages the finances and has a better understanding of the overall financial picture. I am that person in my family. Are you that person in yours?
If so, would your spouse (or other beneficiaries) know where to find your financial information? Insurance policies, bank accounts, investment accounts, safe deposit boxes?
I know for my personal situation I know a bit more about our financial details than my wife does. I use my FLOP to layout all of the pertinent details for my wife, if she ever needed them. It contains the name, phone number or web address of each institution, our account numbers for those institutions and any other pertinent info that may be needed.
I then burned the file to a CD and kept it in our safe. Every year or so I put a copy of the updated FLOP in there.
Losing a loved one is a terribly difficult process. Having a “roadmap” prepared in advance for your loved ones is a great way to help eliminate unnecessary stress.
If you are interested, you can download a copy of my template for my FLOP.
This article was included in the Carnival of Personal Finance
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Well, I told the world that I saved $330 by switching to Geico from AAA a few months back. I mentioned in that post that I really liked dealing with the insurance gal that I was dealing with. She has always been very helpful and since we have developed a bit of a relationship it makes it much more enjoyable dealing with her.
Saving another $200 a year on car insurance
She emailed me about a week ago asking me if I would be open to her getting me a new quote with a few other insurance companies. Of course, why not? So, she ran it and she seemed to be very excited to tell me that she could get me the exact same coverage for $200 cheaper per year than Geico.
The new company is America First/Liberty Mutual who coincidentally just recently purchased Safeco. I don’t know much about this company. I think the truth about whether or not it is actually a good deal remains a secret until you have a claim. Dealing with AAA on a claim turned out to be quite difficult, so that made the decision to switch even easier. Hopefully I never have to find out how good America First is…
My car insurance lesson
The lesson learned here is that I have saved $530 on my car insurance (keeping the same coverage and limits) over the last 6 months. I didn’t really think I was paying very much, but I am glad I shopped around. It is something to think about.
A while back I wrote a post about how to leverage your emergency fund to save you money on car insurance. This is another thing to consider if you are trying to save money on your car insurance.
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Yep, it is true, I just switched over to Geico and saved $330 per year on my car insurance. From what I have seen of Geico so far, they appear to be very promising. But, I don’t think the truth really comes out with insurance companies until you actually have a claim. I will let you know when/if that day comes.
I was with AAA before and I was deliberately paying more than the average for the sake of convenience. I knew my agent well enough that I could email her or call her directly, rather than talking to a random agent, like I will likely have to do with Geico.
I try to shop around once a year for insurance rates, and for whatever reason the price gap increased since last time I checked. For the same amount of coverage $330 was a bit too much to pay for my convenience. To add to that I haven’t had good experiences with AAA anyway, so I figured it was time to make the move.
If you haven’t shopped around in a while, you may be surprised at some of the price variances with car insurance. Some companies rate drivers on different criteria, so you may be able to save a few hundred bucks a year by switching. I don’t necessarily recommend Geico, because I haven’t seen the full picture with them yet. But, they were the best rate that I found - oh and I just love that little Gecko!!
Technorati Tags: Geico, switch car insurance, save money
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Your [tag]emergency fund[/tag] should be for an EMERGENCY! Not, “I really, really want to go to this concert,” or, “I really need a diamond studded dog-collar for Tinkerbell.”
Everyone’s definition of an emergency is different. But, if you want it to be of some use to you, you need to have a strict definition of an emergency.
Your emergency fund is what you should turn to when “life happens.” It will be what you turn to rather than your credit cards.
Leverage your emergency fund
Also, your emergency fund should put more dollars into your pocket once it has been well established. Here is how:
- You start putting $100 a month into a high-yield savings account. This will not generate much income, but it will do a whole lot better than spending the money.
- After a five months, barring no emergencies, you will have $500 in your high-yield savings account earning a nice interest rate. Now you can call your car insurance company and ask them to raise your deductible from from $100 to $250. Since you have $500 set aside for an emergency, you will now be able to afford the $250 deductible.
- The good news is that when you raise your deductible, your insurance bill goes down. Now that you are saving $120 a year on your insurance bill, you can add that to your emergency savings. Instead of saving $100 a month, you can now save $110 a month ($120/12 months=$10) with no extra money out of your pocket.
- Now that you are adding $110 a month to your emergency fund each month, it will grow even faster. In a few more months, you will reach $1000 balance. You can call the insurance company again and ask them to raise your deductible to $500. Again, this will lower your insurance bill even more. Add the difference to your emergency savings and keep this cycle going.
- As you can see doing this over and over again will save you money, while expanding your safety net. Your bank account will be growing at a faster pace and you will have more peace of mind.
The figures used are hypothetical and I would suggest raising your deductible only to a level that you are comfortable with. But remember, you are paying a lot of money to the insurance company to have a low deductible.
Keep letting your emergency fund grow larger and larger and shoot for a dollar amount that would cover 3 months of your living expenses. Once you get to that point, then you should start looking at investing in mutual funds or stocks to get a better return on your money.
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… to do this, but you should do it anyway.
If your [tag]house[/tag] or [tag]apartment[/tag] happened to be destroyed or [tag]damaged by a disaster[/tag] you would need to know what possessions you lost in order to get fully reimbursed. I don’t care how good your memory is, you are not going to remember every item that was in your home. Chances are you will forget about many of them until months after the claim when you need that item.
An easy fix to this solution is to take your camcorder or camera and spend 5-10 minutes to take inventory and record all of your belongings. Pan across your closets, bookshelves, CD cases, peek into each drawer, the cabinets, garage and basement.
I would suggest saving this recording in a fire and water-proof safe and/or at some other location.
After I did this myself, I realistically thought about what I would have forgotten. I estimated that the [tag]insurance[/tag] company would have saved about 50% by me not doing this.
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