On Thursday, October 15, 2015, schools, universities, government agencies, and businesses across California will participate in The Great California ShakeOut. We all know how important it is to be ready with a plan in case of an emergency like an earthquake. Not only will our children participate in this earthquake drill at school, but here at ACap we will also be participating in the #ShakeOut. Drills and emergency kits (we update ours yearly with medicines, nonperishable foods, clothes, batteries, etc…) are vital for the moments during and immediately following an emergency. But what happens after the ground stops shaking? Equally important to practicing procedures and preparing a physical emergency kit is establishing and maintaining a financial emergency preparedness kit. What is a financial preparedness kit?
List of Accounts:
What if something were to happen to you that would prevent you from arranging your financial affairs for your dependents and loved ones? Is there someone who knows where your bank accounts are held, which credit cards you have, or whether you own/rent your house? In many marriages, one of the spouses takes on the role of household Chief Financial Officer while the other spouse is left uninformed. To prevent confusion and additional stress should something happen to your household Chief Financial Officer, maintain and update a master list of all your accounts: banks, credit cards, mortgages, etc. The list should also include whose name the account is in and the type of account. One great method to catalog such items is by preparing a net worth statement. Ensure that both spouses are aware of where this information is held and how to proceed in the case of a family emergency.
Net Worth Statement:
A net worth statement is an individual’s equivalent of a company balance sheet. A net worth statement lists all of your assets, liabilities, and net worth; your net worth is your assets minus your liabilities. Your net worth statement should list the name of each account, the account number, the value of that account on a given date (to be updated periodically), who the account belongs to, and whether a beneficiary is designated on the account. A well crafted net worth statement is essential to see how your assets grow over time. It will also allow you to run ratios to determine your debt to income, debt to assets, and debt to equity – all measures of one’s financial health.
Just as a natural disaster can cause catastrophic physical damages, an unexpected death can leave spouses and loved ones in the dark about your financial matters. Don’t let a financial earthquake happen to alert you about the importance of creating and maintaining a financial plan. Contact ACap and we will show you how to get started.
Have a financial question? Contact ACap Asset Management at info@acapam.com or 818-272-8511.
Ara Oghoorian, CFA, CFP® is the president and founder of ACap Asset Management, Inc., a “Fee-Only” investment management firm located in Los Angeles, CA specializing in helping doctors and physicians make sound financial decisions. Visit us at www.acapam.com.
