Harrison Lazarus Advisors: Top Ten Financial® - Chapter 6

When I was a junior in college, my room caught on fire. It was caused by an old light fixture, which combusted in the ceiling and lit the attic on fire. I survived but many of my important papers and files were ruined. Fortunately, I had the important documents copied and stored in at my parent’s home. This saved a lot of time and trouble.

The one expectation in life you can count on is change and sometimes changes can be disastrous; and whether it’s an earthquake, fire, tornado, hurricane or snowstorm, you can turn these disasters into just another day or even opportunity (e.g., vacation day) when you are prepared. This is a matter of you taking the time in advance to gather all your important documents (files, folders, photos) together, copying and/or scanning them and then storing the copies and originals in a safe place.

Gathering the documents

Examples of important documentation worth saving are:
Birth certificate
Marriage certificate
Social security card
Health information (vaccinations, hospitalizations)
Employment contract
Drivers license
Passport
Deeds, title, title insurance for auto(s) and real estate
Property Photos/Videotapes/DVD/Negatives
Other Photos/Videotapes/DVD/CD’s/Negatives
Receipts for big-ticket items like furnishings and home improvements
Appraisals for coins, jewelry, medals, rare stamps and other collectibles
Original stock or bond certificates
Original prospectuses and sales materials for any partnerships
Insurance declarations (e.g., property, life, health)
IRA, 401(k), 403(b), and other beneficiary designation forms
Legal papers (e.g., wills, power of attorneys)

Copying the documents

Once you have gathered these documents together, there are several ways to copy them. The easiest way is with paper, but this can lead to problems with finding and retrieving the papers when the documents are needed. The other is electronically, which is the preferred method since it allows easy searching, updates and multiple user access.

There are a few ways to complete the electronic method:

Copy and scan these documents to your computer. Using your printer and computer. Most new printer and computer models have this feature.
Fax the documents to convert the files into PDFs. Some websites that help you do this are efax.com, pfax.com, and jfax.com.
Use a professional service such as File Cabinet, or Scan and Host.

Storing the documents in paper form

You can place the originals in a fireproof safe or safe deposit box. They each have their advantages, listed below.

Fireproof Safes

Fireproof safes are an ideal way to store irreplaceable documents or valuable possessions. They are usually rated by the amount of time they can withstand the extreme temperatures a fire produces. Models are typically available with one-, two-, and four-hour durations but models with lower and higher ratings can also be found.

Many of these safes also offer protection against water, humidity, and other changes in climate.

Today, fireproof safes are made to protect not only papers but also disks, CDs, DVDs, and other audio and video media from the extreme temperatures a fire will produce. These type of electronic data is often more fragile than paper documents and will be destroyed at much lower temperatures. These are called fireproof media safes afford a greater degree of protection than traditional fireproof safes.

Small, box-sized fireproof media safes are ideal for homeowners. These discreet safes offer a way to protect valuable items without infringing on the overall style of the home because they can be hidden or tucked away nearly anywhere. They can provide a great deal of space to store documents, media, or anything else that needs to be secured. Considering the inexpensive cost, fireproof safes are a very affordable way to protect valuables in the home or business. Smaller versions can often be found for as little as $50 with larger models costing into the thousands. Keep in mind that the higher the rating of the safe, the longer it will protect items and at higher temperatures. Look for protection that will last at least an hour and withstand temperatures of at least 1,400 degrees Fahrenheit. Fires happen every 50 seconds in the United States and these safes can be one of the best ways to protect valuable documents and files from destruction.

Safe deposit box

Similar to a fireproof media safe, a safe deposit box is a convenient place to store important items that would be difficult or impossible to replace. The safe deposit box also offers privacy (only you know what is inside) and security under the bank’s umbrella. In addition, some insurance companies charge lower insurance premiums on valuables kept in a bank's safe deposit box instead of at home. Also, do not forget that a safe deposit box rental can be tax-deductible.

Unlike a fireproof media safe at home, some items that should NOT go in a safe deposit box include anything you might need in an emergency, in case your bank is closed for the night, the weekend or a holiday. Examples: originals of a "power of attorney", passports (in case of an emergency trip), medical-care directives if you become ill or incapacitated, and any funeral or burial instructions you make. Consider giving the originals to your attorney, and making copies to go in your safe deposit box or to give a close friend or relative.

The other complication about a safe deposit box is what your state law says about who has access to your safe deposit box. Ideally, the person you name to oversee your financial matters (your "executor" or "personal representative") should have easy access to your original will (copies are not valid). Some states make it relatively easy for co-renters, family members or the executor to remove the will and certain other documents (such as life insurance policies and burial instructions) from a deceased person's safe deposit box. In those states, it may be a good idea to leave your will in the safe deposit box. But other states may require a court order or another official action to remove the will, which can take time and money. That is why you should check with a bank official (or your lawyer) to find out what is required under state law and your bank's own policies in the event of your incapacitation.

Whether you choose a fireproof media safe at home or a safe deposit box at the bank, make sure a responsible family member or friend is aware of where your important documents are kept, and how to gain access to them.

Storing the documents in electronic form

Although you can only store the originals in paper form, storing your copies and backups electronically gives you and the ones you trust the power to use the internet and mobile phone networks to store, access, share and reach your information - anywhere.

You can control who has access to your files. Anywhere you go, you can always get the files you need.

Electronically, it’s easy to store, access, and share files online. Some systems include features that make sharing files a snap. Just add the files you want to share, and your friends and family members can access them using any web browser or even their phone.

Suggested places where you can place your documents electronically are:

Similar to your choice about a fireproof media safe at home or a safe deposit box at the bank, tell the people that need to know about these documents (e.g., beneficiaries, attorneys, CPAs, trustees, executors) so they know where to find them and can get them when needed.

As you prepare to store these documents, ensure that beneficiaries are elected for all of your accounts. This is crucial for an IRA, 401(k), 403(b), and life insurance policies to have a designated person(s) as a primary (and in some cases, secondary beneficiaries) beneficiary. This takes a little effort, but is well worth your time, since you don’t want these assets to be distributed through probate when you should be the one to decide.

Emergency planning

Lastly, don’t forget your emergency planning. At least annually, prepare emergency supplies in case of a flood, earthquake, tornado, hurricane or fire. You never know what might happen. In preparation, here are a few steps to follow:

Step 1: Get a Kit

Have at least 3 days of supplies in an easy-to-carry evacuation kit, with additional supplies on hand
Store it where it is easily accessible
Remember to check your kit and replace outdated stock every 6 months

Step 2: Make a Plan

Talk with your family and friends about your plan
Learn how and when to turn off utilities and how to use your fire extinguisher
Tell designated individuals where emergency information and supplies are kept. Keep information updated
Practice evacuating your home twice a year with both personal disaster and catastrophic disaster in mind. Drive your planned evacuation route and plot alternate routes on a map in case main roads are impassable or gridlocked.
Include pets in your evacuation plans

The most important part of the plan is to choose two places to meet after a disaster:

Right outside your home, in case of a sudden emergency, such as a fire.
Outside your neighborhood, in case you cannot return home or are asked to evacuate your neighborhood.

Choose an out-of-area contact for all members of the family to call in case of disaster. The selected contact person should live far enough away that they would be unaffected by the same event, and they should know they are the chosen contact. Remember that during a disaster, it may be easier to make a long distance phone call than to call across town.

Having predetermined meeting places will save time and minimize confusion should your home be affected or if the area is evacuated.

You can find more information at:

Now why would I, as someone who coordinates the financial affairs of a select group of families, advise you to prepare for an emergency? It comes down to protecting your finances. If an emergency happens and you are unprepared, you will spend more time and money taking care of yourself and your loved ones than if you had prepared ahead of time. This also happens to be a good segue to the next Chapter 7 - Property and Casualty insurance.

Chapter 6

The VALUE of Tax Deferred Investing

2009 Numbers