Newsletter: Get your finances in order before becoming sick. Here’s how
Good morning. I’m Rachel Schnalzer, the L.A. Times Business section’s audience engagement editor, back with our weekly newsletter. From wearing a mask to limiting social interactions, many of us are taking precautions to curb our chances of becoming sick with the coronavirus. But how many of us are taking financial precautions to make life easier in case we do get sick?
I spoke with financial planner Sarah Behr to learn how to make sure you’re prepared in the event of a major illness. After all, you don’t want to scramble to get your accounts in order while dealing with the symptoms of COVID-19 — or leave your loved ones with a financial mess to clean up if you’re incapacitated, she explained. By the way, these steps aren’t specific to the pandemic — they’ll serve you well in many kinds of crises. “Even if the motivation is kind of morbid, [the virus] is a great reason to get things squared away,” Behr said.
Here is the advice Behr shared with me. Her words have been condensed and edited for clarity.
Save up money if you can: Think about putting together an emergency fund that can cover your expenses in case you’re unable to work. Consider your fixed expenses (such as rent and car payments) as well as bills and purchases that can vary from month to month. Factor in anything you need for your kids and pets as well.
You need enough money to get you through three to six months. I’d love it if you had more than six months’ worth, given the duration of the coronavirus crisis. Once you know how much you should be setting aside in an emergency fund, make sure it’s in a checking or savings account where it can be accessed easily.
Put together these three documents: At the bare minimum, everybody should have a power of attorney, an advanced healthcare directive and a will. There are statutory documents accepted in California that can be printed off, signed and notarized. It’s easy — you can do it tonight. You should always keep physical copies because a lot of times, especially for the power of attorney, a bank will want a wet signature, like a notarized copy [rather than an electronic signature].
The power of attorney allows you to designate someone who can access your financial accounts, such as your bank account, your investment accounts and your retirement accounts.
The advanced healthcare directive nominates someone who can make healthcare decisions for you if you’re incapacitated. Someone may feel they can trust their best friend more than their parent who lives out of state. You may want to designate two people if one of them lives out of state and could have difficulty getting to you quickly. Designating two people could also be a good idea if one of them lives with you, in case both of you become ill at the same time.
Everyone needs to have a will, no matter how much money you have. It allows you to have control over who receives your possessions, such as your car and your collection of books, as well as your pets. Depending on the type of work you do, you may have digital assets you created such as photography and writing. Wills also allow you to have control over items of sentimental value. Everybody has something.
There are a lot of reasons you would want to have a say in what happens to your assets. For instance, say you’re an unmarried 35-year-old woman living with your boyfriend of five years. If you die, in the absence of a will, all of your assets will go to your parents if they’re still alive, and if they’re not, they’ll go to your siblings. But if you have a will, you can say that your boyfriend should receive everything in your house because you bought it together.
Folks who have children or real estate, or joint assets that are worth more than half a million dollars, should get a trust. This is a fancier form of a will, and you need an estate attorney to do this. It often costs anywhere from $2,500 to $5,000.
The classic example of why someone would want a trust is in the case of minor children. In the state of California, if you have a will, the child is entitled to their inheritance at age 18. A lot of parents feel that 18 is a little young to inherit Mom and Dad’s $700,000 retirement account. If you have a trust, you can nominate a trusted loved one to be a fiduciary for this money until the child is older.
Update your beneficiaries: Your retirement accounts always need to have a beneficiary. If you’re married in California, by law, it’s your spouse, who can waive that if they choose to. If you have a minor child, the child should not be the beneficiary.
A lot of people also have basic life insurance included with their job. It’s a substantial amount of money that only is triggered upon death. You want to make sure that there’s an updated beneficiary for that money.
Automate your payments: Make sure your rent and utilities are being paid automatically, if possible, and in full. Almost every bank allows you to set this up online. We’re hearing about people who catch the virus who are just so fatigued that they lose track of their bills. You don’t want to become sick and recover two months later, only to find out that the water is about to get shut off.
Consolidate your accounts: Do some housekeeping with your bank accounts and investment accounts. Sometimes we end up with an old account from a previous job, and it’s helpful to tidy stuff like that up in case you’re incapacitated and a loved one needs to access your accounts to pay for rent or other expenses. Make sure they can find everything and that their process is simple.
Use a password aggregator: So much of our financial life is online. You should be using a password aggregator, such as Dashlane or LastPass, to protect all of your accounts from identity theft. Password aggregators allow you to designate an emergency contact who can request access to your passwords. For instance, if you were to get really sick, this person may need to turn off services such as Netflix, Hulu and Amazon Prime to save money. A password aggregator enables you to set up a way for them to have access to your accounts to do this.
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One more thing
KFC will suspend its well-known slogan “It’s Finger Lickin’ Good” after 64 years of use, reports USA Today’s Brett Molina. What with the COVID-19 pandemic, the restaurant says the slogan “doesn’t quite fit in the current environment.”
Have a question about work, business or finances during the COVID-19 pandemic, or tips for coping that you’d like to share? Send us an email at firstname.lastname@example.org, and we may include it in a future newsletter. Keep an eye out for our answers to questions from readers, which will return next week.
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