Instead of the usual physical health-related resolutions, why not consider resolving to perform a financial health check-up? Retirement Director Taylor Pluss outlines three steps to consider that can help you be better prepared for the unexpected.

Walking into yoga class the other morning, I could tell the crowds of New Year’s Resolutioners were out in full force. As a daily practitioner, I always make a point of getting to class early this time of year because I know it will be full of new students vowing to start a heathy habit. Of course I don’t knock these people for trying, but inevitably the classes are back to being filled with just the “regulars” by the end of January.

Why do so many people fail to stick with their New Year’s resolutions? More often than not, it’s because we vow to commit to something daily or weekly and we underestimate the time and effort involved. Going to yoga class or the gym or preparing healthy meals at home are all time-consuming activities. Expecting to go from never working out to hitting the gym five days a week is simply unrealistic for most. (By the way, I use the example of exercising and eating healthy because, statistically speaking, those two resolutions – along with spending less and saving more – are the most common New Year’s resolutions.)

So, the question becomes, why can’t a resolution be something you only repeat once a year, rather than daily, weekly or even monthly? And instead of focusing on our physical health, perhaps we could focus on our financial health. And I’m not talking about simply spending less and saving more – as I mentioned, that’s already one of the more popular New Year’s resolutions. What I’m proposing is an annual check-up on our financial health.

The following are three important tasks to consider as part of that check-up, each of which is designed to help you be better prepared for the unexpected.

Creating Financial Records Organizer

Create a financial records organizer. You can find this tool in various formats, but it is essentially a central repository where you can organize your important financial documents. The organizer can help family members manage your affairs in the case of a catastrophe, serious illness or death. If you’ve already created one, consider making it your New Year’s resolution to review it every year to make sure everything is up to date. It’s a good idea to duplicate your financial records organizer and give a copy to your executor and/or trusted financial professional or keep it in a safety deposit box – another New Year’s resolution if you haven’t already done this.

You will also want to consider recreating the organizer in some sort of virtual format. Being from Colorado, the devastating Marshall Fires that occurred here in December were a harsh reminder that circumstances can change in an instant. Having a virtual record can be instrumental in helping manage losses from floods, fires or other natural disasters. Just be sure to password protect this information and share the password with individuals like your executor or agent.

Review your beneficiary designations. Speaking of beneficiaries, another easy resolution is to make sure you have beneficiary designations on every account that allows them. In fact, you should have primary and secondary beneficiaries listed if allowed. Many accounts such as IRAs and 401(k)s cannot be set up without providing beneficiary designation. However, many people don’t realize that checking accounts, savings accounts and brokerage accounts can also have beneficiary designations in the form of payable on death and transfer on death designations.

Why is this important? First off, your beneficiary designations direct your assets into the hands of the people you want to receive those assets when you are no longer around. In other words, these designations represent a future gift for your loved ones. Second, when those loved ones have to close your estate, any assets that do not have a designated beneficiary will more than likely have to go through probate, which can be an expensive and lengthy process. Of course you will not be around to witness any of this, but why not make things as easy as possible for your beneficiaries?

Reviewing Beneficiary Designations

One important caveat: beneficiary designations cannot be a “set-it-and-forget-it” resolution. It must be an ongoing resolution because every time you have a life event – e.g., marriage, birth, divorce or death – these designations need to be revisited. When those big life events happen, you will want to ask yourself whether you still want the person(s) listed as your beneficiary to receive the funds you’ve designated for them.

Update your estate plan. As we begin 2022, we are close to entering the third year of the COVID pandemic. Although none of us wants to face our own mortality, I’m guessing many of us have thought about it at least once during this historic event we are living through. Why not resolve to creating or updating your estate plan?

You may be reading this and saying to yourself, “I don’t have an estate, so why would I need an estate plan?” But the reality is, if you have a dollar in assets or are over the age of majority in the state where you live, you need a basic estate plan. If you become incapacitated or die, that dollar in assets has to go somewhere, and someone will have to make important financial and medical decisions for you. A basic estate plan can mean different things for different people, but in general it should include a will, a power of attorney, a medical power of attorney and a medical directive.

It’s important to note that I am not here to provide legal advice, so I strongly suggest enlisting the help of a qualified estate attorney to help you though this process and get the right documents in place. So, your resolution could be to set up that meeting. If you already have an estate plan, consider resolving to set up an annual meeting with your attorney to revisit the documents you’ve created to make sure they are up to date and reflective of your current life situation.

The Ultimate Resolution: Be Better Prepared for the Unexpected

I know we are already nearing the end of January, so maybe you’ve already made – and possibly already broken – those New Year’s resolutions. If that’s the case, I hope this article motivates you to establish a new resolution that you may find easier to stick with than daily yoga classes.

When it comes to your financial health, you can and should implement these check-ups at any time throughout the year. The best gift you can give to yourself and to your loved ones is to be prepared for the unexpected. Because if the last couple of years have taught us anything, it’s that you never know what surprises the years that lie ahead might bring.