Week 1 Family Binder and Life Insurance

I have more money to spend when I take the time to keep my finances organized.
I have more time because I'm not searching for information and paperwork.
I have less stress because I know exactly what I have and when payments are due.

Today I'm starting a series to detail exactly how I organize our family office.

My favorite organizing secret is our family notebook. I keep a large binder with page protectors inside. Over the next few months I'll share with all the important household information I have included in this notebook. I know my family will have what they need should something happen to me. And I can find all the paperwork I need for our finances to run smoothly.

Let's start with life insurance. If you depend on someone else's income to make your life better and you don't have your own investment nest egg, you will need life insurance to cover the lost income you that will result from the death of your loved one. If you are single and you have no one to provide for after you die, you may not want or need life insurance.

Going forward, I'm going to assume you have life insurance* or will buy life insurance in the future.

How much you will you need is a personal decision but there is a  basic way to figure this out.

One million dollar's worth of life insurance will give you about $40,000 a year. Many experts agree that withdrawing about 4% a year is the basic way to figure this out. Take out 4% each year and the money will replace itself from the average interest you will make on the money left in the account.

For example, if you can live on $120,000 a year, you will want 3 million dollars of life insurance (or other income).

As I share about organizing our finances, keep that in mind. Where you live and how you live will affect how much life insurance you will want to have. Cost of living is everything.

I have a photocopy of the first page of our life insurance policies. I have these in a sleeve in my family notebook binder.  I also like to print out a label to name the page in the upper right corner of the plastic. I store the complete policy in a separate file because I don't need to access it and it is a quite large document.

During a recent financial check up, I noticed that my name was spelled incorrectly on one of the policies I was a beneficiary on. Had he died before I realized it, I would not have received that money. So take the time to check this.

Get started on your family notebook and you are on your way to organizing your finances!

*I only buy term life insurance. I don't like any other kind. If you have whole life insurance, do your research and decide for yourself if you are okay with what you have.  I 'm not going to make a case for term insurance as there are many good articles online about the subject. I do not offer any financial advice but rather share what has worked for me. Consult your own financial planner or attorney for professional advice.

updated 4/4/2017