Home / How You Will Benefit From a Financial Inventory

Lehigh Valley Woman – Finance Section – June/July 2013

by Laurie A. Siebert, CPA, CFP®, AEP® Vice President, Valley National Financial Advisors

What is a financial inventory and how will you benefit?
A financial inventory is the first step in taking control of your financial life. The inventory is the foundation on which you make sound decisions that move you forward toward meeting your financial goals.  These goals should be defined and may include saving for a car, home, family, vacation, wedding, education or retirement.  Having this information at your fingertips will help you make proactive decisions and save you money and time. Step one is gathering the pertinent information.

Step one – taking an inventory
Assets – If you haven’t already organized your financial records, do that.  Once your records are organized, take a detailed inventory of all your assets and all your liabilities. With one place to go for all your information, you position yourself to make proactive and smart decisions.

Start with the most liquid of assets: cash – bank accounts including checking, savings, and money market accounts.  As you gather this information, record the account number, account value and how the accounts are titled.  Are they individually owned, joint with spouse or joint with another?  Also, are they payable on death accounts or transfer on death accounts?  This is important to know because all of these differences have an impact on your financial planning, your estate planning and even your education planning if you have children going to college.

Continue your list with brokerage accounts, savings bonds and retirement accounts. For brokerage accounts you will want to know how much you paid for your investments and when you bought them.  Value savings bonds at www.treasurydirect.gov by creating an inventory that will give you the interest rate, maturity date and accrued interest to date.  For your retirement accounts, you will need to know if they are 401ks, 403bs, IRAs – traditional or rollover, ROTH IRAs, or deferred compensation plans. Different rules apply as to when you can withdraw money from these accounts or if these accounts are subject to creditor claims.  List on your inventory the primary and contingent beneficiaries.  This is very important.

Cars, personal property and real estate – People forget that personal property may have value.  Real estate may have special restrictions or special rights or restrictions.  This is important when deciding what property will go to your heirs and what inheritance tax to expect. Sometimes “our things” have sentimental value as well and by taking an inventory of them, we have the opportunity to decide who might treasure them as we do, after we are gone. Record it all.

Liabilities – Record the balances today on mortgages, auto loans, student loans and credit cards. Include the interest rate, payment term and minimum monthly payment.  Does your mortgage payment include escrow payments or mortgage insurance premiums?

Step two – Cash flow for Income and Expenses
Record sources of income; separate from your investments, such as wages, pensions, Social Security and trust income.  Expenses may include housing and utilities, food, clothing and personal items, out of pocket health care, transportation, vacations, entertainment, income tax and payroll tax.  Review your end of year paystub to have a better idea of what expenses are coming out of your paycheck.  Know if expenses are monthly, quarterly, annually or periodic.

What kind of questions can you answer after this?
How much am I worth? What kind of estate will I leave? Who are the beneficiaries on my accounts?  Do I need to change my Will to coordinate with my beneficiary designations? Should I refinance? What is my interest rate?  How long will it take me to pay off my credit cards or student loans?  Which debt should I pay off first? The list can go on and on.

You will save a lot of time and money by having this information all gathered in one place.  Saving time with your attorney, financial advisor and accountant saves you money. Seeing your options makes you a better decision maker.  Update the inventory and cash flow yearly. Soon, you will see patterns and budgeting and thoughtful financial decisions will become second nature.

If you would like a template for your financial inventory, email me at lsiebert@valleynationalgroup.com and mention this article. I will email it to you.

In summary

  1. Organize your financial papers.
  2. Inventory your assets and liabilities.
  3. Know how your accounts are titled and beneficiary designations.
  4. Write down your cash flow – Income sources and expenses.
  5. Know how much you are making on your assets and how much your liabilities are costing you.
  6. In addition – list all of your insurances, terms and costs.

Be proactive, not reactive, and make the best of your choices.

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication, including any attachments, is not intended or written to be used, and cannot be used, for the purpose of 1. avoiding penalties under the Internal Revenue Code or 2. promoting, marketing, or recommending to another party any transaction or matter addressed herein. Valley National Financial Advisors is the marketing name for Valley National Group, Inc. and its affiliates. Securities offered through Valley National Investments, Inc member FINRA, SIPC, 1655 Valley Center Pkwy, Suite 100, Bethlehem, Pa 18017 (800) 383-8297.