How to Create a Money Binder | The Modest Millions Show

If you manage your family’s personal finances, what would happen if the worst happened and you were no longer “available” to manage the household finances? In our house, I manage the finances, and Mrs. Modest is perfectly okay with that. If something happened to me, I don’t know if my wife would know the location of all our assets. Enter, the money binder. In today’s episode we talk about the importance of a money binder and how to create one today.

IN THIS WEEK’S EPISODE

  • The importance of a money binder
  • The key components of a money binder
  • The importance of defining your investment philosophy
  • A discussion on managing passwords

How to Create a Money Binder

A money binder is much more than simply a list of your bank accounts. Your money binder is a key component to your personal finance plan to ensure your loved ones are able to keep your personal finance plan in place if something unfortunate happened to you.

Below are the key sections that should be included in your money binder. So, go out and grab yourself a three-ring binder, with a couple of section dividers and get to work on creating your money binder.

Money Philosophy

This should be the first page in your money binder. This is the executive summary, the single piece of paper (or two) that outlines your entire money philosophy so that your loved ones can continue where you left with your investing, saving, wealth generation. This is like your manifesto. Personal finance is just that: personal. There are number of ways to approach personal finance, and this intro document gives you a chance to chart the course for the next captain of the personal finance ship.

You can lay things out any way you’d like. You can write it as a step-by-step document so your loved ones can follow in your DIY personal finance steps, or you can write it in a way that a professional that you trust and recommend can review your money philosophy and strategy and advise your loved ones based on that guidance.

In addition to outlining your philosophy, use this area to give a quick State of the Budget report. Just like the President’s State of the Union address, give an update on the health of your personal finances.

As with anything over time, your money philosophy will likely change over time. And, if you’re including the State of the Budget update, you’ll need to update this cover sheet periodically. At least annually, but maybe semiannually or quarterly depending on your situation. When you update the document and as you insert it into the money binder, sit down with your loved ones and walk them through the details and updates. It just helps keep everyone on the same page.

Key Contacts

The first section of the money binder includes the contact information of the key people your loves would need to contact in the event you’re no longer able to manage your family’s finances. This list might include your accountant, financial advisor, life insurance agent, benefit plan administrator from work, estate/trust attorney, banks, etc.

Include contact name, phone number, email address, mailing address, policy numbers, account numbers and any other pertinent information that they would need to verify that they can access the account.

Net Worth Statement

Your mileage might vary depending on the complexity of your personal finances, but here is where you can track all of your net worth and your assets. It’s somewhat similar to the Key Contacts section, but here you’ll want to include recent statements from your bank accounts, retirement accounts, investment accounts, business income statements, real estate, cash-value life insurance policies, loans, mortgage, etc. This is more of a high level section just to outline all of your major assets and liabilities. Don’t get too in the weeds with this section.

Life Insurance

This section is pretty self-explanatory, but include copies of all your life insurance policies (both cash-value and term policies). Also include any information on how to submit a claim, as this may be one of the most immediate and helpful information in the money binder if it comes into use. Don’t forget to also include information on any life insurance policies in force at your employer(s), as there is sometimes some employer-provided life insurance, and it can be easy to forget about. And, check with your credit card company as well. Sometimes there is life insurance coverage if you book travel with your credit card and you encounter an accident and pass away while on that trip. If so, it couldn’t hurt to include this information in the binder.

Wills, Trusts and Directives

If you’ve worked with an attorney to create any wills, trusts, powers of attorney or advance medical directives, be sure to include copies here. We haven’t gone through these steps yet, with the exception of advance medical directives, but when we do, we’ll definitely include copies here. Should the money binder be needed, this might also be one of the most immediately needed sections.

Business(es)

If you have a full-time business or a part-time side hustle, don’t forget about including the Businesses section in your money binder. Include things like financial statements, documented business processes, overarching business strategy and key contacts that would be helpful for someone who might not understand all of the complexities of your business to step right in and keep the business humming.

Passwords

Your passwords are an important piece of your money binder, but you’ve got to be careful here. Your loved ones will need to access your accounts, but you don’t want to just create a single document that could wipe out your personal finances if it got in the wrong hands. Think about it, you might want to store your money binder in your safe at home. That’s probably a good idea. But, what happens if your house is burgled and they steal your safe, eventually cracking it? You’d be frantically trying to remember all of your accounts and changing your passwords.

You could encrypt the passwords onto a portable hard drive, but those don’t last forever so your password file could be corrupted when your loved ones need it most.

You could also create some fancy code that can only be decrypted with a special key that your loved one knows, but that sounds pretty complicated.

As far as I can tell, one of the better ways to do handle the passing down of passwords is to have two separate files. One sits in your money binder that includes a numbered list of accounts, login URLs and usernames, and the other document sits in a safety deposit box or with an attorney or an accountant or another trusted resource that ONLY includes a numbered list of passwords. With the second document, since it only includes passwords (you’d need the other document to do anything with the passwords and vice versa).

An argument could be made that you don’t even need to include the passwords, since upon death, your beneficiaries (or your estate if beneficiaries aren’t defined) are granted access to all your accounts, so really the passwords are only needed for the online accounts that aren’t typically part of the estate, like for Facebook or Gmail. Granting your loved ones access to these accounts will help them manage and transition them when you’re gone. It’s not necessarily related to your finances, but it’s still sensitive information, so you’ll want to take proper precautions.

WRAP-UP

That’ll do it for this week’s episode.

What about you? Do you have a money binder in place? How do you securely manage your passwords for all your accounts? What’s been your experience? How has it gone? I’d love to hear from you.

Also, make sure to reach out with your feedback for me or for the show, topic ideas, personal anecdotes of your own journey or if you just want to say hi. You can always reach me at feedback[at]modestmillions[.]com.

For a recap of the strategies, tools and links that we talked about today, check out the show notes at modestmillions.com/015.

Also, while you’re on the site, don’t forget to subscribe to receive email updates when we post new episodes (you can do so at modestmillions.com/subscribe). And please, if you like what we’re doing here and you find the information valuable, help us spread the word and show your support by leaving us a five-star review on your whatever podcast platform you’re listening to us on.

Join me next week when we talk about how to find your side hustle.

Until then, remember to keep squirreling away now to earn millions later!

Thanks for listening; we’ll catch you next time!

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