by Phil Lebkuecher | Jan 27, 2023 | Behavioral Finance | 0 comments
I’m of the age now that when the phone rings in the middle of the night, it’s normally not an invitation to join a great party. In fact, when it has occurred, I’m grateful for when it’s a wrong number or something funny. But like some of you reading this, I’ve gotten the call about a loved one or friend who’s had an accident or medical emergency and needs help in the middle of the night. These tragic things can happen to us and this is why we need to be prepared with a red file.
The red file is a place to put essential information, documents, and contact information regarding your personal and financial affairs. It gives the people whom you trust the information and location of important documents, so they are able to help you when you cannot do these things yourself.
The contents of the red file should be, first and foremost, a power of attorney as well as health directives. This is essential if you want your wishes to be followed. The red file should also contain at least the location of your will, or the attorney to contact that has a copy of your estate planning documents. I would also recommend a list of bank and investment accounts as well as insurance coverage, especially health, disability, and life insurance policies.
You might also consider writing down the details to what monthly bills, like mortgages or car notes, must be made and how you pay those bills. Utility bills and any other recurring expenses should also be made known in the red file. If you have a safety deposit box, make sure you describe where the key is located and at which bank branch location.
Finally, provide a list of contacts of the important people in your life. Professionals like your doctor, lawyer, investment adviser, tax adviser, business partners, and banker should be listed. But don’t forget important family or friends that may need to be made aware of your situation. And possibly your pastor, priest, rabbi, yoga instructor, drinking buddy; whatever is most appropriate for you.
I’ll close with an image from my sailing days. When sailing offshore, it’s wise to have a “throw bag” on board. This important bag contains things that, in the event the boat starts sinking, you’ll need for survival and rescue. The bag helps you so you won’t be fumbling for essential items while you’re in a bad situation.
The red folder gives you the same ability to reduce the stress of a bad situation by having the things you need in a place that can be found quickly by your trusted people. While the “throw bag” can be life-saving, it’s no exaggeration to say that the red folder serves a similar purpose.
Take the time now to put your red file together and let a loved one know where it’s located. It’s one of the wisest, most loving things you can do.