The Red Folder - Pink Magazine, June 2008
It is true -- most women live long enough to face financial insecurity and uncertainty if they are unprepared. On average, women live seven years longer than men and are more likely to live a portion of their retirement alone; widowed, divorced or unmarried by choice. Many of these women are retiring with inadequate investments for their twilight years coupled with a significant decline in income after divorce or the death of a spouse. It is sad, but single women face a much higher rate of poverty than elderly, single men; approximately one in five lives at the poverty level.
Many women confronting these harsh realities earned less money than men during their years in the workforce (today, women earn 77 cents on every dollar that a man earns) and many left the workforce early to raise children and or take on the care-giving responsibilities of their parents.
Most women focus on their money when a crisis strikes: job loss, blindsided by divorce, sudden widowhood or an illness. Women can avert financial mayhem by establishing mental and physical organization with the orderly maintenance of financial and related paperwork. But women who take responsibility for their finances are ready to make solid decisions in a time of crisis, especially if they are living alone.
Good organizational skills are the key to successfully managing your finances, and achieving this goal requires knowing your financial standing at every stage of life – young, elderly, divorced, single, married or widowed. The Red Folder is designed to help simplify your financial life on an administrative level and take you from being dependent on others for your financial understanding to being organized, independent and capable of decision making impacting your future.
The Red Folder should contain a list of important individuals, companies, and their contact information. It might typically include names and phone numbers for your brokers, financial advisors, insurance agents, a phone number for the social security administration, your company’s human resources department (if you are receiving a pension or have company provided life insurance), your attorney and accountant or CPA, the names addresses and phone numbers of all children and grandchildren, and any other important information that a surviving spouse or child would need. Copy the front page of each investment, brokerage and bank account, insurance policy, wills or trusts, healthcare and durable power of attorney, deeds and vehicle titles, and any other important documents. You only need to copy the first page, but write on it the location of the original document. For example, you keep your insurance policies in a safe deposit box; copy the policy cover page, write the location of the original (safe deposit box) on the copy, and keep the copy in the red folder. Your survivors will not only have information for everyone they will need to contact if something happens to you, but also an inventory of all the important documents, accounts, titles and policies, with their account numbers and a notation of where the original is kept. Plan to update this once a year. The folder can also be taken with you in the event of a hurricane evacuation.
Here are two potential crises in a woman’s life where financial organization is paramount:
Death of a spouse: It is important to know your current income sources as a married spouse and what they would be upon the death of a spouse. For example, how much money will you need each month to maintain your current standard of living? Will you continue receiving both your husband’s pension and social security after his death? Are you the primary beneficiary on your husband’s IRA(s)? Are there estate taxes to be paid and from what monies?
Illness: Do you have a healthcare power of attorney? Where is it located and who else knows its location? Do you have investments that can offset the cost of an unexpected surgery?
All women should seriously consider these questions and circumstances and realize that understanding paperwork relevant to your financial well being cuts the learning curve in half.
Life is a challenge – lessen the stress in your life and establish a system of financial organization.