Death Proofing your Finances

If you're unaccustomed to this word, "death proofing" might sound extremely morbid. The concept is inspired by a Swedish word "döstädning," which translates to 'death cleaning'. Margareta Magnusson's book "The Gentle Art of Swedish Death Cleaning" popularized this concept. “dö” means "death" and "städning" means "cleaning."

In Swedish, this term refers to the process of removing unnecessary things to make your home nice and orderly before you leave the planet. It applies to our finances as well. Let's face facts: death is inevitable. If we intend to leave behind a stellar legacy, we must organize our finances before we exit the world.

In the financial world, "death cleaning" or "death proofing" refers to the decluttering of finances that people should focus on as they begin to age and approach the end. It is a sensible concept which advises on getting rid of excess debt and simplifying our financial situation instead of leaving behind a financial mess for our heirs to sort out.

We should learn to clean our own mess. Life can get much easier for us if we can simplify and meticulously organize our finances; it also takes a potential extra burden off the shoulders of our descendants after we pass away. Responsible adults must understand the importance of "death proofing" your finances and undertake the process at the right time.

Of course, youngsters needn't really worry about it right away, but what's the harm in being well informed?

When?

Research has revealed that a person reaches the peak of their ability to make financial decisions at the age of 53. Moreover, dementia and cognitive decline generally tend to set in at around 60 years of age. Psychology claims that our decision-making and rational-think abilities decline as we age, hence making us vulnerable to scams, frauds, poor judgment and unreasonable actions.

The common assumption in the financial world is that 50 is the ideal age when we should initiate the task of decluttering our finances. We should do it mainly to protect our aging selves.

Why?

Why not? It is better safe than sorry, right? Have you ever had to sort out the financial mess of a deceased relative? My Grandpa had succumbed to Parkinson's disease and had trouble remembering things in his last days. When he passed away, my mother had a tough time gathering all his documents and information in order to proceed with the formalities of financial claims.

Some insurances could not even be claimed as we couldn't trace the required documents. My mother was in a sorry state as she was already mourning the loss of her father and also had to tackle these glitches at the same time. I learned a valuable lesson and I would definitely not want my successors to go through such agony.

Life is unpredictable. Memory is volatile. Diseases are rampant. Growing age makes a man physically and mentally vulnerable. A smart, pragmatic and thoughtful human would understand the importance of sorting out and straightening his or her finances.

Steps to "Death Proof" Your Finances

Here are a few steps that can guide you as you conduct a financial "death proof":

1. Consolidate Financial Accounts

   The primary focus should be on integrating your scattered bank accounts under a single one. Too many bank accounts can be quite difficult to manage. You might lose track of them. It is also more convenient to monitor fewer accounts for suspicious transactions.
   If you have had multiple jobs, you might have various provident fund accounts. Consolidate the funds in each of them to reduce the financial clutter. If you have invested in stock and shares, it would be best if you swap all individual stocks and bonds for mutual funds; get a professional to manage your investments. These steps will simplify your financial situation.

2. Automate Payments

   Memory lapses are quite common as you age. If you forget to pay your electricity or cooking gas bill, you might be denied the supply of these essential items. If you forget to make a credit repayment, you not only have to pay late fees and tackle a high APR but your credit score will also take a blow.
   It is better to set up automatic monthly payments for all your credit and utility bills. Most banks allow you to avail ECS or Electronic Clearance Service which automatically debits the billed amount from your savings account to pay the monthly bills that you have signed up for.
   Pay your credit bills in full amount each month to avoid the burden of unnecessary extra payment. Just make sure that your savings account has sufficient money to fund all your bills.

3. Repay Your Debts

   Take responsibility for your actions. If you have landed in debt, your poor sense of money management is the culprit. Your successors are not accountable for it; they must not be made to suffer for your mistakes. Be aware of what you owe and draw an effective budget plan that enables you to repay your debts as quickly as possible.

4. Fewer Credit Cards

   Most financial planners suggest that you should prune the number of credit cards when you get on in years. If you ever had a lot of credit cards, it would be best to wrap up and slowly close the accounts of the ones that you barely use.
   With increasing age, try to close most lines of credit and restrict yourself to using just two credit cards - one for daily purchases and another for emergencies. Keep the two cards that offer the highest credit limit.
   Do remember that closing your credit accounts will hurt your credit score, so make sure that you are financially secure and wouldn't be applying for a new loan before you start chopping off your credit card subscriptions. It would be ideal if you gradually unsubscribe over a period of a few months.

5. Get a Confidant

   Identify a trustworthy person, preferably a family member, who can make decisions on your behalf if you are unwell. Entrust your financial and health details to this trusted person. This person should be able to attend to your needs if you are amidst a medical or gerontological emergency.
   It would be ideal if this trusted person is someone quite young to ensure that he or she doesn't become impaired or incapacitated simultaneously. Grant him or her access to your financial accounts, or at least tell them where they can find the information during an emergency.
   Get a lawyer to create your will in case you want to decide how your assets and property will be divided among your successors after you pass on.

6. Consolidate All Documents

   It is better to keep all important documents handy in case of a crisis. You should create an "emergency" folder or a box where you keep all your crucial documents that your family might need in your absence. Keep this box or folder somewhere safe and keep your confidant informed about it.
   Keeping it in your bank locker wouldn't be a great idea as it wouldn't be accessible at all times. A fireproof and locked safe or a locked cabinet would suffice. As we live in a digital age, you should also scan all your paperwork and store them safely in an encrypted folder in the cloud to help your successors in case your original documents are lost or misplaced.

   When you amalgamate this emergency folder, make sure that the following documents are safely packed in it:

   1. Your will

   2. Medical documents

   3. Powers of attorney, if relevant

   4. Your Birth and marriage certificates

   5. Birth, marriage and death certificates of deceased family members

   6. Military records, if any

   7. Identity cards - Passport, Voter ID, PAN, Aadhaar, Driving License, Ration Card, etc

   8. Car titles

   9. Property deeds and any other ownership documents

   10. A list of your financial accounts

   11. Insurance policies

   12. The contact information of your lawyer, financial advisor, insurance agent

   13. Photocopies of all identity proofs and credit cards

To Sum Up

Life is packed with uncertainties and we never know what destiny has in store for us. Unforeseen circumstances are inevitable.

However, an aging man knows that his days are numbered. It is better to make life comfortable for those we leave behind before we finally leave for our heavenly abode. A financial "death cleaning" or "death proofing" could be a blessing to our successors.