My grandmother passed away a month ago and, frankly, I’m still reeling from it in some ways. She was a daily part of my life for my entire childhood, a regular phone companion, and a person I visited (at least) monthly, even though she lived four hours away.

My mother took the loss even worse, especially since she was the one charged with taking care of my grandmother’s affairs in the days after her passing. Unfortunately, we came to find out that my grandmother’s papers and information were incredibly poorly organized, with my mother finally resorting to digging through boxes of old papers and calling numbers just to put the pieces together.

With such organization, it was really clear that my grandmother’s financial organization relied entirely on her ongoing health and sharp state of mind. If she had fallen into poor health, either physical or mental, it would have been impossible for someone to step in and take care of her affairs. In her passing, she left a lot of confusing papers in her wake, adding up to a lot of painful hours for the people left behind, sifting through all of this information to take care of such things.

After this experience, I realized that I never want my family - my wife, my children, my parents, or anyone else - to wind up in this situation. I resolved to go far beyond my old master information document and create a resource that my family could turn to in any painful situation - my loss of life, my loss of good mental or physical health, and the potential loss of our property in a disaster.

I’ve been collecting all of this information in a binder of my own design. I took a serious look at several prepackaged solutions for this type of situation - Life.doc, Know Where You Are, and several others - but all of them failed in some respect. They left out something I considered important. They weren’t customizable enough. I couldn’t just print off more forms. So, I decided to assemble my own.

What follows is a detailed description of the document I’m still assembling with enough detail that you could easily make your own. My advice? Copy and paste all of the text below into a Microsoft Word document, then start filling in the blanks. I would turn each section into a big header - perhaps on its own page - so that it’s easy to find, and I’d use separators to keep the sections apart.

If you have the same kind of worries that I do, assembling this binder will take a big load off of your mind.

Ready to dive in? Let’s get started.

What You Need
To assemble this, you’ll need several items.

A three-ring binder Since you’ll be moving pages around, a three ring binder is the best way to go. Although you may save this documentation electronically, you’ll want to have a hard copy sitting in a safe place (like in a deposit box at a bank) so that you can turn to it in times of need.

A computer with a printer This is optional, but highly worthwhile. Recording all this information in an electronic fashion makes it much easier to make updates later.

A three-hole puncher This makes it easy to punch holes in the pages so that they’ll easily fit in the binder.

Dividers You’ll want 15 to 20 section dividers for the binder to make it easy to flip to the place you want.

A camera, preferably a digital one You’ll likely need to take pictures of many of your items. A digital camera makes this quite easy, though a film-based one fills the need, too.

A writing utensil and some notebook paper As you prepare this document, you’re going to take a lot of notes along the way. Be prepared.

Plenty of time This will take quite a long time to assemble. Don’t expect to do it all in an hour or even in an afternoon.

A Basic Emergency Plan
Every family should have an emergency plan. Where will you meet in times of disaster? What key people do you need to call? What key items should be extracted from the home? Where are the shut-off valves in your home? It’s worth your effort to start this process by developing a simple emergency plan and keeping a copy of it in your home as well as in this binder. Here’s what you should include.

Immediate emergency plan Identify two locations where you will meet in the event of an emergency. One place should be about 500 feet from your home. The other place should be a location outside your town that all family members can easily locate - say, the home of a grandparent. That way, all of you know where to go if there’s a disaster at your home - or a disaster in your area.

Emergency item list You have five minutes. What do you grab out of your home? Spend some time thinking about this and make a list of five or so items that you (or family members) could quickly grab in the event of a disaster. Old photos, a backup hard drive, and a portable safe might be good things to list.

Household shut-down information What do you need to do to effectively “shut down” your home? Know where the turn-off is for the gas and the water and note them here, as well as fire extinguisher locations. If you keep emergency food or water stored somewhere in your home, note that here, too. If you have a burglar alarm in your home, make a note of this, too, as well as any plans you have related to that (such as calling an alarm phone).

Three (or more) emergency contacts Who should be contacted in the event of an emergency? You should have their contact information at the ready, particularly every possible phone number for them. Good people to consider for this role include your parents, your siblings, your lifelong friends, and your pastor/clergy.

Who possesses keys for your home? Keep a list of the people who have keys to your home/automobiles, as well as their contact information. If you keep a key hidden outside, I would not note this in the document.

Key contacts You should keep a list of key contacts - work, school, and organizations where you (or your spouse) hold leadership positions are good to note here. You should also include contact information for your primary care physicians.

Key Information About Each Family Member
You should maintain some basic information for each person who is dependent on you - you, your spouse, your children, and any other people who you’re responsible for (such as disabled or elderly relatives). What information is worthwhile for each person?

Key personal information Full legal name and birth date should be recorded as a minimum. Social Security number is optional - it could be very useful, but it’s also something of a security risk. Perhaps just write it on the copy stored in the safe at the bank.

Home, work, and school addresses, phone numbers, and emails In other words, the most complete contact information you can assemble for each person.

Key work contacts Such information as your work identification number(s), your department at work, and any other key data from your job should go here. You should also note the name and contact information for your work supervisor, any key assistants or subordinates that you have, a human resource contact, and a pension/401(k)/403(b) contact. If the person is a student, contact information for the school and any school identification numbers are key.

Health insurance information Make absolutely sure you have health insurance information for each person - the policy number, the provider, and contact information for the provider.

Medication list What medications is the person actively taking? What dosages? What pharmacies? What doctor(s) prescribed the medication?

Diseases or other health concerns A simple list of the diseases and other major medical conditions of the person is useful, as is an allergy list. Blood type can also be useful, as can whether or not the person is an organ donor.

Complete physician and pharmacy list with contacts Every doctor that a person sees on any regular basis should be noted (name, specialty, contact information).

Other medical history A medical history can also be useful in a medical emergency, such as surgeries and past conditions.

Copy of will, living will, power of attorney, trust documentation A copy of all of these documents is useful. These can be photocopies, as long as the location of certified versions is identified.

Details on All Insurance Policies
For each policy that you have of any kind, make a list of the insurance type, the insurance company (and contact info), the policy number, the agent’s name, and the agent’s phone number. A copy of the policies can also be useful, but at the very least, you should jot down a quick summary of each policy under the contact information.

Types of insurance to remember: homeowners’ insurance, automobile insurance, renters’ insurance, other property insurance, life insurance, health insurance, dental insurance, disability insurance, long term care insurance, liability insurance, pet insurance, and mortgage insurance. There may be others.

Details on All Accounts
A complete listing of all of your accounts is essential.

Banks You should maintain a list of all banks where you or anyone in your family holds an account. You may want to note account holders as well. Account information is optional here - I would perhaps write it in by hand on the copy in the safe, but not keep it electronically.

Investment accounts The same information should apply to all investment accounts, retirement or otherwise. This includes pensions and any other potential sources of income.

Key property title locations The location of the titles of all homes and automobiles you or your spouse own is useful.

Legal partnerships A list of all legal partnerships that the person is involved with is vital, along with a contact person for each one.

Key financial personnel Contact information for your accountant, your stock broker, and/or your financial planner(s) is key here.

Mortgage and other debts A full list of every organization with which you hold a debt is also useful.

Credit cards Keep a list of every bank with which you have a credit card, as well as the phone number for that card. Don’t include the account numbers - they’re not necessary and are a bit of a security risk.

Real estate holdings A full list of your real estate holdings is very useful, along with the location of any and all deeds.

Legal representation You should also have contact information for your lawyer.

Location of other legal documents Depending on your situation, you may need to note other legal documents of importance. You may want to note the location of any birth certificates, adoption papers, custody agreements, divorce agreements, military papers, lease documentation, passports, real estate deeds, pre-nupital agreements, marriage licenses, wills, trusts, living wills, contracts, powers of attorney documents, and any other contracts that may be relevant.

You can include copies of any of these as you see fit, but you should keep all of the original documents gathered somewhere (preferably in a safe in a bank).

Service Providers
This piece is simple. Every business or individual that provides a service to you should have their contact information listed in a central place (so that they can quickly be contacted to postpone or eliminate services).

Services to remember: your child’s caregiver, your housekeeper, your baby sitter, your pet sitter, your gardener, your pool maintenance company, your gas company, your telephone company, your cell phone provider, your electric company, your cable provider, your garbageman, your lawn service, your pest control service, your computer repairman, your building superintendent or landlord, your alarm services, your cleaning services, and any other services you might have.

A Thorough Inventory of Your Possessions
This will perhaps be the most time consuming part of all. For insurance purposes, it’s incredibly useful to have a thorough inventory of all of the possessions in your home (and elsewhere). Here’s the exact procedure I would follow.

First, make a list of every room in your house, all external buildings, and any other key locations where there’s a significant amount of your property. This is essentially a location checklist, to make sure every place where you have property is accounted for. Don’t forget the attic or the basement or the shed in the back!

Next, go to each of these rooms/locations and make a careful list of all of the items with significant value in the room. Don’t worry about specifics - just make sure you’ve actually noted all of the valuable items in the room. It’s more important to hit all the big things than to get bogged down in items worth just a dollar or two that prevent you from ever getting this done, so I propose a rule of thumb: only note things with a value of $20 or more. If you want to note more items, come back later and do this again, but don’t write down the items on the first time through if the value is that low.

Don’t forget drawers, jewelry boxes, under beds, in closets, or other such locations that are easy to overlook. Take your time with this process.

Once you have this big list of possessions, document it as much as possible. Write down any serial numbers you can identify. Take photos of as many items as possible (including large collections, like books, DVDs, and so on). If you have a digital camera, this isn’t a problem - thoroughly document your items. Make estimates as to the value of the items. For larger items (anything worth more than, say, $100), note the date and place of purchase, the purchase price, and keep a copy of the receipt (you can scan the receipt and save it in the document if you wnat).

This will take a long time. Don’t sweat it. Take your time and do it right.

Updating Your Document
I recommend several avenues for maintaining and updating the document.

First, keep both an electronic and a hard copy of the document in a safe place. I recommend keeping them in a safe deposit box at your bank. Keep the electronic copy on a CD or on a memory stick.

Second, update your local copy of the document electronically every time you notice a change. You can print off updates for each change if you like, but don’t sweat it too much.

Every six months or so, review the document carefully for changes. Add new possessions and remove ones that have been sold or given away. Then, print out any updated pages and replace them in the binder that’s in your safe deposit box, as well as replacing the electronic copy.

You’ll Be Glad You Did It
Even aside from the peace of mind that will come from having this document, there will come some point in your life where having all of this information at hand will come in handy - your house burns down, or your spouse passes away suddenly. During those times of crisis, having all of this data available easily to you will make all the difference in the world, taking a healthy dose of stress away from that painful and challenging moment.

One of the biggest themes running through The Simple Dollar is the drive to get one’s financial house in order - eliminate that high-interest debt, learn how to live cheaper, build an emergency fund, and focus on spending less than you earn. Once that becomes a standard of your life, though, it is inevitable that you will eventually reach a point where your finances are under control. Your high interest debt is gone. Your saving habits are such that you are accumulating money in the bank.

And you’re left wondering what’s next?

I dealt with this question in my own life in late 2007 and early 2008. What was next for me was changing careers and doing something I had always dreamed of doing - writing for a living, and doing it with enough flexibility that I could spend tons of time with my family, particularly with my children while they were young. That was my dream. Before that, writing for a living and having such huge schedule flexibility was a seemingly inaccessible dream.

So I did that. I had good enough spending habits (and no big debts breathing down my neck) that I could afford the steep pay cut that went with quitting my full-time work. I walked away from the office on March 15, 2008, and I haven’t really looked back.

What’s next for me now? What big dreams am I pursuing today? Right now, my focus is on enjoying my children’s youth and improving as a writer. I read voraciously and write voraciously - The Simple Dollar is only a portion of what I write in a given day. (I’m a big believer that the only way one can become good at something is by doing it a lot and admiring and studying the work of people who do it well.) I block off huge chunks of the day to spend it with my family, too - every evening is an adventure of reading books, exploring nature, playing in the park, asking questions, trying new foods, and so on.

As my children grow older, what do I want then? As my skills grow as a writer, I fully intend to branch out publicly into other topics. I also intend to travel with them quite a bit so they can see the world (meaning we’ll go to different places and go off the beaten path), and I would genuinely like to have a house in the country, with a big barn in the back and the tools to do a bit of small-scale farming, with some chickens and a huge vegetable garden.

What’s next for you? Most likely, it’s something different than what I want for my future. I know the people around me have a lot of interesting plans. One of my close friends wants to spend his time building houses. Another friend wants to start a winery.

Whatever your dream is, it likely has a lot in common with what’s next for me:

What’s next seems almost like a mirage right now. It feels unreal, something that you really can’t attain from where you’re at right now, mostly because you see all of the obstacles in the way.

What I find is that many people just simply accept that their vision is unreachable, so they settle into a steady day-in day-out life, doing the same old thing over and over. They let their spending fill up their income and abandon the dreams of anything else, secure in the small comfort of a nice car and a few escapes.

If you choose that route, what’s next will just be more of the same. For some, that’s the right answer - for me, it’s not.

What’s next will require quite a bit of money in the bank. If nothing else, a major life change demands a healthy emergency fund - cash to get you through the transition. Most of the time, the dream requires some serious pocket money.

That means saving. It means spending as little as you can and putting the rest away into some sort of investment. It often means being fairly aggressive with your investments.

What’s next will require some sacrifice and difficult choices right now. This summer, our family’s vacation will be a camping trip to a state park. We drove our previous car almost into the ground, to the point where there were so many necessary repairs coming up that we were afraid to drive it very far.

What’s next for you? What are you doing to get there?

File this one under “interesting, but hopefully I’ll never have to use it.”

For a long time, my wife and I discussed making out a will. Who would we leave our children to should something unexpected happen to us? Where would our assets go? After a lot of soul searching and discussion, we figured out what we wanted and created a will stating these things.

However, that didn’t cover all of our bases. I wanted to make sure that several personal items of mine would go to specific people in the event of my singular death. Although I completely trust my wife to handle this for me, I still desired to have a clear and legally binding explanation of what I wished to happen to a handful of personal items.

Upon hearing about this, one of my wife’s relatives suggested that I make a simple holographic will for those things. “Sure, all you have to do is write down your instructions and sign it in your own handwriting. It’s foolproof!”

It seemed to simple to be true - and it was, for my case. It turns out that I live in Iowa, where holographic wills are not legal (I eventually decided to trust my wife with the disbursement of such items). However, in twenty-five of the fifty states, a document as described above does actually function as a legal will.

You’re kidding, right? According to Lawchek, a holographic will is in fact legally binding in many U.S. states. Some states require a witness, while other states do not require anything of the sort. Check that site to find out the specifics in your state. It may also be useful to call a lawyer in your state just to be sure of the specifics - this is a great question to ask if you have access to free legal counsel at some point.

How exactly do I make a holographic will? All you have to do is write out, in your own handwriting, specifics on how you want your estate (or specific elements of your estate) to be disbursed to people. For example, you may want to explicitly list that certain personal items go to specific people and so on. You may also want to direct that all remaining assets go to someone in specific. You must also sign it at the bottom.

In some states, you may have to have a witness who also signs the document - consult the rules in your state for more information.

It is important that if you make such a will, you are specific and very clear with your wishes. It is probably worthwhile to include a blanket statement leaving the remainder of your estate to someone you trust so that if there are issues of ambiguity, you can have some faith that the person you trust will act in your interest anyway.

When might a holographic will be useful? The most obvious situation is when you are in imminent danger of losing your life. For example, if you’re trapped in a cave during a snowstorm and you’re concerned you might not make it out alive, you may want to write a holographic will. A person might also write one out if they are terminally ill and want to make sure that their wishes are recorded because they believe the end is near.

Should I go this route for making my own will? In short, no. Although it’s something very useful to know if you are in a desperate situation, the inconsistent legal nature of a holographic will makes it something not worth trusting your estate to unless you’re in that desperate situation.

A much safer route would be to write out your wishes in the form of a holographic will as a draft of your real will, but then follow that exercise up with the creation of a true will with those principles. This way, you can be sure that it will be legally binding.

Not too long ago, a friend of mine lost one of his parents very suddenly. It just came out of nowhere and it felt like a punch in the gut to him. He spent a few weeks almost in a daze, lamenting the loss of his father, who he was very close to, and when he finally came out of that daze, he discovered a few things. He’d racked up quite a bit of credit card debt. He was deeply behind on his work. He had let some important personal things slide. In short, he now had some serious catching up to do in his day to day life.

The closest experience I had to this was during the first week of January 1996, when over a three day period the son of a family friend killed himself, an uncle I was very close to passed away from cancer, and a cousin of mine that I had practically grown up with hung himself. I don’t remember much of that period - it was kind of a haze - but I do remember going back to school and just withdrawing from things for a week or two.

Thankfully, my life was easy in those days. I went to school. I participated in some extracurricular activities. I went home. That was pretty much the cycle of my life, so there wasn’t anything too bad going on if I didn’t quite live up to my responsibilities.

Now, as an adult, things are much different. If something devastating hit my life, I’d have to rebound quickly for the sake of my family - and for the sake of my career. Plus, when those extra expenses that happen during a personal crisis hit, I’d be much happier in the long run if they didn’t have to go onto plastic.

Here are some basic steps you can follow to keep yourself always ready for the unexpected but inevitable bad hands that life deals to us.

Keep an emergency fund.
More than anything else, an emergency fund can help you through tough times in the future. Keep a savings or a checking account somewhere stocked with a few months’ worth of living expenses, and keep a little bit of cash at hand for more specific emergencies.

Having easy access to cash without putting yourself in debt means that you don’t have to worry about the bills later on from the actions you need to take right now. You’ve got the cash to handle most issues, like sudden travel, meal expenses, and other short-term costs that are often related to sudden emergencies.

I usually recommend keeping some cash nearby, too, in an intelligent hiding place in your home. I have $300 in $20 bills hidden in my home, waiting for the right opportunity to be used. When I need it, I can just grab it and go.

Keep a “work buffer.”
Keeping a “work buffer” can be vitally important for enabling you to deal with day to day life. It allows you to walk away from your work for a short while with minimal stress, and the less stress you have during an already-stressful situation, the less likely you are to spend money needlessly and make rash decisions. Here are some great methods of giving yourself a work buffer.

Get ahead - and stay ahead - on basic work tasks. For me, this takes the form of having several days’ worth of articles written in advance, so if the vagaries of day to day life catch me off guard, I can just walk away and know that the basics of my job are taken care of.

Have a well-trained backup. Make sure that there’s a person who can handle the mission-critical aspects of your job, or at least knows how to assemble the pieces so that these tasks get done.

Prepare solid documentation of your daily routine. This way, a person can fill your shoes with minimal training in a pinch, making it possible for you to back away with minimal stress at important moments.

Have a list of key contacts ready to go.
If you’re suddenly pulled away because of a personal emergency, there are likely several people you’ll need to contact to make them aware of the situation. Have these people already entered in your cell phone and listed somewhere where you can easily find them.

Contacting all the right people when an emergency happens can be the difference between an easy exit from your responsibilities and a disastrous one. Make sure you’ve covered your job responsibilities thoroughly, as well as the most challenging of your personal responsibilities.

Don’t run yourself out of leave at work.
Many people have a tendency to use their work leave as soon as they get it and fail to accumulate a buffer of leave for later on in the year, then when an emergency strikes, they’ve got to juggle a lot of things in their life and likely alienate their boss in order to be able to handle life’s emergencies.

A better tactic is to hold on to at least a week of your leave and use it only when you have to use it. This way, if a personal crisis strikes, you can quickly tap into that leave and utilize it for something truly important. Coupled with a strong work buffer, adequate spare leave can often make a quick job sabbatical go by with nary a worry.

Develop a strong social and professional network.
If you invest time and energy into consistently helping out others without anything in return, most of those people will be there for you when you really need it. Don’t hesitate to help out people when they ask and never ask for a thing in return unless you truly have a need.

Then, when you’re in a situation where you need help, these people will almost always step forward and give you the help you need, stepping up to the plate for you in pinches and taking some of the workload off your backs. They may also be a personal help, lending you emotional support or other specific things that you may need.

The time spent building up relationships with others pays dividends when you’re in a pinch, so spend some time now building up those relationships before you ever have to call things in.

Keep your master information document (and related documents) up to date - and help others prepare theirs.
There may even be some situations where you have to delve into your own personal finances or into the personal finances of others. For example, if you’re facing a major liability situation, you’ve been critically injured yourself, or a close family member is critically injured or has passed on, it may be important to know what wishes are in place and how people want their assets to be handled.

You can make this easier right now by preparing your own master information document which contains all of this information about you, so if someone needs to access it to help you out in a major emergency, you’re ready to go. Similarly, you should encourage the people you’re closest to to prepare similar documents - your parents, your spouse, your children, and perhaps your siblings or closest friends - so that you can step up to the plate for them in a pinch without having to waste a lot of time or use an attorney and incur a bunch of unnecessary fees.

A little preparation now can make a huge difference when you need it later on. Take some time to get a few things in order and when something disastrous happens, you can focus on the things that are really important and not worry so much about your personal, professional, and financial obligations.

This is an extremely challenging article for me to write because it hits very close to home. Guardianship. Who will take care of my children were my wife and I to both pass away suddenly? It’s a question that’s so painful to think about that many parents simply don’t think about it - and that can prove to be a huge mistake.

Why worry about it? In the most generic sense, you don’t have to. Each state has intestacy laws (intestacy refers to laws that determine what happens to your property in the absence of a will) that will determine, based on a simple set of rules, who would have the opportunity to claim custody of your children. Often, grandparents, aunts, and uncles are options, and in most loving families, the people will come together and find a solid and workable solution for your children.

The only problem with this is that you have no voice in the matter. Your extended family and the state will be making this decision, not you and your spouse. Given the deeply personal nature of the decision, you’ll likely want some input on that decision.

How to Pick a (Possible) Guardian for Your Children

There are many different guides available on this topic, with drastically different advice. What I’ll offer is the criteria we used in coming to this decision.

Does the potential guardian share your values? In other words, does the potential guardian believe in the same things that you believe in and have many of the same philosophies about raising children that you do? To borrow from Les Miserables, you don’t want your little Cosette put in the hands of the Thenardiers, even if you believe they have the means necessary to raise your child.

Do you believe the guardian will raise your child in accordance with those values? Is that potential guardian a good person? If you’re not confident of their character, then you might not want to have your child raised by that person. For example, the guardians we selected for our own child have vastly different interests than we do, but I know their character - our children will be in good hands with them.

Does that potential guardian have a strong family network around them to help with the burden of having unexpected (and likely traumatized) children? Likely, if you die suddenly, the lives of the guardians you selected will be turned upside down. Does your guardian have the appropriate network of support around them to ensure that your child’s life doesn’t quickly descend into chaos? It’s often a good idea that the potential guardian lives near your child’s grandparents (or perhaps are their grandparents).

Will that potential guardian teach your children the basics of success in life? In other words, you wouldn’t want to turn your children over to someone who would be incapable of teaching your child basic life skills. Can the guardian manage their own life effectively?

Does that guardian have the financial security to ensure that your child’s needs are met? In other words, if they’re struggling to make ends meet right now, dumping two children into the situation might not be good unless you’re adding your own financial support (in the form of large life insurance benefits, for example).

Will that guardian have an expected natural lifespan that will allow them to remain as guardian until your child enters adulthood? Your children have already gone through the trauma of losing both parents. Why would you want them to go through the trauma of losing a guardian as well?

The relative values of each of these questions will likely vary a lot depending on your personal values, but they’re all worth considering. These are the exact questions we used when determining who we wanted as a guardian.

When making our decision, we actually made a giant list of everyone who we would even consider as a guardian, then gradually eliminated people one at a time, eventually winding up with three strong candidates. After a lot of discussion, we decided to choose guardians that had the best access (by far) to grandparents for support in raising our kids - that was our “tiebreaker.”

Planning for the Situation

Likely, if there’s a scenario where you and your spouse have both passed on and your guardian gains custody of your children, you’ll want your estate to be used to ensure that your child has every success in life.

First of all, your will needs to specify your guardianship plan. You may even want to specify multiple guardians, so that if your first choice is somehow unable to take on the responsibility, your second choice is clearly stated. Consult a lawyer and ensure that your will is set up properly and legally so that your wishes will be carried out.

The most effective method of ensuring your children get their assets may be to set up a living trust right now, so that if you do pass away, your property is considered part of that trust and can be distributed by the trustee. Within that trust, you could specify rules for disbursement to your children at certain periods in your life. You’ll need to identify a trustee to handle this - someone you deeply trust that you are confident could handle this task with good faith.

If you don’t have significant assets and your primary gift to your children is your life insurance, you can specify in your will that these cash assets are placed into a trust for them. Again, you’ll need a trustee that you really trust, and again, you really should contact a lawyer to get the specifics worked out.

Your children are some of the most valuable things you’ll ever give to the world. Take the time right now to ensure they’re well taken care of if something happens to you.

As regular readers know, I’m a very happy user of ING Direct. They provide my checking services, my savings services, and all of my online bill pay services. They even allow me to set up sub-accounts so that I can save for specific goals. In my opinion, ING Direct is the best of the full-service online banks, and I’m a happy customer of theirs.

Because they offer all of these useful tools, over time, I’ve begun to use ING Direct as my primary budgeting tool. I can set aside money in specific small pools, automatically transfer money back and forth, set up automatic bill payments, and so on. These tools allow me to effectively manage my money.

Here’s a walkthrough of how I do it.

Step Zero: Get An Account
You don’t necessarily have to have ING Direct as your bank to do the following. You merely have to have a bank that has online checking and savings access and online bill pay. Many banks offer this - Washington Mutual and E*Trade Financial are two well-known national banks that offer similar services, and your local bank may offer it as well.

Switching to a new checking account is easier than it might sound. I’ll quote the steps you need to take from an earlier post:

1. Open the new checking account. The first step is the most obvious one. Open the account and get the information you need: account number and routing number. Order checks if you need them. In other words, be prepared. Your new bank may also need the information for your old checking account so you can transfer money from the old account into the new.

2. Make a list and check it twice. Make a detailed list of all automated withdrawals and deposits from your current primary checking account. The best way to do this is to simply watch the account for a period of two to three months so that you pick up as many of these as possible.

3. Balance your checkbook. Make sure you’ve accounted for everything outstanding so there are no nasty surprises during the transition. Figure out what you have in the old account down to the cent so that you can avoid overdraft dangers.

4. Switch over all deposits and withdrawals at once. I find this is easiest to do by switching over the deposits a bit earlier than the withdrawals, so that there is money already in the new account when deposits begin to be set up. I’m also incredibly careful about such things.

5. Leave the old account open for a while with a balance in it to catch any missing deposits or withdrawals. Even though it might feel like the balance in the old account is just sitting there wasting time, it’s actually there to protect you against your own poor memory. Just be patient and give it several months; you might surprise yourself.

6. Close the old account. Be sure to leave a correct address behind. You might also want to end other services at that bank, such as a safety deposit box.

If you’re switching to ING’s Electric Orange checking, it may be useful to skip step #6 and leave the old account open, especially if there are no fees on it. I’ve kept my old checking account open for two conveniences - cashing checks with a teller and the ability to write paper checks (on the rare occasions when I do this any more, maybe once every three months).

Step One: Set Up Automatic Bill Payments For Monthly Bills
For every regular monthly bill you have, you can set up an automatic bill payment for that bill so you don’t have to worry about paying it on time. It’s quite simple.

First, click on the “Electric Orange” tab on the top, then click on “Free Bill Pay.”

Add a new business (with the name, address, and account number) by clicking on the appropriate link, then add that bill in below. You can specify the amount, the date to pay it, or the regular date to pay it.

Once you’ve done this, the next scheduled payment shows up in your basic checking account screen, so you can easily see what’s coming up and when.

Step Two: Set Up A Sub-Account For Each Irregular Bill and Savings Goal
What about the other bills, the ones that only come around every several months and seem to always crunch the budget, like homeowners’ insurance or car insurance? For those, it’s useful to set up a sub-account to slowly set aside money so that when the big bill comes, you’re ready. Here’s how.

Once you’re logged in, in the upper left, click on the “Open Account” option. You can see it clearly in the picture above.

Choose to open a new savings account on the next screen The “Open Now” link in the image above is where you should go.

From there, the process is really straightforward - you can call each account you create whatever nickname you like to identify it as a distinct fund: an emergency fund, a “house maintenance fund,” a “vehicle replacement” fund, a “house insurance” fund - whatever works for you.

After that, you should set up an automatic transfer into that account. You can do that by clicking on the Transfer Money tab along the top.

Then, fill out the information below. As with the automatic bill payments, these will appear on your default checking account view so you can quickly see the money that’s going to be automatically withdrawn from your checking account.

My recommendations? I leave the amounts for the regular but varying monthly bills in my main checking account - things like the cell phone bill and the electric bill just come straight out of the checking. Other bills, especially large ones with longer periods like car insurance and homeowners’ insurance, are handled by having a tiny weekly deduction from my checking account into a special fund just for that purpose. For example, our car insurance is about $400 every six months, so I transfer $15 a week into an account just for that. This way, I don’t really notice that $15 going away, but when the big bill comes, it’s not a panic time - the money’s just sitting there. So I transfer it back into my checking and pay the bill, all online.

Step Three: Pay Your Bills As They Come In
After this is all set up, your only real responsibility is to pay the bills as they come in. I usually pay all outstanding bills once a week, on Sunday afternoon. Keep on top of these bills, so that you’re not dinged with a late fee. With many of the bills handled now by automatic transfer, you won’t have that much to deal with - I usually just have one or two bills a week to pay attention to.

Step Four: Use Your Debit Card as a Mastercard and Use It For Regular Purchases Like Groceries
If you wish to completely centralize all of your spending until you get things under control, ING’s Electric Orange checking service will issue you a debit card that also functions as a Mastercard. If you’re just getting your budgeting under control, it may be useful to spend a few months just running all expenses through that card, so you can keep a careful eye on what you’re really spending. Once you have a strong grip on your spending, you can move on to using other mechanisms for your expenses, but sticking with a check card for a while is a great way to make sure your spending is under control.

These steps, all together, create a centralized view of your day-to-day finances and also form the basics of a budget. This is exactly how I do things right now in terms of day-to-day money management. I use ING Direct to do all of those things, and it’s done wonders for keeping my money in line.

This plan requires you to do some basic math with a calculator. Since you’re already at the computer, using the simple calculator tool on your computer for addition and subtraction should do the trick quite nicely. I tend to use Excel because I usually already have it open in order to update my net worth calculations.

Good luck!

One of the most common topics in personal finance writing is estate planning. Life insurance? A will? A living trust? These are always bandied about and readers are always encouraged to get on board with all of these things.

What’s often not asked is whether or not estate planning really even applies to you at all. Does it? Let’s take a look.

The first question you need to ask yourself is if you passed away tomorrow, would you leave anyone else behind in a financial pinch? Do you have dependents on your income tax? Are you helping out your parents as they get older? Look through your life and ask yourself if anyone would be in a significant bind if you suddenly vanished (and the people you work with professionally don’t count here).

If you can identify people who would need help (or may need your help in the near future, like a future spouse), then you should have some sort of life insurance. There are many tools online for estimating how much you’ll need - this MSN Money tool is particularly good.

If you can’t identify anyone, you probably don’t need life insurance at all. A tiny policy - just to cover your funeral expenses so you don’t burden your parents with the cost - might be appropriate, but if no one is left hanging by your passing, life insurance isn’t really a necessary expense for you.

Another worthwhile question to ask is do you have any specific sentimental property or small assets you want given to specific people when you pass? If you do, then a proper will is in order, so you can specify your wishes. If you don’t care what happens to your stuff for the most part, then you can either not have a will at all (and allow the court system to distribute your assets) or have a very will that assigns everything to one person.

What if you have a lot of assets you want to pass on to people? In that case, you’ll probably want to set up a living trust of some sort - consult a lawyer. You’ll probably also want to prepare a financial preparedness document for your survivors, so they know where everything is and can easily access it.

To put it simply, if you’re a young and unmarried professional without any kids or other challenges, you likely don’t need to worry about estate planning at all. Instead, focus your energy and your money on building a strong career and preparing yourself for the other challenges and goals in life, and revisit this question if you decide later to get married and/or have children.

If you’re young and are married (and/or have young children), but haven’t accumulated significant assets yet, you should have life insurance and a basic will. Life insurance will ensure that your surviving spouse and children are taken care of, and a will may specify any other specifics you may want to label, particularly in the event of the death of both you and your spouse with surviving children.

If you’re later on in life and have accumulated significant assets, that’s when a living will comes into play. Consult a lawyer and get one set up properly so that your wishes are clearly carried out after your passing.

Estate planning is a perfect example of how the same old financial advice doesn’t apply to everyone. People at different stages in life have different needs.

Recently, I mentioned that my wife and I have developed a financial plan to cover our entire life until retirement, and several readers wrote to me asking for more details about this plan. So, let’s take a look and see what I was talking about - and perhaps it will inspire you to do the same.

Defining the Biggest Goals
The first step for my wife and I was to sit down and identify our biggest goals in life. What do we really want to do with the rest of our lives? What do we dream about? It really came down to three big dreams.

Raise our two (and likely more) children with every opportunity in the world and lots of growth experiences. This means a lot of things: saving for college, providing them a top-notch education, giving them everything they need to discover and explore their passions, traveling extensively (and off the beaten path, too, to observe how a diversity of people live), reading a lot, and so on. If there’s an educational opportunity that works for our children, we don’t want our finances to stand in the way of it.

Buy a significant patch of land, mostly forested, out in the country, and build a reasonable house on it. This is something we’ve always dreamed of - a nice, large house out in the country for our kids to finish growing up in and to come home to, with plenty of space for them to sleep when they come back and bring their own children. My wife’s grandfather has this, and it’s so pleasant that it’s even come to feel like home to me - I look forward to visiting there, playing cards with my in-laws, and just enjoying pleasant and relaxing company. We both really want to have such a place for our own children and grandchildren to come back to. We want to be able to purchase the land and commence construction before our children are out of eighth grade, intending to stay in our current school district.

Retire as young as possible and commit the rest of our lives to community volunteerism. Our third major goal in life - likely the one taking center stage when the first two are complete - is to retire young and focus on community and political volunteering for the rest of our adult lives. Running for local political offices, serving on boards, doing volunteer work, and campaigning for other candidates sounds like a wonderful retirement for us.

Our Plan
We actually sketched out a year-by-year plan with specific goals reaching through our youngest child’s high school graduation, setting targeted goals for each year. We attempted to define flexible goals that could still be met even with significant life changes. Here are our goals for the next three years.

By the end of 2008, we intend to have fully eliminated my wife’s student loans, contributed $1,200 each for the year to our children’s 529 plans, and increased our retirement savings to 1.3 times our combined annual living expenses.

By the end of 2009, we intend to have fully eliminated all of our student loans, contributed $1,200 each for the year to our children’s 529 plans, and increased our retirement savings to 1.45 times our combined annual living expenses.

By the end of 2010, we intend to have $20,000 in our portfolio saving for our country house, contributed $1,200 each for the year to our children’s 529 plans, and increased our retirement savings to 1.6 times our combined annual living expenses.

Some Additional Notes
Obviously, this raises a lot of questions, so I thought I’d address some of the more obvious ones right away.

Acceleration We are intending to accelerate this as much as we can. For instance, I’m hoping that my wife’s student loan will be gone this July, so we can focus in on eliminating my own student loan, which might be done in early 2009. This lets us go ahead and start with our investing plan in early 2009 instead of in 2010.

Our current mortgage Our mortgage has a low enough interest rate that we’ll just continue to pay it off, a payment at a time, until we’re ready to move on, at which point we’ll use the proceeds from the house sale to pay off the remainder of the current mortgage.

Retirement planning Not only are we doing much better than many metrics suggest that we should be doing at our age, we’re also trying to set up sources of passive income to help guide us through.

Educational opportunity savings Right now, with our children so young, the educational opportunities are somewhat limited. In the future, we plan on budgeting a notable portion of our annual budget to such expenses, particularly travel and educational costs.

Comments? Questions? Fire away in the comments.