Thursday, July 16, 2009

Annual Inventory; it's good for you

sample inventory sheetThe thing about making a major life change, and moving, and decluttering is that you start to realize that your insurance inventory is out-of-date. So putting the question to you: if you had an event which was serious enough to prompt a call to your insurance agent would you have the information you needed to fill out a claim form with actual data?

Having data on the items you actually own, instead of hedging by finding comparables and estimating, is the best. The information can be compiled in a computer program as comprehensive as Access, or on a simple spreadsheet or Word document, or in good old hard copy in a wirebound notebook. Accompanying photos, in print or on a CD, or video footage of your items is also helpful.

But I don’t own anything and it isn’t worth insuring anyway…

First, I don’t believe you; and second, there’s more to it than the insurance. Doing an inventory of your stuff, not just your valuable or insurable stuff, is a very educational process. You can learn a lot about your lifestyle and choices by doing an inventory. One thing you may or may not be pleased to learn about yourself is whether you walk your talk; in other words do the things you own match the values which you affirm to hold and support

Back to the insurance, doing an inventory will help you evaluate whether or not you need to insure your belongings and for how much. If you already have your stuff insured, is the policy adequate or overkill. This is also a good time to see if you are paying extra riders for items you no longer own like your back-up laptop or granddad’s coin collection.

Remember the point is to do the inventory not obsess over the perfect way to do an inventory. Get a notebook, write it all down in some order, take some digital photos, burn the photo files on a CD, put the CD inside the notebook cover and put it all in your fire safe.

Yes, a fire safe is a good idea for a few important papers. They come in all sizes and are far cheaper than the hours you will spend on the phone trying to recreate your important documents in an emergency. If you really want to create a digital blow-out inventory you can transcribe it later and make a copy either to keep in a bank deposit box or for a friend or relative to keep.

More benefits of an annual inventory…

- Doing an annual inventory has the advantage of being a big project once, and then just needing a brief review and adjustment in future years. It’s really helpful if a file of additions and receipts is collected between inventories.

- An annual inventory points out things that aren’t being used and that could be decluttered. Is your old dorm fridge you keep plugged in for extra beverages really contributing or is it just costing in terms of taking up space and the electricity that keeps it cold?

- Doing an inventory annually can help manage replacements. By tracking how old things are or their efficiency ratings helps to anticipate the potential for a major item like a computer, TV, car, or even items in your wardrobe to need replacement due to age or wear in the next 12 months. It can also help you decide whether a broken item is worth repairing or should be replaced.

-And finally, figuring out what you own and its value can help you approximate your networth. While your value as a person far exceeds the sum of your possessions, occasionally it is helpful to know your approximate networth. I wrote about Net worth and the woman at home last year but in its simplest form networth is the value of what you own minus the sum of the outstanding debt you are carrying.

If you are in a legally binding relationship you have a share of the joint networth and a personal networth that is based on stuff and debts solely in your name. There are complex formulas for calculating how your joint property and debt affect your personal networth that a qualified financial advisor can help assess.

But I don’t have time…

Yes, like other things that are good for you, doing an inventory of your stuff may not be convenient but like everything else you can make the time now or something will come up – at an even more inconvenient time – and force you to do it later. It’s your choice.

Disclaimer: The above discussion is for entertainment, and for promoting personal thought and inquiry. Specific questions about your needs for insurance, the insurable value of your property, or your networth should be directed to qualified professionals.

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