Don't Allow Loss of Loved One To Lead You To Poor Financial Decisions

The following post is from Neal of WealthPilgrim.com. After reading the article, be sure to sign up for free at Wealth Pilgrim to receive more from Neal.

I just took a call from a client grieving for her husband of 42 years.

She’s understandably under tremendous emotional stress.  Frankly, I was amazed at the efficiency with which she was approaching her situation.

Within a few weeks of his death, she had already calculated how much her income would be reduced.  In fact, that was why she called me. Her money and marriage were inextricably meshed.

She was distraught over the loss of her husband….and at the same time…very concerned when she calculated that her income would be reduced by $35,000.  In fact, she sounded worried sick about it.  She was even talking about selling a prized antique car that she loved dearly in order to make up for the short-fall.

I’ve known this woman (a Ph.D.) for about 20 years and I can vouch for her warmth, high intelligence and rational behavior.

That’s why I found it odd that she completely overlooked the fact that her expenses were about to drop more than her income.  We went through everything together and calculated a monthly savings of over $4,000 due to reduced medical expenses.

Also, my client completely overlooked the fact that her husband had an insurance policy that she could make a claim on.  (This was a universal life policy my client’s husband had purchased more than 40 years ago.  Of course, I can’t stand whole life or universal and this was an example why — my client’s claim would mean she’d get a whopping 1.96% return on her money.)

Why am I bringing this up?

First, while my client was fortunate enough to have time to prepare for her spouse’s death, we all don’t have that luxury.  I strongly suggest that you write out a “survivor’s plan” today.

You can take your time to improve it.  Tweak it. Whatever.  But put something together today.

Second, calculate reduced income and expenses. Have a realistic scenario of what it would cost your survivor to live on and what resources will be available.

Third, and perhaps most important, expect to be in shock and incapable of making rational decisions.  Expect it.  Know that you (or your spouse) are going to have to face this situation sooner or later. When it happens, you will simply be incapable of making smart decisions.  Honor your marriage and money.  Have a backup person and don’t make it your adult children.  I strongly suggest you use a non-relative because it would do no good to rely on another person equally impacted by the loss.

If you have ever read my story, you know that my parents did none of the above.  The result was the complete destruction of my immediate family.  I take this stuff really seriously as a result.

While the worst that could have happened to my client was that she would have sold her car when she really didn’t have to and worried over nothing, I know the results can be much more devastating. Take a few minutes right now and take care of this.

Comments

  1. VERY thoughtful and timely topic for all of us.So emotional a topic for most that we shy away from tackling the subject or let our mind think “what if”.Neal you have taken one of the taboo subjects and a personal trauma and some how shown the light on how to deal with these things….The lives you have touched in a positive manner and countless people who will be spared such pain because of your sharing of knowledge is a wonderful tribute.Thank you just doesn’t seem enough.

  2. Great advice…Dave Ramsey’s show last week had a man calling in with this very topic. The caller was terminally ill and preparing things for his wife – he wanted to make sure she had all the tools necessary to go on without him, without having to make decisions in her grieving process. I confess, I cried through the entire call & had to re-listen. Having a plan for this situation is just as key as having a will.

  3. My hubby and I are 26 and 27 respectively, but I realized a couple of years ago that he probably had no idea where all our money was since I manage everything and we talk about it regularly.

    That motivated me to make a list of all our accounts, usernames, passwords, and our life insurance policies. I saved the list on a flash drive and printed one to store in his parents’ safe. I update the flash drive list whenever anything changes and I reprint the list once a year. My hubby is amused when I mention it since he’s convinced I’ll live longer, but I think he understands that I just want everything to go as smoothly as possible is something awful does happen.

  4. My father died five years ago and my mother knew nothing about their finances. I stayed with her (I live over 5000 miles away) for over three months getting everything straightened out and organized. A word of caution – she received numerous calls from strangers who had ‘heard’ of my father’s death and wanted to help her with her finances. I suspect that these strangers read the obituaries and target people when they are at their most vulnerable. If I hadn’t been there, I think my naive mother might have been susceptible to their ‘sympathy and understanding’ and could have lost everything.

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