Tackling Death!Fiscal Fitness Clubs of America
Life’s team has a really tough offensive player…
…who has a great track record of ruining a team’s chance of winning the financial planning game. His name is Death! Sometimes he targets the quarterback, but he’s equally effective in ruining the game by taking out another team member. That means your team needs to evaluate strategies for being prepared no matter who is targeted. Knowing the consequences and being prepared, whether it’s you, a spouse, a partner, a former spouse, a parent or worst case a child is important.
Most adults WANT to make sure that their families (children, partners and/or parents) will not be in both a financial crisis and an emotional crisis in case of their death. However, many people are NOT SURE WHAT to do to ensure it doesn’t happen. It’s also easy to overlook the consequences of the deaths of people we love because the thought is so horrific. It’s because it will be horrific that we owe those around us to be prepared.
Our managing partner, Carol, has a grown son with a 3-month-old child of his own. If something happens to him or any other member of his family, she will be devastated and impacted financially. She knows that if something happens to either parent, she will need to be there to help with chores, babysitting and maybe even the finances. She will need to cut back on her work, pay for more chores to get done at her house, and will want to help fund her grandchild’s future education in addition to what she’s contributing now. If it happened this week, that would be equivalent to several thousands of dollars. The good news is that she has developed a crisis budget based on bad things happening. She can fall back on her emergency fund (aka – curveball account) and cut about $25,000 from her budget, so she can begin to redirect funds. Because she has her retirement set, giving up work means giving up vacations and some desired home improvement projects.
Now, it’s not that she wants her son to buy life insurance to protect her, but they both need to recognize what she can and cannot do if something happens. It helps him to know that she will be there for her grandchild, but he can’t count on it. If something happened to her too, then she also couldn’t babysit. He needs to insure his life and his wife’s life, so that her grandchild’s needs are met while growing up and so education is fully funded. If she dies first and leaves enough money for her granddaughter’s education, then they can lower their own life insurance.
He also needs to recognize that if something happens to Carol and his disabled father was left alone, then his world would be impacted by his health issues. He will need to take time off to settle her affairs, move his dad out of his current home, clean out the house, and address a host of other issues. Since he has a small business in addition to his job as a firefighter/EMT, time off from work would mean that his income would also be impacted.
Carol’s will includes that her son will be compensated for the losses prior to assets being distributed among the children (his siblings). Because they have talked about these issues and the impact of each other’s deaths on the rest of the family, no one will be surprised. Can she honestly say that all her kids have bought in and are prepared for the inevitable? NO! But they do have a better of what to do in case of a death. Like the scouts say, “Be Prepared!”
This month’s challenge is tackling death before he tackles anybody on our team.
- Start with the people whose death would have the biggest financial impact on the family. Then evaluate the choices that would need to be made upon YOUR the death (and a partner if you have one). We have a pre-work questionnaire designed to help our club members to explore the issue. You’ll need to understand the financial impact and decisions that may need to be made. Would the survivor(s) move to be closer to family that would help with children or chores or grief? Would the survivor be able to keep their job or have to change it? Would a single parent of a 5-year-old want to stay on a job that requires travel 5 days a week or night shift work, which will impact how often they see their child?
- Project the costs of the new lifestyle in each case. (We have software for our club members that will help with this.) You’ll also need to think through the different stages of life. If you have children, what would costs be prior to grade school? Would you want to move them from their current school and home? How would the income need to change when the children are out of the house? What would happen if the living spouse became ill and was unable to continue working to full retirement age?
- Add up your investments, insurance, employee benefits, social security benefits, and survivor’s earnings, etc. so you can see how well your resources match your needs. (You can use software or us a basic spreadsheet). If you don’t like the results, it’s time to evaluate options. Do you want to increase insurance or change the plans to a less costly lifestyle or a little of both? Our financial coaches can help make sure you have the right assumptions and information entered. They can also help you talk through your options.
- Now that you know HOW much life insurance you need or someone else in your life needs, you can make sure that your dollars are efficient and your policies are set up correctly. We have forms that you can easily send out to ask for illustrations of every life insurance policy that you have to request face amounts and premiums. If it’s a cash value policy, you’ll also be able to see what they anticipate in terms of cash value, loans, premiums, riders, etc. Our club members can load these up into their cloud folder, so their coach can help evaluate them. We also have a form that you can complete that asks for the current beneficiary designations to be sent to you. Many people find that the designation isn’t quite what they expected because a change form was not recorded or they failed to sign it or send it in. You may find that parents or ex-spouses are beneficiaries, another child was born that isn’t on the list or some other facet is incorrect. Checking on this every two years is a great idea, and, for the cost of a stamp, it’s an easy way to avoid issues.
- Finally, we have a form for you to send off to get quotes and see if you can get a better price for the coverage you have through a low load company and/or different agents or companies. It doesn’t hurt to do comparison shopping every few years since companies change rates and rules.
Now you know the steps and where to find the resources and assistance to tackle death. Let’s go knock that player out, so he doesn’t ruin our team’s chances of winning the financial planning game!
Fiscal Fitness Clubs has all the tools, resources, and coaching from CERTIFIED FINANCIAL PLANNERS™ to make accomplishing these tasks simple and effective. But whether you use us or not, you should still do these things and test out your plan for tackling death!