Prepare Financially for Life's Unexpected Losses
- Steve Scalici, CFP® Treasure Coast Financial
- 2005 23 Aug
As a financial planner I’ve worked with many widows over the years. Some of those widows were well prepared to handle their finances, but most were not.
After working with widows and the unique financial concerns that come with their situations, I feel like I have a pretty good handle on how to advise them. But, recently, I met three widowers that drastically changed my perspective when it came to giving financial advice to families where the man is the primary financial provider. Below is the story of one of those widowers. The other two stories are remarkably similar to his:
John was 39 years old. He was living a good life. He was a deacon in his church, had a beautiful bride of 15 years and two fantastic children. He ran a small business that provided him with a very good income and allowed him to devote much of his time to serving others and spending time with his family. Then, tragedy struck. Jan -- John’s wife -- lost her life to a drunk driver. John's life and the lives of his children were turned upside down.
John was (and still is) a great father. However, in the wake of tragedy he soon discovered he made a terrible mother. When Jan was still with them, she was home every day when the kids came home. John couldn't be home by 3 pm when the kids arrived from school because of his business obligations. After the loss of Jan, however, it wasn't long before John realized that the children needed him to be home more often. Without parental supervision, they made poor choices, and they began getting into trouble around the neighborhood.
Psychologists explained the children’s behavior as quite normal when faced with the loss of a parent. Now John faced a very difficult decision -- the way he saw it, he had three choices.
1. Keep working and run the risk of his children getting into things they shouldn't be. John had always worked until now, and figured he needed to provide financially for his children.
2. Stop working to be there for his children. The only problem, albeit a very large one, was that this solution left his family with no income.
3. The third solution seemed to provide the best of both worlds: he could run his business out of his home. Unfortunately, he quickly discovered that this wasn't the perfect solution after all. John found it difficult to run his business full-time and focus full-time on his troubled kids. Changing the location of where he ran his business didn’t make any difference.
His solution was finally made clear after he checked his eldest daughter into a rehab center: he had to stay home and fully focus on his grieving children.
Now, I'm certainly not qualified to comment on the psychological damage that is created when a child loses a parent. However, I have observed that the mother’s death is often the most devastating to the family unit. I believe there are usually several reasons for this. Not only are mothers frequently the relational and spiritual nurturers of their families, but they usually offer stability by running the household and keeping everything in order. This tends to be true even in households where both parents work outside of the home.
Generally, if a man tries to combine running and organizing a household while working, it doesn’t go well. My wife had gall bladder surgery a few months ago, and I became father and mother to our three daughters (all five-years-old and under). Let’s just say I made it, but barely. According to studies, a man’s brain is less capable of multi-tasking; his left and right sides of his brain literally do not connect as well as a woman’s brain. Combine this with the fragility of grieving children and you can see why John made the choice he did.
Of course John wanted to provide for his kids financially, but he realized that his children needed a spiritual and emotional provider more than anything else. Unfortunately, John learned too late that financial security can be bought ahead of time, but emotional and spiritual security can't.
How? How, could John and his wife have prepared better for their family’s financial security in the event of Jan’s death? In my work as a financial planner, I used to recommend that couples carry a minimal amount of insurance on the non-working spouse -- just enough to cover the cost of funeral expenses, daycare/nanny, cleaning service, etc. You see, in the past I viewed life insurance simply as an income replacement tool for a wage earner. In my flawed thinking, a woman like John’s wife didn’t have an income so her death shouldn’t affect their financial quality of life.
Like many others, John and his wife Jan also bought into that flawed line of thinking. As the primary wage-earner, John had plenty of insurance on his own life. In the event of his death, his wife could have continued the full-time care of his children while still having financial stability. Yes, the loss of their father would have hurt deeply – and would have undoubtedly left a void of its own kind -- but their day-to-day lives and overall financial stability would have remained consistent and stable, providing a sense of security in an insecure and tragic time.
It was only after his wife’s unexpected death, when John was forced to choose between financial and emotional security for his children, that one could see clearly the intangible ways that her loss impacted the family’s quality of life. Because they failed to prepared, John ended up spending most of his savings when he gave up his income. It took him three years following Jan’s death before he felt comfortable enough to go back into business. And those three years of living expenses wreaked havoc on his finances.
Actually, in some ways John can be considered blessed. Most people I know do not have enough money saved to last three trying years with no income. Still, he wasn’t as financially prepared as he could have been. When I met John a few months ago, it had been four years since he lost his wife. His children have adjusted quite well thanks to his wise parenting choices, but the financial impact has been quite devastating.
Now, when I advise couples where one of them is considered a "non-working spouse," I think of John and his children and the difficult decision he had to make. I encourage them to make sure that not only will their family be financially secure in the event of either spouse’s death, but that they will be emotionally and spiritually secure as well.
In all three cases I’ve come across recently, the fathers quit their jobs for at least two years in order to help their children get acclimated. Therefore, I am now recommending that couples base their life insurance decision on the potential loss of income of the working spouse in the event the non-working spouse dies. And with insurance rates at all time lows, almost everyone can afford the coverage.
Steve Scalici is a Certified Financial PlannerTM with Treasure Coast Financial. He is co-host of God’s Money, which can be heard on the internet at www.oneplace.com. You can contact Steve at firstname.lastname@example.org