By Alaina Trivax, WCI columnist
During my early childhood, my father was the mainstay of our family. He worked for the US Department of Agriculture and traveled often to perform product inspections. My mother stayed home to take care of my little brother and me. When we were still quite young, however, my father was diagnosed with lung cancer and eventually passed away. As a result, my mother had to deal with her own grief and care for my brother and me while taking on the role of financial provider and manager.
She eventually found a job as a paraprofessional in our local school district. The position featured a great schedule for someone raising two kids on her own, but didn’t necessarily pay well. Now that I manage household expenses for my own family, I am amazed at how she has made things work. She protected her children from financial worries until we were much older. We didn’t live extravagantly, but we still had a happy and stable childhood.
As you can imagine, this experience impacts how I now approach financial management for my own family. My husband, Brandon, and I are currently maximizing our retirement contributions while aggressively paying off his medical school loans. He has only a few years of training and is employed as a PM&R assistant; I teach English in college. Balancing our priorities – saving for our future and paying off our debts – certainly requires sacrifice, but we continue to do so because of our family’s goals. Once the student loans are paid off, we hope to build or renovate our dream house; things are getting a bit tight for our growing family in our current home. We also keep a list of places we would like to travel with our children as they grow; we would eventually like to take them on at least one international trip each year.
These plans and conversations, of course, include both Brandon and me. It’s hard to think about it, but there’s always a possibility that something could happen to one of us before it gets there. We are both actively involved in managing our finances, and we each have roles that the other person does not currently have the skills to perform. This division of responsibilities works very well for us, but it leaves some vulnerabilities if one of us has to take over completely.
Here’s how we think about it.
Prepare for the worst
For us, the first consideration in this planning was getting life insurance. Given our income gap, Brandon’s death would have a greater financial impact on our family. Our children and I couldn’t sustain our lifestyle on my income alone, so we set up a term life insurance policy for him. We recently welcomed our second son and are currently looking for additional life insurance for Brandon. The million dollar policy we currently have would give me some cushion, but a larger payout would provide greater financial stability for our children and me. My salary as a college professor wouldn’t be enough. We are trying to find the right amount for our growing family, an amount that would cover our mortgage and have a large balance that could be invested to supplement my income.
Thinking about it for the first time, I thought that my death would not be too important from a financial point of view. Brandon’s career is far more lucrative than my job as a college professor, and he has a greater opportunity to supplement his income through extra shifts or other work. He pointed out, however, that he would have to make some career and lifestyle changes if I died. He should either work part-time so his schedule can take care of our children or hire a nanny and increase his income to reflect that. Both are doable options but would require some tweaking. With this in mind, we are maximizing the insurance coverage offered by my employer for a policy of just over $250,000; I have no additional insurance beyond that. This insurance payment would provide a bit of a financial cushion as he and our children move on through life without me.
Having watched my mother navigate life after losing her spouse, I know that just having life insurance is not enough. Currently, our family’s financial responsibilities are split between the two of us, with Brandon overseeing our long-term planning while I manage our short-term needs. At this point, neither of us has the knowledge or skills to take on the other’s role. We would need guidelines on how to manage these responsibilities. With that in mind, we are creating “action plans” that the other person could follow should the need ever arise.
A plan for me
Brandon’s information for me will include a list of potential financial planners to contact in case I don’t feel comfortable taking over the management of our account. They will be WCI-recommended advisors that he has already selected and would trust to help me execute our financial plan. I educated myself on investment strategies, but honestly, I don’t think I could take on this role anytime soon. Even if I learn more, I imagine I’d still be nervous enough to go it alone. Without drastically changing our lifestyle, I would struggle to make ends meet on my salary alone, so managing the balance of his insurance payment and our other investment accounts would be essential.
We also create a written outline of the disability and life insurance policies we hold in their name. This will include policy amounts and who to contact regarding payment. This is information we already have, but it’s not necessarily organized in the most accessible or actionable format. If I needed to cash in on any of these fonts, it would be helpful to have it all together. We also plan to include information about his student loans, as our current terms allow for debt cancellation upon his death. Still, I can’t imagine the process being simple, so having this information in an easy-to-access format would be helpful.
Finally, we’ll make a plan of what I should do with the insurance money. This is something we will talk about together while referring to our financial plan. Do I have to pay off the mortgage first? Does it change if we moved to a bigger house with a bigger mortgage? Should part of the funds be invested? In what type of accounts? I would only carry out this plan in the event of incredible tragedy; having made some of the decisions in advance would allow me to be more confident that my family would remain financially secure.
A plan for him
My action plan for Brandon will include detailed information on managing our monthly and annual budgets. We’re currently maxing out our retirement accounts and aggressively paying off his student loans because I’m making sure we’re sticking to a budget that prioritizes those goals. He’s quite removed from our day-to-day finances right now, and he really prefers it that way. In order for our family to continue to achieve our financial goals in my absence, he should become much more involved in our short-term finances.
Although Brandon is our family’s main breadwinner, he would also find himself with additional expenses if anything were to happen to me. Given my schedule as a teacher, I am the primary caregiver for our children on weekdays, holidays and in the summer. His work schedule will not have the same flexibility; he would need to cut his hours or find some sort of extra child care to fill those gaps. He would also need to outsource many of the household chores that I currently handle. Finally, he and our sons would have to switch to his health care plan which is significantly more expensive than the insurance we currently have through my employer.
My life insurance policy would offset at least some of those extra expenses and give him a buffer to work with while finding things. I plan to consolidate the information for this policy, including who to contact for payment, so that he can collect the funds as easily as possible.
From a logistical perspective, we’ve also documented our logins for almost all accounts and stored this information in a secure location. This includes our financial accounts and information to access our email accounts. It seems that new connections always require some sort of verification, so having access to each other’s email accounts would be necessary if one person needed to manage everything.
For a few accounts, we sometimes know and use each other’s login information now. For example, my job as a teacher allows us to obtain a discount on our home and automobile insurance. Brandon manages our insurance, so he connects to my email for verification codes when they’re needed. Logistically, it works for us. We are not always available at the same time to do this kind of administrative work, which makes things a little easier.
Unrelated to our finances, our login list also includes information for our social media profiles and other personal accounts; these accounts are not necessary for financial management, but having access to all of them could make things a little easier in the event of one of our deaths. All of our account information is stored in one location, but it’s just assumed that neither of us will log into the other’s Instagram unless it’s really necessary.
Fingers crossed we’ll never need these plans
After my own father died, my mother kept things consistent for my brother and I – we stayed in our family home and always had the food and clothes we needed. Of course, Brandon and I hope our preparations are wasted, and we never need those plans. In the event of a tragedy, however, we want our children and surviving spouse to still be able to achieve the dreams we talked about: the house with a big yard, the annual family trips, and more. We hope that this extra preparation, beyond just securing life insurance policies, will have provided financial security for their lives should the worst happen.
Have you made plans in the event of the death of your spouse or partner? Do you have enough life insurance? Do you have the expertise to support the other person’s role in your family’s financial structure? Comments below!