13 Jan Lesson Learned: Managing Money after Husband’s Death
Mrs. B. enjoyed being a stay-at-home mom while her husband worked as a pilot. She and her 3 boys (ages 13, 15, and 17) were shocked when Mr. B. got sick and passed away in his early 50s.
But the family was lucky. They would be well provided for because he had an adequate amount of life insurance. Mrs. B. also received about $5000 per month in Social Security benefits. Once her oldest son turned 18, social security would go down to about $3500 per month, and it would do the same as her other sons reached age 18 as well. And she wouldn’t be eligible for social security for herself until she reached the age of 60. Additionally, she also received a life insurance policy of $500,000 from her husband’s previous employer.
It seemed like financially, the family would be okay.
The Problem
There’s no doubt that dealing with the loss of your spouse or parent is probably one of the worst things anyone can go through. People handle grief in many different ways. We often see people spend excessively when they are trying to deal with emotional issues or grief. Unfortunately, Mrs. B. didn’t handle her husband’s death in a financially healthy way.
So we started meeting on a consistent basis to help her manage her finances. She decided to roll her husband’s 401(k) over to an IRA. Everything seemed to be going in the right direction, but then I noticed an unusual amount of spending: Every other night she was eating out. I figured that for the first four to six months she was trying to get control of her life. But the spending continued and increased.
In addition to eating out often, she was also shopping,.high-end shopping—places like Nordstrom, Saks Fifth Avenue, and the like. Prior to her husband’s death, she never shopped at places like this! She even ordered extra debit cards for her boys so they could purchase video games and play games on Netflix whenever they wanted. (That was the first time I heard about Netflix; we missed the boat on that one!)
The Solution
I had a conversation with her about getting her finances back on track, but she was hesitant about investing a portion of the life insurance funds, curbing her spending habits, and developing a budget. I knew that if she didn’t get her spending under control, she would resort to pulling funds out of the life insurance proceeds to pay for her new, expensive lifestyle. I also recommended that she get back into the workforce because in just four to five years, she wouldn’t have any income. I didn’t want her to end up having regrets in the future.
I also encouraged her to get counseling and to talk to someone about how she was feeling emotionally. It was clear that she had questions about why her husband died and how she would raise three boys by herself.
The Result
I would love to say this story ended on a happy note, but it didn’t. She didn’t listen to our advice and kept right on spending. Her social security decreased by $1500 a month when her oldest turned 18, and she continued with her costly lifestyle by depleting the life insurance funds. Eventually, she was forced to liquidate her husband’s IRA and paid a stiff penalty for doing so. Mrs. B. and her sons could have had a very secure financial future if she had made wise decisions, but because she didn’t deal with the emotions surrounding her husband’s death, things didn’t end well for her.
If you’re looking for someone you can count on, contact www.russellandcompany.com today. You don’t have to go this alone; just reach out and get the help you need to plan for a secure future for yourself and your family
