Where did all the money go?

Reading today’s paper I see a headline about a former musician who is practically destitute and unable to care for his medical needs. Very sad but unfortunately not that unusual. We hear these stories all of the time. The money is good at one point and then it disappears.

We’ve talked a lot about saving for retirement but it occurred to me that it could be even more difficult for those who don’t earn steady incomes. They may earn a lot in one month or year and practically nothing in the next. Unfortunately earning a lot can be deceptive because you may think that it will always be there. It happens with best selling authors, artistes and even lottery winners – the money is there and then it goes and in many cases the person is worse off than they were before. Even worse than the loss of money is the loss of self-esteem that goes along with it. Many people fall into depression when they realize how they have squandered a windfall and now have nothing to show for it.

So, what to do if you have a windfall of one type or another. This may be my shortest blog ever because I have one answer – get professional advice and help! A financial planner will help you to make a realistic budget and to put the rest of your money to work for you. Taking that step sooner rather than later gets you in the habit of living conservatively and most importantly restricts your making careless financial mistakes that you can’t recover from. These include giving large gifts to family members and hangers on when you really can’t afford to do so despite appearances. Wealth can be a blessing but you need to nurture it so that it continues to be so! Your financial planner can be particularly helpful in setting up a pension plan so that you have enough for your retirement years.

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No time for retirement planning – Make time

The decade just before retirement may be the busiest for professionals. We have decades of work and life experience that have value to people inside and outside of our workplace. We probably therefore have a full plate at work with responsibility for people and projects. We probably also have responsibilities and obligations in associations, church, clubs and so on. Add in family and friends and there is scarcely time to sleep, let alone sit down and engage in retirement planning. As a result we may get to retirement with a great reputation but no plans for how to live the last two or three decades of our lives and not enough money.

Of course there are certain things that we have to do but if we are honest there are an awful lot of things that we are doing simply because we are asked and said yes out of guilt, fear or obligation. I remember one such incident when I volunteered for something at church. It was not my area of strength or even interest but they needed volunteers and I felt obligated to volunteer. Immediately it mushroomed. After signing up I discovered that there was a mandatory training before the event which required several hours on a Saturday. During that training I discovered that we were required to show up a couple of hours before the event and stay for a couple of hours after for a debriefing session. It was at a particularly busy time in my life and I felt my whole body tightening up as each new requirement unfolded. Fate or God intervened and a couple of days before the event I came down with a severe dose of the flu that kept me in bed for days before and after the event. The point of the story is not that we should never stretch ourselves or assist others, but to think before we do and to choose wisely especially in light of the need to leave time and energy for time for things that are critical to our long term future.

Steven Covey left us a great tool in his urgent vs. important matrix. Urgent things tend to shout and scream at us until they get our time and attention. There are different types of urgent however. Some things like a crying child or sick relative are truly urgent. Other things that appear urgent are someone else’s priorities and attending to them not only derails us but debilitates us. Important things don’t clamour for our attention but neglecting them can have serious consequences. These are our priorities and we shunt them outside at our peril. Fail to take care of those things in the yellow box like planning for your future and you will regret it in the future. If you’re not familiar with Covey’s work then please read up on it. It is transformatory.

The problem is how to say no to the urgent. It could be your boss, your co-workers, your friends or even your church and it is important to them that you do what they are asking. It’s a dilemma we all face. I love what Brene Brown says and rather than paraphrase I’ll just let her say it – “The moment someone asks you to do something you don’t have the time or inclination to do is fraught with vulnerability. “Yes!” often seems like the easiest way out. But it comes at a price: I can’t tell you how mnay times I’ve said “sure!” in my squeaky I-can’t-believe-I’m-doing-this voice, only to spend hours, even months, feeling angry and resentful.” I bet that sounds familiar! She suggests this – CHOOSE DISCOMFORT OVER RESENTMENT. That means, choose feeling uncomfortable in the moment rather than resentment later. Volunteering at church at the time I did it was not a good choice especially since I did not explore the parameters before committing to serve. I should have taken the time to think it through before making any decision. No doubt you can think of your own experiences at work or volunteer associations when you said ‘yes’ and you should have said ‘no’.

Back to retirement though. It’s about moving our retirement planning into the important yellow box zone and making time for it by saying no to those things that appear urgent but that we feel instinctively aren’t part of our purpose. Writing down retirement planning as a priority and assigning time each week to it puts it up there with the other demands on our time and may make it easier to say ‘no’ to the things that we perhaps shouldn’t be doing.

Retirement planning will involve different things to different people and require different amounts of time. If you’ve been doing it for years then it may just be a matter of scheduling time to make sure things on track. On the other hand if you haven’t given it any serious thought you may need to plan meetings with financial planners, develop strategies for how and where you will live, follow up on those strategies and so on. Schedule in the time and see how much more relaxed you feel as you begin to take control of your future. Hold the time as sacred as you hold time at your job, church and so on. A decade or two from now you’ll be glad that you did!

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Preparing for the Inevitable

The other day my housekeeper gave me the heads up that the gardener had had a death in the family. She wasn’t just preparing me to extend my sympathies. She was warning me to expect him to ask for a donation towards the funeral expenses. Death is expensive and most people on minimum wage simply do not have the thousands of dollars necessary to meet those expenses. In fact most people find the costs associated with funerals to be quite prohibitive. But death is inevitable –in fact Benjamin Franklin reminded us that nothing is certain in life except death and taxes. So why are we so unprepared to deal with the former?

Fortunately not everyone is unprepared and we can learn from the “wise virgins” among us. When my housekeeper’s husband died she was able to draw on an insurance policy that she had taken out years before. In other cases the deceased has made their own preparations by paying ahead of time for some expenses and leaving funds for the rest. Can you imagine the relief when grieving family members know that one thing that they don’t have to stress about is where to find the money to pay for the funeral?

So how can you prepare for the expenses related to funerals? I’m writing this for my my blog readers who may have to bury older relatives but it’s also important for us to consider this information for our own lives.

1. Identify wishes: It is natural for family members to want to do the best for the deceased but what is the best? In some cases it is a simple funeral and in others it is an elaborate funeral. Finding out what your relative wants before they go gives you a chance to prepare financially and to help them to prepare financially. It also means that you can resist emotional pleas from funeral directors and family members and friends to choose certain options or packages. You might want to consider writing down your personal wishes and letting others know where to find it.

2. Insurance: Research to find the best policy for your situation. Of course as you know insurance is cheaper when you are younger and healthier so start early for yourself. However, even as you get older you can get a simple burial policy. If your older relative cannot afford the cost it may make financial sense to pay for their insurance yourself. Of course trust is a big issue when you are insuring the life of another person.

3. Prepayment: Burial plots and caskets can be chosen and paid for ahead of time. Not only does this relieve the family of the expenses at the time of death but it is one less decision for grieving loved ones to make.

4. Dedicated/Allocated Savings : – Some expenses cannot be prepaid but a savings account dedicated to funeral expenses can take care of these expenses. If the person is living overseas and desires to be buried in the land of their birth, then the costs of shipping the body home and so on have to be factored in as well. Of course this applies to you as well if you live overseas.

If you’ve ever been involved in planning a funeral for a loved one you know how emotionally draining it is. It can also be a time for conflict and confusion as family members scramble to meet expenses and argue about what type of funeral the deceased would have wanted. Preparing ahead of time is one less thing to worry about and may be the deceased’s final gift to the family.

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Are you Going to Enrich or Enpoor the next generation?

Yes, I know ‘enpoor’ is not really a word but I got your attention and that was the point! A friend and myself were chatting last night about the fact that some families do an awesome job of passing on assets from one generation to the other while others don’t. Some examples – Family A has accumulated assets over the years and as the parents got older they began to think about how to pass on their assets to their children. They consulted with lawyers and financial experts to find out the best way to transfer their assets to their heirs and they followed through on the advice. Children were informed of the decisions, and where necessary names were put on titles, bank accounts and so on. When they passed on, their heirs not only knew who would inherit what, but they were able to take possession with minimum fuss.

Now let’s take Family B who has also accumulated assets over the years. The parents both made wills but that was the extent of their estate planning. When they passed on, the heirs found that there were numerous legal and financial hurdles to overcome before they could take possession of the inheritance. In fact they never did take possession of one particular piece of land because the cost of doing the legal work and paying the back taxes was beyond their capacity. As you can see the heirs of family A were enriched by their parents’ assets, but unfortunately the heirs of family B were poorer in the short term. Relationships may have been strained in the process as well.

Unfortunately the Family B scenario is the norm in too many situations. In my country we use the term ‘dead lef’ to refer to the assets that have been left by a deceased person and most people can state case after case where ‘dead lef’ has fractured families. Many people admit to giving up on the process because they cannot afford the time or money to acquire what was left to them, or they get turned off by the unpleasant, sometimes bitter family disputes over the ‘dead lef’.
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So why is it that we don’t do a great job of transferring wealth in so many cases? If I were to hazard a guess I would say that many Caribbean people of African descent are not used to having assets to pass on and we have therefore not developed the habit of doing it well. The end of slavery in the Caribbean region simply meant the end of forced labour but it took several generations to crawl out of poverty and several more to acquire property. That’s the explanation that I would hazard but an explanation is not an excuse. We have property now and we dishonour our life’s work if we don’t make sure that our descendants get to enjoy it with minimum pain.

Writing a will is critical but it is only the first step. If you have wealth – and I am using the term to include any assets that you have, you must meet with a professional to find out how to transfer it in a way that is painless to your heirs. For example do you have a title to the land and house? If you are leaving one piece of land to several heirs, is it clear which piece they are each to get? What taxes will they owe when they are to acquire what has been willed to them? Is there a way to minimize Government charges and death duties by taking certain steps now? Most of us won’t know the answer to these questions but lawyers and estate planners do, so we must consult them. Don’t assume that you have to have a huge net worth to get their attention either. Most banks offer some form of estate planning that will get you started, and if you search you may be able to find free legal aid to do the rest. Even if you do have to pay is it worth it to avoid the pain and confusion that the inheritance of your assets will create later on if you have not planned properly? Of course it is!

Another issue is that many people know what to do and don’t do it. As my friend and myself were chatting we came up with some possible reasons for this. One is superstition – if I write a will or start talking about who will get what, will I hasten my death? Another reason might be fear – if certain family members know that they will not be receiving an inheritance will they stop caring for me? A third related reason is the desire to control. If no one knows who will inherit what they will all have to pay attention to me. Each individual will have their own concerns, but it is worth confronting these concerns and asking yourself two questions. The first – If I don’t manage my estate well, how will my heirs remember me? Picture the confusion, financial and emotional stress, anger and bitterness between family members when you are answering that question. And the second question – Do I want to leave my heirs richer or poorer? Let the answers to those questions guide your decision making.

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