Yesterday afternoon, I opened Facebook expecting to find a bunch of sappy spouse's day posts from my friends. Instead, I found that my newsfeed was teaming with a shocking news story: Kobe Bryant was dead. Kobe, just 41 years old, had died in a helicopter accident earlier that morning. The world was in shock.
I can only assume, but I would guess that death wasn't on Kobe Bryant's mind when he awoke Sunday morning. This former basketball star was in seemingly great health and being just 41 years old, there would have been no reason for him to think he was going to die that day. But, a tragic helicopter accident claimed Kobe's life, the life of his 13-year-old daughter, and the lives of seven other victims.
The world wondered. How could this happen? Was Kobe really gone?
But, here's the cold, harsh reality. This could happen to any of us. Not one of us is guaranteed another day on this earth. I really hate to write such a depressing blog post, but for the sake of our loved ones, we need to talk about being prepared for death. Just yesterday 41-year-old Kobe died, leaving behind his wife and three of their daughters. Now, I ask you, if you died tomorrow, would your family be ok? Would your spouse and/or your children have what they need? Or would they be left, not only grieving, but struggling to make ends meet as well?
We are so quick to think that 'I'm still young' or 'that would never happen to me' or even 'I don't need that yet.' But, the truth is that death happens. And being prepared for death doesn't make you a coward who's living life scared. It's quite the opposite. Being prepared for death is one of the greatest gifts you can give your family. Being prepared is truly an act of love.
So, how do you prepare for death? How do you plan well for your family's finances and their future?
Having life insurance is one of the most important steps in securing your family's finances. Until you are able to self-insure, you should have a term life insurance policy that is 10 to 12 times your annual income. The idea with this is that, if you died, your life insurance payout could be invested in a good growth stock mutual fund. With the S&P 500 averaging a return of 12 percent, your family should be able to essentially replace your income by living on just the interest from this investment.
Stay-at-home parents should have life insurance too. Although stay-at-home parents don't bring in an income (unless they are self-employed), they are still invaluable assets to their families! Trust me, I know. I'm a stay-at-home mom. If I were to die tomorrow, my husband would need to start paying for childcare for our three girls (which would easily be at least $2,500 per month), he might need to hire a cleaning service to help keep up with the housework, and I guarantee the grocery budget would increase (I'm the master of feeding a family on pennies). A life insurance policy for a stay-at-home parent will help your spouse more smoothly transition into their role as a single parent, allowing them to grieve and not worry about how additional expenses such as childcare will fit into the budget.
Are you feeling a bit daunted by life insurance policies? Are you not sure where to start? I highly recommend using Zander Insurance. They will shop around for you and find the best term life insurance policies for you to choose from!
**Note: Avoid whole life, cash value, or permanent life insurance policies. These policies are often advertised as being advantageous investment options. However, their rate of return on investment is terrible, and these policies are typically 5-10 times more expensive for a much smaller payout.
What would happen, if you didn't die, but you were seriously injured - injured to the point that you could not work? My husband was faced with this question one scary evening during the winter before our second daughter was born. He and his fellow EMS crew member were returning from an ambulance transfer they had taken to a neighboring town. The ambulance hit a patch of ice, they lost control and began to roll. As the ambulance was rolling, my husband thought to himself, "Please let me come out of this ok or dead." You see, at that time, we had a life insurance policy for him, so the girls and I would have been taken care of upon his death. However, we had no disability insurance for him (even though his income was our only income); and he knew any serious injuries that prevented him from working would leave our family struggling to pay the bills.
In the case that you are injured and cannot work, you should have disability insurance to protect your family and your family's finances. There are two types of disability insurance - short-term disability and long-term disability. If you already have an emergency fund of 3 to 6 months worth of living expenses, you do not need short-term disability insurance. You are self-insured for the short term. Congrats! However, everyone (I repeat, everyone) should have long-term disability insurance, regardless of whether or not your job is considered 'risky.' The Social Security Administration reports that one in four of today’s 20-year-olds will become disabled for 90 days or more before they turn 67 years old! You need to protect your family and that includes having long-term disability insurance.
Disability insurance is relatively cheap. You should get as much coverage as you can - around 60-70% of your income. Many employers offer disability insurance and it is almost always cheaper to buy it through your employer. So, start by checking with your human resources department to figure out if your employer offers disability insurance. If they don't, then I recommend using Zander Insurance to find a good policy.
Will or Trust/Estate Plan
A 2017 survey found that nearly 6 in 10 American adults did not have a will. You guys, that's insane! You need a current will/trust and estate plan. If you do not have a current will, or if your will is deemed invalid by the court system because it wasn't completed correctly, a judge will appoint an administrator for your estate. Do you really want to leave decisions about the placement of your minor children and/or the distribution of your assets to a judge? Do you really want to leave that up to chance? Having a will in place puts you in control. Not only do you give up control when you die without a will in place, but it also puts emotional and financial strain on your family. In addition to grieving, your family will be trying to deal with the mess you left them and it will be costly to sort this mess out.
We live in a DIY-loving society and I will admit that I often encourage people to do things themselves in order to save money. However, this is NOT the case with wills, trusts, or estate plans!! Please do NOT go onto the internet, complete a fillable will document, and think that you've got things covered for your family. When you're putting together legal documents, you need to work with an attorney who can ensure that you've properly taken care of your entire estate.
Dave Ramsey often talks about the importance of putting together what he calls your 'legacy drawer.' It's a designated place in your home (usually in your safe deposit box) where you gather all of the important documents that your family would need in the case of your death. Having these gathered and neatly organized will keep your family from needing to dig through the entire house (and possibly miss important things) upon your death.
In your legacy drawer, you should include your will/trust and estate plan, insurance policy information for all of your policies, a listing of all of your financial accounts, password information, important documents (like birth certificates, Social Security cards, marriage license, etc.), a copy of your tax returns and monthly budget, and any funeral preparation information and/or legacy information you want your family to know.
I'm going to be honest. I hate talking about death. I don't want to think about my kids not having their mom. I don't want to imagine life without my husband. But, the amount of peace I feel knowing that we have a plan is incredible. Having a plan provides security. Having a plan puts the authority in your hands - not in the hands of a judge who doesn't know your children or their needs and who's simply tasked with dividing up your estate. Having a plan allows your family to just grieve instead of scrambling to pay the bills. Please don't let another day go by without making a plan for your family, your finances, and your future.