A recent chat with a friend soon turned into a request for a review of his financial situation, as I had a bit of time over the weekend we ended up having this very important discussion.
The lack of proper financial advice soon became very evident when looking at his situation. The family home still has a substantial mortgage; and he and his wife also own an investment property, which is being serviced with an interest only loan.
The husband is 54 years old, and is the main income earner who works in a very physically demanding job.
When the simple question was put to him that should he be injured and could no longer work or worse still, suddenly pass away, in what financial situation would his wife and daughter find themselves in?
His answer staggered me, he said: “Well, my wife could go back to work and my daughter is at uni, so she still has many years ahead of her to earn an income, my family will be fine and besides, I have $120,000 in my six superannuation funds which will be more than enough for them.”
Wow,! His 52 year old wife would have to go back to work, sell the investment property which would not generate any profit at current market conditions, his super payout would not cover the amount owing on the family home and his daughter would be left without any financial legacy from her father. Besides this worrying situation, if he was injured and could not work for any length of time, this family would be in dire straits.
Unfortunately this individual has set himself and his family up for failure in the event of the unexpected. What a sad legacy to leave his family.
I explained that this situation had an easy fix and provided him with a few strategies to think about, and showed him how inexpensive it would be. One of these was rolling his super into one preferred fund and saving hundreds, if not thousands of dollars a year in fees. As an option, death cover could be funded through the super, incurring no ‘out of pocket’ expense to the family but enabling them to be debt free in the event of his premature demise.
Having left this information with my friend for a week or two, I contacted him to see if he had given his situation any further thought and if he wanted to implement any of the strategies we spoke about. Once again his answer was very disappointing, although he thought doing the super consolidation was a good idea, he still didn’t think that he needed any other insurance.
It is not amazing that most people are willing and do provide for their families when they are alive, this is who we are as humans and it is what we do. It is the nature of things. What is truly staggering though is that so many people still fail to provide for their families once they have passed away.
In the end, the choice is always ours, we can ensure our families are well cared for financially once we are gone, or we can fail them, leaving them at a time of sadness and distress with a financial burden that could so easily have been avoided.