Visionary Horizons was fortunate enough to add Nick Hughes, CFP® to our team at the beginning of 2019. Nick will be servicing his clients from his office in Chattanooga, TN. Here, in his own words, is his reason for being in our industry and steps you can take to protect your family with appropriate financial planning.
Why I Became a Financial Planner
One of my most life-shaping and changing experiences occurred for me almost 20 years ago. I was in my senior year of high school considering my college options when my world was unexpectedly turned upside down. Our family lost its provider and patriarch when my dad succumbed to an aortic aneurysm and subsequent complications at the age of 59, just a few days after Christmas.
While the loss and grief that consumed me was intense, I found strength in my mother’s resolve. She stayed strong for me and my sister during the roller coaster of emotions that followed my dad’s diagnosis, surgery, complications and eventual death. Not only did she lose her partner and father of her children but also her primary source of income.
We would find additional surprises and disappointment in the days and weeks to follow. One of the biggest surprises was a large life insurance policy on my father that did not pay out due to a previous lapse. Despite being born and educated in Germany, my mother was determined for us to make it. She worked as a machine operator in the textile factory where my father had been the plant manager for over 25 years. I would later spend my college summers and weekends working in that very same factory to help pay my way through college. I am very grateful for that experience as well as it shaped my work ethic, instilled humility and empathy which are critical in serving the needs of my clients today.
In addition to a lack of life insurance and savings, we would later find out about some additional debt incurred for farm equipment my dad had purchased prior to his death. While my father had been a great provider for our family, he had never planned much for the future.
One of the things I learned, during this experience is that it is never a good idea for someone to make big financial decisions while they are grieving. My mom would admit she made some hasty decisions but also some decisions that worked out like selling the family home and most of the land and downsizing into a much smaller home. This along with the generosity of family friends and college scholarships allowed her to also help put me through college on a factory worker’s wages. It is truly amazing what the human spirit is capable of.
While I wasn’t aware of it at the time, this experience would shape my future career and mission in life. I began my career as a financial professional over a decade ago to help ensure that families I work with never have to go through a situation like mine. Below are 3 keys to ensuring the financial well-being of your family when bad eventually happens.
- Develop a contingency plan for your family and review it every 2 to 3 years.
Thinking and talking about our own mortality, or that of a loved one is never easy. Because this is such an uncomfortable topic of conversation for most folks, it is no wonder that so many families endure situations similar to mine. Remember that failure to plan is planning to fail.
While you may have many of the individual pieces of a good plan in place and an idea of how things should be carried out, I highly recommend developing a letter of instruction for your spouse or family members. During their time of grief, this can provide them with a “cheat sheet” or instruction manual of how you would like for them to handle things. If you need help with this, I can provide you with a template that is a good starting point. Once completed, you should keep this in a safe place alongside your estate documents.
Another great step is to have occasional family meetings to review your plans so that all family members understand that a plan has been developed and also communicate any changes to the plan. Discussing this ahead of time and providing transparency may also result in less family squabbles after the fact.
- Review life insurance, disability, and long-term care benefits regularly.
If you are providing for a family or spouse, I recommend that you plan to provide for them without having to liquidate real estate, investments or retirement accounts immediately. This can be accomplished by an adequate emergency fund of 3-6 months of living expenses in addition to having enough life insurance to pay off debt and continue to provide for your family.
An often overlooked area of contingency planning is in the event you become disabled. This can be catastrophic to a family as they are incurring additional medical expenses while also losing one of the family’s breadwinners. These benefits can protect your income for a long period of time at a reasonable price.
Planning for the long-term care of a spouse or a family member is also critical, as it can cause the household expenses to more than double. This can be a huge financial drain and deplete investments very quickly and impact the future quality of life for the family.
While you may have benefits in place through your employer, you often will lose these when you change jobs or retire. I would suggest reviewing all of your insurance policies every few years. You should also make sure you have named beneficiaries and contingent beneficiaries on all life policies as this is often the quickest source of money for family members after your death.
- Work with a team of professionals to develop and implement your plan.
In my mother’s case, she was able to get counsel from an attorney and real estate broker who helped her make some very sound decisions after the fact. By working with a team of professionals ahead of time, you will likely have more options and flexibility at your disposal. I would suggest working with an attorney that specializes in estate planning as well as a Financial Advisor who has earned the Certified Financial Planner™ designation which is widely considered the gold standard for financial planning professionals. While you may feel you have already developed a good plan on your own, an outside professional is likely to provide you with a more objective view of your situation and also shed light on any blind spots you may have in your plan.
One of the best steps you can take for your family is to develop an estate and contingency plan to provide for them in the event of your death. This is a good idea no matter what stage of life you are in. In my late 30’s now, I expect to be around for several more decades but if the man upstairs has different plans for me, I have peace of mind knowing my wife and two boys will be taken care of by the planning we have done. In addition, I know clients will be in good hands with our team of experts at Visionary Horizons if that day comes sooner than I would like.
Nick Hughes, CFP® is a Wealth Advisor with Visionary Horizons, a Registered Investment Advisory Firm in Chattanooga, TN. Nick has been helping retirees and widows simplify their financial lives and develop more clarity about their future since 2007. He has contributed to articles for Market Watch and FinancialPlanning.com and is a regular contributor to the Visionary Horizons blog.