Photo: Robert Trachtenberg
I spoke with a woman recently—let's call her Ellen—who told me a heart-wrenching story. Four years ago, Ellen and her husband, Nick, celebrated his 50th birthday with a wonderful cruise through the British Virgin Islands. But while waiting in the airport for their return flight to Dallas, Nick suffered a fatal heart attack. Ellen arrived home a widow.
In one shocking afternoon, Ellen lost not just her beloved husband of 15 years but her sense of her future as well. "We had plans," said Ellen, now 53. "I see so many couples who don't think about retirement, but we did. We planned to sell our home, pile into an RV, and visit all the ballparks and stadiums across the United States."
Ellen, who works as a speech pathologist, still hopes to one day take that cross-country RV adventure, and yet like so many of us who face a life-altering change, she is struggling through the transition. She contacted me to ask for help creating a new financial plan. But as I pored over her financial information, I quickly saw that she is actually in great shape.
In fact, she has plenty of income to cover her monthly living expenses. The mortgage for the three-bedroom home she and Nick bought for $150,000 in 1995 is nearly paid off. A treasured lake house—which Ellen visits every weekend and plans to one day make her main residence—is mortgage-free. In addition to about $400,000 in retirement savings, she expects to eventually receive $500,000 after-tax, when an office building she and Nick invested in is sold. I was intrigued by Ellen's plea. She's got a solid job, has the retirement-planning puzzle pretty much solved, and, bless her heart, no credit card debt. So what's the problem?
"I find it very difficult to make financial decisions by myself," she confided. "It's pretty accurate to say I am afraid of money." So afraid, it turned out, that she recently lent a close relative $17,000 rather than let the money sit in her bank account. The finances of the deal don't worry me much—her relative has a solid track record and is paying Ellen 5 percent interest—but what jumped out was Ellen's motivation: "I thought giving her the money would be safer than my keeping it," she told me. Giving the money away is safer than keeping it? In a federally insured bank?
What Ellen needed wasn't really financial advice. Instead, she had to overcome the emotional issues that were triggering her fear-based decisions.
Next: The real source of Ellen's fear