I’d like to share a real-life fairytale that’s more like a story of financial independence, romance and all. It’s the story of Sally who, like many women we’ve met in our wealth management practice, was very comfortable giving full financial control to her husband. Some call it the “Prince Charming Syndrome.” Many women — including those with high-powered careers or businesses of their own — want a man to ride in on his white horse and take control of the family finances. So Sally didn’t talk finances with Mike, the dream-come-true executive she married. When Mike took an early retirement, they continued to live a very comfortable lifestyle, including moving to Southern California where they enjoyed friends, golf, and the good life.
At age 65, Mike was diagnosed with cancer. Although they knew he only had months to live, the couple still did not talk about finances — at least not until the very end of Mike’s life. That’s when he told Sally they had virtually no assets and that, as Sally tells it, he had been “robbing Peter to pay Paul” in order to maintain their lifestyle. He also told her she would need to sell their home because there wasn’t enough income to pay the mortgage.
It started with Mike using investments to live off of and, when the financial crisis hit and his prior employer almost went bankrupt, he used the equity in their home to fund their lifestyle. You see, Mike’s million-dollar retirement account was worth very little because he had invested it 100 percent in company stock that dropped down to cents-on-the-dollar during the financial crisis. All the while, Sally had no idea.
Fast forward just one year and Sally is showing amazing resilience. She misses Mike and is grateful for the life he provided her, but she realizes her Prince-Not-So-Charming hadn’t been doing her any favors by keeping the facts of their finances from her. She was very lucky that Mike had not yet cashed in his life insurance policy before getting sick. The $500,000 payout from that policy is pretty much all Sally has to live on besides Social Security. She's advantaged in others ways, too: She is able to live with a relative, and the monthly budget we created together even includes monthly savings. Her lifestyle has changed significantly since Mike passed away, but Sally is living within her means and learning a lot about her investments — most importantly, that compounding or reinvesting her returns rather than using them to augment her current lifestyle will provide added security for her down the road.
Sally is fortunate because things are going to be okay for her. But one thing I can say with 100 percent confidence is she won’t be relying on a future Prince Charming to control her family finances.
Janet Acheatel is a member of the DailyWorth Connect program. Read more about the program here.