A Foundation for Economic Responsibility: "What's the Worst That Can Happen?" --A Tale of Two Families

This simple question, "What's the worst that can happen?" is one of the primary foundations for us taking economic responsibility for ourselves. Not a comfortable question to ask. None of us want to admit that our lives can take a bad turn. However, to be able to answer this question, then equip ourselves for it, is a big first step toward being economically responsible.

So, what is the worst that can happen economically? Well, if we are part of a family, the worst is that our family is deprived of our income either because we died prematurely or became disabled. Not only will our family grieve our absence in their lives, but the lack of income will make their lives considerably worse.

Actually this happened last year to two acquaintances of mine. One was 42, the other 49. They died in unrelated accidents about 30 days apart. The first one left a spouse and three children: 20, 18, and 9. The other left a spouse and two daughters, 21 and 17.

The first one had a small group life policy--her annual salary--with her employer. It was enough to bury her and pay her final medical bills. Her spouse is trying to support his kids on 62% of their total family income. One is in college, the other wants to go. The tough thing is he can't stop working for any length of time. If he does, the family will financially fall apart. He can't take time off to be with his kids, especially the youngest who is having the worst time.

The second one had enough insurance to replace his entire income indefinitely. His wife invested the entire amount in a secure investment and is living off of the proceeds. The oldest has stayed in the private college she is attending. The younger one can keep her plans for college too. His wife doesn't have to work outside the home unless she wants to. So while his wife misses her husband, and his daughters miss their father, their lives are not financially devastated like the first family. There is an emotional hole because of the unexpected death, but not financial ruin.

The reality is most people do not have this economic foundation to the degree they need it. And while their economic houses look good on the outside, a lack of a firm foundation against "what's the worst that can happen" will lead to a collapse if in fact the worst occurs.

Finally, it's easy to deny the need for a firm foundation such as this. After all, like the foundation of a home, the relative strength or weakness of a foundation is not readily apparent, expect in times of stress. But,like a home's foundation, if you wait until you need this foundation for economic responsibility, then it's too late. The damage is already done.