Scott Pape: Financial advice for when your spouse is terminally ill
Jen asks: Sadly, my husband has just been advised that his cancer has moved to “terminal” (he is only 48). We are devastated, but the reality is we have to make some hard decisions about where to go from here.
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JEN ASKS: Sadly, my husband has just been advised that his cancer has moved to “terminal” (he is only 48).
We are devastated, but the reality is we have to make some hard decisions about where to go from here.
Luckily, we have always believed in having life insurance, and that will more than cover the mortgage, so financially my boys (10 and 13) and I will be OK. But I want to make sure it stays that way.
After ensuring we are debt free, I want to invest some money for the boys, and I am torn between AFIC shares and investment bonds.
Any advice would be appreciated — we have so many decisions to make.
BAREFOOT REPLIES: My heart breaks for your family.
The simple answer is “yes” — buy some shares in AFIC. But there’s nothing simple about your situation.
If I was your husband, my only wish would be to make sure that my family was financially secure.
So let’s grant him that wish. Speak to his super fund immediately and lodge an application for a terminal illness condition of release, for which you’ll need sign-off from two doctors (one a specialist).
This will give you access to his death benefit now, instead of having to wait.
Then, sit down as a family and discuss what you’re going to do.
Now here’s the really important point — turn this into a life lesson for your boys. Explain to them that you’re going to be OK because their father is a good provider who made sensible financial decisions, like taking out adequate insurance.
When you get the payout, pay off the mortgage, put something aside for a final holiday together (or to pay hospital expenses), put three months of living expenses in a mojo savings account (extra if you’re taking a break from work), buy your AFIC shares, and park the rest in a 12-month term deposit so you can allow yourself time to grieve.
The best way to look after your sons is to be financially strong yourself.
ETHICAL DILEMMA
LOUISE ASKS: I have a question about ethical investing.
Having done some research on ethical funds, I find myself stuck between two extremes.
Some have low fees but are not ethically stringent enough for me. Some are super stringent but have high fees.
I want something in the middle. I was wondering what your thoughts were on Morphic Asset Management, which is seeking to raise more than $200 million for the Morphic Ethical Investment Trust, to be listed on the ASX.
BAREFOOT REPLIES: Choosing a fund boils down to two things:
DO you understand it?
HOW much are they charging?
Here’s how Morphic explain their fund: “This will be an opportunity to invest in an ethical long/short equity fund providing you with diversified exposure to a portfolio predominantly comprised of global listed Securities and Derivatives that comply with the Company’s social and environmental guidelines.”
Louise, before you invest your hard-earned with them, you need to understand that paragraph.
OK, now on to the costs.
As an investment grump I pick up the prospectus and skip past all the pretty pictures and all the marketing guff, and go straight to the fees — since that’s the only thing in the prospectus that you can actually count on happening:
They’re charging 1.25 per cent per annum, plus a 15 per cent outperformance fee.
That’s too damn high for me.
Research from Standard and Poor’s proves that 80 per cent of fund managers can’t reliably outperform a cheap index fund over the long term.
So if I were in your shoes, I’d invest in the UBS Ethical International Fund (ASX: UBW).
It’s simple to understand — it’s an international index fund that screens out companies involved with tobacco and weapons.
How much do they charge? A low 0.35 per cent.
TOP-CLASS TIPS
MISS J ASKS: I am a high school economics teacher.
This week I made your recent article “How Not to Raise a Spoiled Brat” required reading for my year 9/10 class.
I am looking forward to hearing their thoughts.
I am also planning to play the ASX Sharemarket Game with the class.
Do you have some top tips for them as they try out investing for the first time?
BAREFOOT REPLIES: Even though I’m a former employee of the ASX, I have to tell you that I’m not a huge fan of the game, because it encourages short-term trading, not long-term investing.
My tip would be for the class to do some real-world homework.
Have them ask their parents three questions:
WHERE is their super?
HOW many super funds do they have (most people have three)?
WHAT are they being charged in fees (as both a percentage and a dollar amount)?
That’s one lesson the entire family would never forget!
If you’ve got a burning money question, or you want to win a fight with your hubby, shoot over to Barefootinvestor.com and ask a question.
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The Barefoot Investor holds an Australian Financial Services Licence (302081). This is general advice only. It should not replace individual, independent, personal financial advice.