Who Else Is Affected by Your Financial Decisions?

The Questions Investors Should Be Asking Themselves — Part 6

By Brett Carleton, CFP®, ChFC® President & Founder, Heritage Wealth Management

Throughout this series, we've asked some very personal questions.

Why are you thinking about your financial life now?

What does money mean to you?

What are you trying to accomplish with your wealth?

What financial concerns keep you up at night?

And what did the last market decline teach you about yourself?

For Part 6, I want to widen the circle.

Who else is affected by your financial decisions?

For most of us, the answer extends well beyond ourselves.

It's our spouse.

Our children.

Our grandchildren.

Our parents.

Sometimes it's a sibling or another family member who may eventually need our help.

When I think about financial planning, I don't think we can fully understand someone's financial life without understanding the people who are important to them.

Because ultimately, many of the financial decisions we make aren't really about money.

They're about people.

Start With Your Spouse

One of the first people to consider is your spouse.

In many marriages, one person naturally takes the lead on the family's finances.

Maybe that's you.

You pay the bills. You understand the investment accounts. You communicate with the financial advisor, CPA, and attorney. You know where the insurance policies are and how the estate plan works.

Your spouse may be involved, but perhaps not to the same degree.

That arrangement may work perfectly well today.

But ask yourself:

What happens if I'm no longer able to do it?

Would your spouse know whom to call?

Would they understand where your income comes from?

Would they know which accounts you own and why they're invested the way they are?

Would they understand the financial plan well enough to feel confident making decisions without you?

That's not simply an estate-planning question.

I think it's part of being a good financial partner.

One of our goals at Heritage is to develop relationships with both spouses whenever possible. I don't want the first meaningful conversation with a surviving spouse to happen after they've lost the person they relied on to handle the finances.

What Do You Want Money to Do for Your Children?

Children introduce an entirely different set of questions.

Most parents want to help their children.

The more difficult question is often:

How much help is actually helpful?

Maybe you'd like to help with a first home.

Pay for education.

Provide money to start a business.

Help with grandchildren.

Give your children an inheritance.

Or simply create a financial safety net if they ever need it.

But generosity can come with its own concerns.

Will giving too much reduce their motivation?

Should every child receive the same amount?

What if one child needs more help than another?

Should you give money now or leave it as an inheritance?

Should there be trusts or other protections around what they receive?

There isn't one answer that works for every family.

That's why I think the financial planning conversation has to start with your values before it gets to the strategy.

Equal and Fair Aren't Always the Same Thing

Family situations can become particularly complicated when parents begin thinking about how wealth should eventually pass to the next generation.

Sometimes equal is exactly what parents want.

But life doesn't always divide neatly into equal pieces.

One child may be financially successful and independent.

Another may have experienced setbacks.

One child may have spent years helping care for aging parents.

Another may have special needs that require financial support for the rest of his or her life.

One may be very responsible with money.

Another may not be ready to manage a significant inheritance.

These are deeply personal decisions.

The role of financial planning isn't to tell a family what's fair.

It's to help them think through the consequences of their decisions and then make sure their financial and estate plans reflect what they actually intend.

What About Your Grandchildren?

Grandchildren often change the way people think about wealth.

Suddenly, the time horizon becomes much longer.

You may begin thinking about education.

Family experiences.

Helping them get started in life.

Or simply giving them opportunities you didn't have when you were young.

One of the things I encourage families to think about is whether they want their wealth to create an impact only after they're gone—or whether they'd like to see some of that impact during their lifetime.

There's something very different about leaving money to a grandchild someday and being able to take that grandchild on a trip, help pay for college, or watch them use a gift to begin their adult life.

Both can be meaningful.

The question is:

Which is meaningful to you?

Your Parents May Be Part of Your Financial Plan Too

Financial responsibility doesn't only flow down generations.

Sometimes it flows up.

As our parents age, many of us eventually become involved in decisions we never expected to make.

Where should Mom or Dad live?

Can they continue living independently?

Can they afford additional care?

Who has power of attorney?

Where are their financial records?

What insurance do they have?

What happens if one parent dies before the other?

These aren't hypothetical questions for many families.

My wife, Laura, and I have both experienced the process of helping aging parents transition into care environments. One lesson from those experiences has stayed with me:

It's much easier to have these conversations before there's a crisis.

If your parents are getting older, understanding their plans can be part of understanding your own.

Some Families Have Responsibilities That May Last a Lifetime

For families caring for someone with special needs, planning takes on another dimension.

My family understands this personally.

Our daughter Jessica suffered a traumatic brain injury in 2014, and planning for her long-term care has been an important part of our own financial lives.

Laura and I have spent years thinking about questions many parents in similar situations understand very well:

Who will help care for her when we can't?

Where will she live?

Who will oversee financial decisions?

How do we make sure resources are available without unintentionally disrupting benefits or support?

Who will advocate for her?

Those questions go far beyond investment management.

They involve estate planning, legal documents, financial resources, living arrangements, family members, and the people and organizations that will eventually become part of that support system.

For families in these situations, financial independence isn't only about making sure you have enough.

It's also about making sure someone you love will be cared for long after you're no longer able to do it yourself.

Make Sure the Next Generation Knows the People You Trust

There's another aspect of family planning that I think gets overlooked.

Do your children know your financial advisor?

Do they know your attorney?

Your CPA?

Do they know where your important documents are located?

They don't necessarily need to know every detail of your financial life today.

But there is value in making introductions before they're urgently needed.

I've always believed that one of the greatest compliments a family can give us is introducing their children or other family members to Heritage.

Not because we need to manage everyone's investments.

But because when life eventually changes, it's helpful for the next generation to know there are people who already understand their parents, their family, and what was important to them.

Wealth Can Transfer More Than Money

When people hear the word “legacy,” they often think about inheritance.

But I think legacy can be much broader than that.

You can leave money.

But you can also pass along values.

Work ethic.

Generosity.

Gratitude.

Responsibility.

Stories.

Family traditions.

The way you treated people.

The organizations and causes you supported.

And perhaps most importantly, the example you set for how money should be used.

If your children and grandchildren inherit your assets but don't understand the values that helped create and preserve those assets, something important may be lost in the transfer.

That's why some of the best family financial conversations aren't about account balances at all.

They're about:

Why did we make these decisions?

What mattered to us?

What do we hope this money allows our family to do?

Those conversations can become part of the legacy too.

Draw a Circle Around Your Financial Plan

Here's an exercise I think can be useful.

Imagine your financial plan sitting in the center of a piece of paper.

Now draw a circle around everyone whose life could eventually be affected by it.

Your spouse.

Your children.

Your grandchildren.

Your parents.

A sibling.

Someone with special needs.

A charitable organization.

Maybe even future generations you'll never meet.

Then ask:

Have I actually planned for each of these people—or have I simply assumed everything will work out?

That question may reveal areas of your financial life that deserve more attention.

Financial Planning Is Ultimately About People

Investments matter.

Taxes matter.

Estate documents matter.

Insurance matters.

All of those things are important pieces of a comprehensive financial plan.

But they're still just tools.

The purpose of those tools is to help care for people and accomplish things that matter to you.

So as you think about your financial future, don't stop with:

“Am I going to be okay?”

Ask another question:

“Who else am I responsible for helping make okay?”

Because for many of us, that's where financial planning becomes much more meaningful.

Coming Next: Does Your Financial Plan Reflect the Life You’re Actually Living?

In Part 7 of The Questions Investors Should Be Asking Themselves, we'll look at how life changes while financial plans sometimes stay the same.

Your career changes. Your family changes. Your spending changes. Your priorities change. Tax laws change. Even your definition of a successful life may change.

We'll explore why a financial plan should evolve along with you—and why revisiting old assumptions can be just as important as creating the plan in the first place.

About This Series

The Questions Investors Should Be Asking Themselves is an ongoing Heritage Wealth Management series exploring questions that can lead to more meaningful financial planning conversations.

Because sometimes improving your financial life doesn't begin with finding a better answer.

It begins with asking a better question.

Disclosure: This material is for informational purposes only and should not be considered investment, tax, or legal advice. Investment strategies involve risk, including possible loss of principal. The questions and concepts discussed in this article were inspired in part by the work and perspectives of David Booth, founder of Dimensional Fund Advisors and author of Stay Calm. Heritage Wealth Management is not affiliated with or endorsed by David Booth or Dimensional Fund Advisors.