Fairport Women

Rebuilding Home: You Don’t Want to Go Down This Rabbit Hole

By Deborah Feldman

I used to love staying at my grandmother’s house. She was an excellent cook, listened patiently to all my childhood ramblings, and always provided an interesting perspective to the many questions I had about life. She was such a positive person and only as an adult did I realize that one of the reasons she was so much fun to visit had to do with the way she communicated with us. She rarely used negative words to modify our behavior. Instead, she chose descriptive phrases to discourage or alert us to impending danger. One of her favorite phrases was “you don’t want to go down that rabbit hole!” Whenever I heard her say this, I remember that “Little Debbie” conjured up scary, sharp toothed critters lurking in a hole created by one of the many rabbits in her yard. This was enough to stop me dead in my tracks whether it was something I expressed or wanted to do that met with her disapproval.

This brings me to the subject of this week’s blog. Over the years I have counseled many widows on financial matters and while no two people process this tragedy in the same way, there are some common fears and feelings that we all share. We are hurting and we want the pain to go away. We want our old life back. We don’t know how and don’t want to handle our new situation. These feelings of fear and sadness have caused some widows to choose a path that temporarily makes them feel better but does not bode well for their financial futures. My friend Charlotte is one example.

Charlotte’s husband died unexpectedly and left her with three children to raise, some investment accounts, some debt and about $500,000 in life insurance proceeds that was payable to her. She was completely devastated when James passed away and absolutely felt lost in the world. She had no experience handling money, paying bills, hiring handymen, filling her car up with gas, you get the idea…

One of the first things that I helped Charlotte with was to apply for Social Security. She was relieved to learn that she would be receiving so much money each month. I had her make a list of her expenses and then I created a cash flow spreadsheet to serve as a tracking tool to monitor her spending patterns. We looked longer term and structured a portfolio strategy to provide funds for college, weddings, retirement, etc. We met with an attorney who put together her estate planning wishes. Charlotte was in pretty good shape financially speaking. Life was moving forward for her until one day she mentioned that she was going to buy a sports car. She thought that she should give herself something to look forward to, and the red 2-seater sports car became a fixture in her garage. Somewhat impractical for the young family of four, yet Charlotte was thrilled with the purchase. A few months later Charlotte hired a contractor to build a larger family room addition with a new kitchen at a cost of $90,000.

I began to get concerned about her spending and gently expressed it. She acknowledged that these purchases gave her something to look forward to and that they were something both she and James had talked about doing in the future. She made a promise to curtail her spending. We agreed to monitor expenses every month. I remember the feeling of relief I had after our talk. I didn’t want my friend to jeopardize her family’s future for fleeting moments of gratification. 

So for a few months she was in good shape and then what followed were a string of smaller, expensive purchases: a $10,000 trip to Disneyworld, $5,000 diamond earrings, trips to day spas, designer clothing spending sprees, and she had a $500/month lottery expense!!! At the one-year anniversary of James’ death, Charlotte had spent $250,000 of the $500,000 insurance money. She seemed to feel that spending another $7,500 on a watch just wasn’t that much to worry about. At this point I was truly frantic – she is one of my closest friends, I’m a very experienced financial advisor and as a team we were failing. Her spending problem occupied many of my waking moments and began to invade my dreams. Somewhere along the way I thought of how I could employ my grandmother’s “rabbit hole” warning to Charlotte’s addictive, downward-spiraling spending habit.

I’d like to say that Charlotte immediately saw the wisdom of the “rabbit hole” warning and that her excessive spending stopped overnight, but it didn’t. We initially agreed to a slowdown strategy and eventually (after a lot of work on her part and strain on our friendship) she was able to reign in her spending and we celebrated each month of progress with a special dinner! Today she is the proud mother of 3 amazing adult children, who all graduated from some form of higher education. Whenever Charlotte is complimented on any of her many accomplishments since James died, she always gives a wry smile, a sideways look, and credits her friends who helped her “climb out of the rabbit hole.”

For more insight from Deb, you can read the previous issue of Rebuilding Home here, or stay up-to-date on new issues by following Deborah Feldman’s blog on LinkedIn.