ShareMe Archives — Page 2 of 111

How to Handle Financially Toxic Parents

September 14, 2020 By MelissaB 7 Comments

Your parents should provide for you as you grow up, but what happens when they ask you for money? Should you give money to your parents? The answer to how to handle financially toxic parents depends on both you and them.

Reasons Your Financially Toxic Parents May Need Money

There are many reasons your parents may ask you for money. Some are valid reasons, and others, not so much.

A Job Loss

Sometimes the unexpected happens. Your parent may find him or herself out of a job and in need of money. Our neighbor, Rob, worked hard all his life. Because he married young and he and his wife had children in quick succession, Rob never got to go to college. He worked as a janitor. While he and his wife were responsible with their money, they just didn’t have much money. They couldn’t establish much of an emergency fund because his income just paid the bills and covered the expenses of his seven children.

When Rob was 59, he lost his job. At that age, he had a difficult time finding a new job. In this situation, helping your parents out, if you’re financially able, is the right thing to do.

An Unexpected Funeral

How to Handle Financially Toxic Parents — Photo by Rhodi Lopez on Unsplash

If your parents no longer have life insurance and one dies, how does the other pay for the funeral? Funerals can run upwards on $10,000 or more. If your surviving parent doesn’t have the money to pay for the service and burial, contributing to this expense can be a nice gesture.

For Younger Siblings

My friend, Joan, became friends with another girl, Leslie, in high school. Leslie had an unstable home life and eventually moved in with Joan and her family. When we all graduated high school, Leslie went to college for engineering and also worked full-time to support herself.

At regular intervals, Leslie’s mom, who still had four younger children at home, called Leslie and asked her for money. For years, Leslie gave money to her mom because she felt guilty. After all, her stepdad had just left, and her mom had to provide for the younger kids.

However, over time, her mother continued to spend irresponsibly, but Leslie didn’t feel like she could say no because if she did, her younger siblings would do without. Leslie begrudgingly gave her mom money until all the kids were out of the house.

Bad Money Management Skills

How to Deal with Financially Toxic Parents — Photo by allison christine on Unsplash

Now, I’m on the flip side and am old enough to have friends who have adult children. One of those “friends” (and I use the term loosely), Heather, continually writes on Facebook about her money troubles. These posts always appear as thinly veiled requests for money.

In the most recent post, Heather wrote about the financial troubles she and her husband have and went on to say that their 20 year old son, who is working two jobs and taking a full load of college classes, is giving them money to pay for their utilities and gas to and from work.

However, in that same week, Heather posted about going out to eat two different times and having a manicure and pedicure as well as getting her hair highlighted.

Say what?!

Should You Give Your Parents Money?

As an adult, if you find yourself in the awkward position of deciding whether or not to give your financially toxic parents money, there are a few questions you should ask yourself:

Can you afford it? Do you have the money to give your parents? Can you loan them money without causing your own financial hardship?

Why do your parents need the money? Are your parents in a truly tight financial spot because of unemployment, sickness or another issue? Or, do they have a history of mismanaging money and now, like so many times before, they’re in a bind?

Are they trying to change their situation? If your parents are facing financial difficulties, are they taking steps to try to improve their situation? Are they wisely cutting expenses and learning how to manage their money so they won’t be in this position again? You probably can’t give them advice here because they likely won’t listen, but you can recommend your favorite financial blogs or books to help them get a better handle on how to manage their money.

What does your spouse think? If your parents are routinely asking for money, your spouse may be annoyed or angry. After all, you’re giving away money that now can no longer be used for your own retirement fund, household needs, or for your kids. If your spouse is tired of you giving your parents money, please listen. The last thing you want to do is make your own marriage unstable to enable your financially toxic parents bad money habits.

Money arguments are the number one cause of divorce. Giving money to your parents frequently can definitely lead to tension and disagreements in your own marriage. Is enabling your parents worth it?

Should You Cut Your Parents Off?

If you do decide to lend your parents money, how often can you do so? You should set boundaries for the limit of your generosity in the beginning. Leslie, the girl I went to high school with, regularly gave her mother money for eight to ten years. Then, as her younger siblings grew up and left home, Leslie saw that her mother often caused her own drama and financial woes.

She cut her mom off about 15 years ago, and now she rarely hears from her.

I don’t know how long Heather’s son will lend his parents money, but I hope it’s not for too long. There’s no reason why a son should be financing his mother’s highlights and pedicures when he himself is working two jobs to pay his way through college.

Finally, if your parent is in dire financial straits due to addiction or gambling, you shouldn’t lend them money. Using tough love here would be the best advice.

Have your parents ever asked to borrow money for you? If so, how did you handle it?

Are you a parent? If so, have you ever asked to borrow money from your children?

Couples: To Combine Finances or Not?

The Best Spacing of Children for Your Finances

Is Debt Hiding a Form of Cheating?

Saving vs Investing: Investing for Income

December 13, 2018 By Shane Ede 12 Comments

Saving and investing go together like milk and cookies, sweet and sour, and Elvis and banana peanut butter sandwiches, right? Right. Well, almost right. It’s easy for us to say that saving and investing are important parts of a personal finance plan. It’s easy for us to say that and then move on. After all, we just said they’re important, right? Not so fast.

Saving and Investing ARE important

They just aren’t equally important. Heck, it’s another whole post, but even the different types of investing aren’t equal. Just as important as saving and investing together is the concept of when to use which, and how much. The mix of liquid savings in the form of cash accounts and CDs with the amount of your money that’s invested can be one of the most important parts of your overall personal finance plan.

Traditional advice tells us that cash accounts and CDs are the super safe way to keep your money with you, and investing, in it’s varying forms is all kinds of risky. Investing in stocks? Risky. Investing in pork bellies? Risky. (unless you really like bacon. Just kidding, still risky.) But, is the amount of risk involved in investing more or less risky than leaving too much of your money in the bank to rot away at current interest rates? How about you ask the people of Cyprus if they still feel safe having their money in the bank?

Success is risky.

Few who accomplish success do so without some element of risk. In fact, the easier the path to success is perceived, the less chance there is of truly obtaining it. I don’t say that to seem philosophical. I want to make a point, however. You’ve got to have a little risk, if you want to succeed. You’ve got to have Investments if you want to succeed financially. And, I think the ratio of investments to savings should probably be much higher than most would suggest.

Investing for Financial Independence

One of the key tenets in a financial independence plan is that you need to replace your income in order to free yourself up to be independent of a job. Not independent of work, but of a job. There are, obviously, many ways that you can go about replacing that income. Decreasing your expenses is usually a part of most plans. But, most people’s expenses will only decrease so far. Sure, you can go extreme, and get them lower, but for many that isn’t what financial independence is about. Even with your expenses decreased as low as you’re willing to take them, you’ve still got to replace the income to pay those expenses. Investing can be a very good way to get started towards replacing your income.

Investing for Income

In order to replace income with investing, you’ve got to invest for income. You probably try and do that by becoming a super successful day trader and making up the income in profits from all the great deals you made. First, find yourself a few super successful day traders who have done that. Come back when you’ve given up. If you’re going to invest for income, it’s got to be reliable. It can’t rely on your ability to find a good bargain and then sell it at a massive profit a few days later. There are traders who are still waiting on Facebook to make a comeback so they can even get their money back. Reliable income is the key. For this, we need investments that are steady, don’t require the continued increase in value of the stock, and also don’t require us to sell like a fiend in order to create the income. What are these mysterious investments, you ask? Dividend stocks.

Dividend stocks are stocks that pay a dividend on each share of the stock that is held. The amount of the dividend can vary, but there are many that you will find that pay dividends in the range of 2-4%. Depending on the policy of the company, they usually pay quarterly, but there are some that pay monthly and yearly.

Dividend stocks aren’t the only way to invest for income, however. Investing in peer-to-peer lending in a program like Lending Club is one. Rental real estate is another. A business can even be a way to invest for income. Each has varying levels of passivity, or the amount of direct interaction on your part to earn the income. A business that you run can mean well over 40 hours a week of direct interaction to create the income. Something like Lending Club or rental real estate can be brought down to a level that borders on passive income entirely.

Savings vs. Investing

With any investing tool, whether it be dividend stocks, lending, real estate, or some other instrument, there will be risk. With risk usually comes reward. I’ve been earning over 8% return on my Lending Club portfolio. Dividend stocks can lose value, or even stop paying dividends. The real estate market can dry up, and you can have problems finding renters. Risk is inherent. Unless you want to directly trade your time for money (call it a job), you’ve got to take on a little risk and begin setting yourself free.

Savings shouldn’t be shunned completely. I still believe that an emergency fund is an important tool. I still covet a debt free lifestyle. But, once my debt is paid off, and my emergency fund is full, you can bet the rest will go towards investing for income, and building my wealth towards financial independence.

How about you? What is the role of savings in your personal finance journey?

Original img credit: Two men with pipes posing as boxers / Deux hommes, pipes à la bouche, prenant une pose de boxeur by BiblioArchives / LibraryArchives, on Flickr

Are We Too Confident in the Stock Market?

August 22, 2018 By Shane Ede 4 Comments

Experts are fond of telling us all about the historic returns of the stock market. But, does our belief in that make us overconfident in the stock market?

You’ll have a hard time finding someone who won’t tell you that the market performs quite admirably over time. It may have it’s ups and downs, but it performs at a rate that touches on double digits for longer periods of time. And, it’s hard to argue with the facts. Take the market for any given 10 or so year period and you aren’t likely to find too many periods where it hasn’t returned a pretty nice rate. Especially when you compare it to the rates of savings accounts and CDs over the same period.

But, there’s shady side to all of that. Our confidence in the ability of the stock market to return those kinds of numbers can sometimes cause us to over-invest our portfolios. Every time the stock market drops significantly (or crashes altogether) we hear stories about the person who was near retirement and now has to work for another 10 years because he/she lost it all in the stock market drop. Invariably, you hear one of the reporters utter something about whether the stock market is as safe as we all make it out to be.

Charging Bull And the truth is, no. It’s nowhere near as safe as some would make it out to be. In fact, it’s down-right risky. And the less diversification you have, the riskier it becomes. Hold all your money, or a significant portion of your portfolio, in one stock and you’re just as likely to suffer a tragic loss than you are to retire rich. Ignore the more conservative professionals who suggest that you should move more and more of your money away from stocks and into something like bonds as you age, and you have a much higher chance of suffering a tragic loss.

Our confidence isn’t entirely misplaced, however. The facts remain that the market does return a healthy rate over time. And as long as you can weather a few down trends, you’re likely to come out on top if you just hold on for the ride. The overconfidence comes when you keep your money in too high of a percentage of stocks as you near retirement age. By the time you are 10-15 years from retirement (about age 50-55) you should have moved at least 50% of your portfolio away from stocks and into bonds. Your investment adviser should be able to help you with that, or you should sign up with a stock advisor service (like the Motley Fool Stock Advisor, or Betterment). When you’re 5 or so years from retirement, you should be closer to 90% in bonds and other safer investments. Yes, these investments are less likely to have high returns, but they also are almost guaranteed to return something. And, as the old saying goes, something is better than nothing.

The bottom line is this. Be aware of the risk of the stock market and that you should begin playing it safer as you near retirement age and you should be ok. Don’t get overconfident in the history of the stock market and it’s giant returns. Most importantly, find an investment adviser that you can trust and, at the very least, get their advice on your portfolio and it’s allocations, and you should find yourself hitting retirement with most of the money you expected to be there.

Image Credit: Charging Bull by kdinuraj, on Flickr

This post originally appeared on Beating Broke on 10/25/2010, and has been refreshed.