personal Finance Story

Mom and Dad are screwed and by association so am I.

The sandwich generation, as it has been named, is a frightening economic situation where middle aged couples face the difficulty of supporting both their children as well as their parents.

In about four or so years, my fiancé and I expect to start a family. Once that happens I anticipate, as most reasonable couples would, that our expenses are going to increase. We’ll be supporting a family of our own and besides being exciting, it will undoubtedly be expensive. We will need a bigger place to live. Our grocery, utilities, and other spending categories will increase in kind.

Also in about four or so years, my parents will arrive at retirement age. That is scary when I consider everything working against them.

• So far they have very little saved for retirement.
• They are still paying for their mortgage.
• They still support all of my siblings in some way.

That’s not a great way to head into the golden years. With only four years to go, there isn’t much they can do. I don’t expect them to be able to make up a lifetime of retirement savings in fraction of the time. It was their choice all through life to sacrifice for my siblings and I. My parents have always joked that retirement would be downgrading to a forty hour work week. With that reality slowly sneaking up on us, I feel pressure to provide for them, at least in part, to make up for all they did when I was younger.

That doesn’t sit well with my future wife.  We shouldn’t have to handicap our new family to make up for my parent’s situation.  It is after all, going to be our money in a few short months and not my own.  Everything I have and will have will be hers as much as it is mine.

That being said, there are ways to mitigate the effect of the sandwich.  It’s a two pronged approach and it starts with my parents.

How to Survive the Sandwich?

In as few words as possible, be prepared for it. It’s not like this is going to be a surprise. In about four years, we are going to have to deal with it.  The to-do list for my parents is short and sweet.

• Stop providing for their grown children
• Reduce their living expenses dramatically
• Get on a budget
• Funnel money into catch-up contributions
• Stay healthy

What Have I Done So Far?

During a recent visit, I gave my parents a copy of Dave Ramsey’s Total Money Makeover. I hope that they give it a good read and that they implement some of the teachings inside. There is a wealth of information in those pages that could have a transformative effect on their finances even in the few short years they have to prepare.

I have also worked with one of my Brothers in order to help straighten out his finances. I’ve attempted to get him on a budget and put him into a position to pay down his credit card debt.

Lastly, together with my fiancé, we have worked hard to establish a solid financial base to launch our lives. Here we sit, just a few years out of college with good jobs, well funded retirement accounts, and savings in the bank. We will be paying for our wedding ourselves without help from parents or family.

So we have a good start.  But four years is not all that far off though.

Bad things happen to good people. It happens with money all of the time.

I know plenty of people who have or are experiencing some form of financial hardship. And I’m not talking about anything related to the current economic downturn. I’m simply talking about life throwing a curve ball. Several of them happen to be in my own family.

• A co-worker is on a one way trip to bankruptcy. I hear the creditors calling him from over the cubical wall.
• Both my brothers are struggling with credit card debt that they cannot afford.
• My sister lives paycheck to paycheck and has to beg from family and friends to get by.
• My parents hope of a comfortable retirement is dwindling with each year that passes.

So far in my life I have been very blessed. My parents made sure that my siblings and I had the opportunity to pursue higher education. It is at least one of the reasons they are so far behind. They worked three to four jobs between themselves in order to give us all that great gift. I don’t think I will ever be able to repay them for their sacrifice, although I try.

I ended up getting a good job after college and am engaged to a gorgeous woman who shares my financial goals. With those advantages, I’ve been able to help one brother, my sister, and even my parents over the last few years. It makes me very happy, at least at first, to be able to come to their aid. I just wish that I had the magic words that would help them all out of their respective financial troubles for good.

In the world of money and finances I am doing pretty well. Thus far I’ve managed to avoid being in a financial accident myself, but I am often caught up in the eventual financial traffic jam caused by those around me.

I have in the past reached out to those I love and help them. I can see myself in that situation again in the future. I am fearful of not being able to come to their aid. My most sincere desire in this world is to see my friends and family happy, healthy and without financial burdens.

The start of any fateful journey begins with a first step. The road to financial independence, and my ultimate goal of giving my future wife, my family, and my friends everything they deserve, is no different. That journey favors the prepared. No matter what your own personal goals are, the path always starts the same way. You have already heard this advice before, but it bears repeating.

• Have an adequate emergency fund
• Invest for the long term in tax advantaged accounts

It’s all common sense for personal finance blog readers but not so to most of those I love. It hurts to realize that there may still be more than a few traffic jams ahead of me.

To the tune of around $350.00. More on that later. But first, I love my fiancé. We are proof that financial opposites not only attract but can be mutually beneficial.

NOT Two of a Kind

My fiancé and I view money differently. With each and every paycheck I get, I quickly get that money out of my checking account and into my ING Direct account. It’s a form of arbitrage. I use that money to pay the bills at the end of the month, but in the meantime, I collect the interest. The quicker I move money the longer it gets to build interest.

Is it a terrible lot of money? No. I’m not going to be taking a fancy vacation off of it anytime soon. For me, it is the best and most efficient way of handling my money. It kills me when I know my money is in any form of “down time”.

On the other side of the coin, my soon to be better half likes to see her money in a big pile. The bigger the better, regardless of the fact that it could be earning her more in her ING account.

There is nothing wrong with either method.  We are just different and thats ok.  We have learned to tolerate each others peculiarities.

Fiancé To The Rescue!

Fast forward to today. In my effort to maximize my ING returns I made a mistake. It seems in retrospect that I had two outgoing transactions for a very similar $350 and change. I mistook one for the other and ended up withdrawing more than I should of to my savings.

So there I was looking over my bank account and the foreboding negative value. What am I going to do?

I check my accounts regularly, so I caught the mistake while the offending transaction was in Pending Status. So no over draft fee, yet. Time to panic and profess my undying love to my fiancé who I know keeps ample cash reserves in her checking account. In case you did not know, all deposits made at Bank of America ATMs by 8PM post the same day.

So after a quick after work trip to the ATM, my fears of over draft hell are assuaged.

A Moral To The Story?

Not likely. I’m not about to stop my practices. It is nice to know that I have a safety net though. And although I can’t quite put my finger on it, I am sure that in the near future I will have a chance to return the favor.

Great relationships can thrive on differences. That’s true with people and money.

Just say ‘NO’.

It works for drugs. I see no reason why giving money to family is any different. In fact, the destructive influence they have on relationships can be comparable. It is a poison.

Very soon after graduating college, I took my first job in the engineering field with a big fat engineering salary. At least that is what I assume my older sister must have believed. Being the fat cat I am, I should have no trouble lending her $100 or so. Every month.

It was always for a good reason. The babies needed food, they just came up short this month. I handed over money without thinking too much about it at first. The only thing that really irked me was the urgency required with every request. She always needed the money right away. The only method that would suffice was always same day service from Western Union or the like. For those who have not had to use such a service the fees charged for a same day cash transfer are onerous.

Eventually as I began to show reluctance in lending money so frequently, the ante was raised. The amounts got bigger, $300 $500 now. Now the repo man was coming for the car, the heat just got turned off.

Eventually, she needed $1500 tomorrow. And if I didn’t give it to her, she would just find a loan shark to get the money from. One that was sure to break her legs when she ultimately could not give the money back. It was too much for me. I called my parent and got them involved.

It seems that she had also received money from them. And our younger brother. And our grandmother. And her home town friends. And even a distant aunt who happened to be in the hospital at the time.

I said no. She has since stopped asking me for money and thus, we do not speak to one another at all. I doubt that I want to invite her to my wedding. I’m saddened whenever I think about it.

Get the Entire Family Involved

If any family member is legitimately in trouble, then it’s time to put pride aside and tell the whole story. No secrets, just brutal honesty. If my family had at least been honest with each other then we would have realized what was going on sooner. Maybe we could have solved something before it went too far.

Learn from my error and don’t lend money to family. A little tough love early on may have helped to avoid a ruined relationship in the future.