Welcome to Ask the Bills, where every two weeks Helaine Olen answers readers’ questions about their most nagging personal-finance and financial etiquette dilemmas. Seeking advice on a money issue? Email firstname.lastname@example.org.
I’m a young recent graduate with student-loan debt. A few months ago I moved to Europe to teach English. The pay is just enough to cover my rent, bills, and food, so I’m surviving, but only just. But I want to build up some savings, an emergency fund, and spend a bit more money on myself and my social life. Here’s the thing: I have a rather large amount of money invested in my parents—about $8,000. At school and before moving abroad, I never spent much money, so my parents and I worked out a deal where I would “lend” them money when they were a bit cash-strapped, and then they would pay me “interest”—less than they would pay on a loan, but more than I would get from a bank. They aren’t in much better financial shape now. Their expenditures include occasional holidays, but they also have credit card debt totaling at least their debt to me. I don’t want to lecture them on financial responsibility, I don’t want to deny them their lifestyle, and I don’t want to worsen their cash-flow problems. But at the same time, I could really do with a bit of that money back. What do I do?
You’re being very diplomatic here. You’ve “invested” money in your parents, you write; you could “really do with a bit” of it back. And surely Mom and Dad would like to return it! Few parents want to be dependent on their kids.
Here’s the rub: It sounds like your parents don’t have the money. And since you’re not a credit card company, you won’t be turning them over to a debt collector—nor would you want to. Are they legitimately hard-up? Or just clumsy with cash? I can’t answer that and, in a way, it doesn’t matter. It’s hard enough to change our own behavior, never mind the behavior of others. And the only thing a lecture about financial responsibility will accomplish is damage to your relationship with them.
But, but, but! You’re almost certainly thinking that it’s their actions that are damaging the parent-child bond. Should they fail to return your money, your parents are letting you down. They should have just said they needed money and not made hard-to-fulfill promises about interest rates or returning it. Then you could have chosen whether to help them out or not. If you now find yourself stewing about the “lifestyle” your money is funding, that’s OK—for now. But this, alas, is part of becoming an adult: realizing that parents are far from perfect, and often forgiving them for it.
So what do you do? If you tell your parents about your current financial situation, emphasizing how financially stressed you feel, chances are they’ll return some of your funds over the next few months. But will you see all of it? It doesn’t sound likely.
And remember: You have no obligation to give money to your parents in the future. When you have money to save again, find a bank. A real one.
My husband refuses to make and stick to a family budget. He resents the idea of limiting himself, and his idea of budgeting is “we just need to spend less.” We both work full-time state jobs with mediocre salaries, have one of our two children in day care, and basically live paycheck to paycheck, with no cushion. We each have $8,000 in credit card debt, and I have $25,000 in student loan debt. We don’t have an extravagant lifestyle, hobbies, or other large money pits we can eliminate, and our house is paid for. My husband pays the bills because his salary is slightly higher than mine, and every month I basically transfer over my whole paycheck minus my student loan payment and a pittance toward my credit card, leaving me no cash for personal expenses and ever more debt piling on the card. I know I need to stop using the card if I’m to ever pay it off. But if I’m ever going to get out of personal debt, I feel I need to come up with a financial plan that only I will stick to and doesn’t depend on my husband’s participation. Short of divorcing him, how do I get myself out of debt without his cooperation?
It sounds like the primary issue isn’t that you and your husband aren’t budgeting but that you don’t have enough money to meet your needs. You own your home (so you’re only responsible for taxes and maintenance), you claim no extravagant habits, and yet you’re still falling behind financially. That’s not a surprise, given that $25,000 student loan bill and child care expenses. In a majority of the states, child care costs more than in-state tuition at a public college.
Here’s the good news: Child care isn’t forever. That money will be freed up within a few years. In the meantime, start by working out what you need to get by every month for the day-to-day expenses you are putting on your credit card. Then subtract that sum from the amount you’re sending to your husband’s account and tell him why. There’s no reason you should keep piling on debt because he refuses to sit down and come up with a spending plan. If you stop enabling your spouse’s financial behavior, he might agree to work on your finances together.
Finally, I’d ask if you or your spouse can find a better-paying job, or if you even want to do that. Perhaps you love your position, or perhaps it offers benefits you didn’t mention. (Many state jobs have a retirement pension, for instance.) It’s a lot easier to get ahead financially by increasing income than by cutting back on expenses.
My husband and I are both 61 years old. We have no debt. The house, the cars, and the credit cards are all paid off. The cost of living where we are is very low. His salary is in the low six figures. I make about $50,000. Sounds great, right? The problem is I’m terrified of retiring because I worry we’ll outlive our retirement income. I hate my current job. My husband loves his, and doesn’t plan to retire before age 65, if then. Between the two of us, we have about $750,000 in our retirement funds, and he’ll have a modest pension when he retires. I’ve looked at many of the online calculators that tell you how much money you need to save to maintain your standard of living in retirement, and most of them indicate we should have about $2 million. That’s not going to happen. Right now we’re basically living off my husband’s income and saving mine. It feels selfish to want to retire early, since if I work to 65, that’s basically another $200,000 we could save. Do we have enough money to retire? Can I quit my job without too much guilt?
Indulge me while I talk about my grandparents for a minute. Grandma Ann was a working mom before the term existed. She loved her work—so much so that she was still getting up in the morning long after most of her friends had left for Florida. She thought that would be boring. She didn’t retire until she was 93. Then there was my mom’s stepdad, my Grandpa Murray. He owned a tailoring and dry-cleaning business and hated it. He and my Nana Sara were thrilled when he finally closed the business, and they began to spend winters in Florida in a shabby but inexpensive rental.
There are many people who love their jobs and would like to work as long as possible. But that’s not you, and that’s fine. We only get one life. As we get older, most of us realize how precious our time is and how much we don’t want to spend it in situations we don’t enjoy.
Why am I telling you this? Well, right now there’s a push by policy and personal-finance types to encourage people to remain in the workforce as long as possible. It’s well-intentioned—many people are at risk of landing in severe financial straits when they leave their jobs. But unless you have some expected expense you aren’t telling me about, that’s not you. You might need to make adjustments and consider financial trade-offs, but you’re doing fine. Enough with the retirement calculators!
As for retiring, there are two big questions that I can’t answer but you can. First, do you really want to leave the workforce, or do you want to leave your workplace? Could you get another job, perhaps one that pays less but leaves you happier? It’s very easy when we’re miserable at work to think we’re done with paid employment altogether, but that might not be true in your case. Don’t do something hasty you’ll regret. Plot your escape more carefully than that.
Second, what does your husband think of all this? I don’t mean that if he says you shouldn’t retire, you do what he says. But if putting your money aside for retirement is a plan the two of you agreed on, he needs to be part of the decision about how to handle finances going forward. It’s never a good idea to present a loved one with a fait accompli.