Dealing With A Financially Irresponsible Parent
Dealing With A Financially Irresponsible Parent – As parents, we all want what’s best for our children, but we also understand that they don’t always know what’s best for them.
When considering the distribution of your financial assets after your death, assessing the level of financial responsibility for your children is a critical part of making effective choices and creating solutions for a lasting legacy.
Dealing With A Financially Irresponsible Parent
There is so much to learn not only about the complexities of financial matters, but also about personal strengths and weaknesses when it comes to investing, spending and saving.
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Financial maturity is something that must be earned. This is why 77% of people who win the lottery quit or get into some form of cash gain within a few years. They don’t know how to handle their newfound wealth.
For parents who are trying to find out the best way to prepare for their children, this question of financial responsibility becomes big. While a will ostensibly ensures that your assets are distributed according to your wishes, a trust is a better option in many situations.
A trust gives you more control over how and when the estate is distributed to the child by putting a trustee, sometimes a trusted friend or relative, in charge of managing the assets. The trustee could also be a lawyer who set up the trust or a financial institution such as a bank.
Alternatively, you can provide for your children. For example, you can leave the home in trust, ensuring that your child will always have the comfort and stability to have a place to live. (To make sure your child can’t sell the house for cash, put the house in a trust that requires the proceeds from any sale to be reinvested in another house.)
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You can also designate your child’s estate to be used to pay off student loans or a mortgage. (Just make sure to check for early payment penalties.)
There is no one-size-fits-all solution when it comes to leaving money to your children. Ultimately, you need to carefully consider their needs in the context of their personality and maturity level. If you need help with this, reach out to us – we’ve helped many families navigate these troubled waters!
And remember, sometimes you may have to apply a little tough love, but they will thank you for it in the long run. WASHINGTON – How much responsibility do you have to take care of financially irresponsible parents in their old age?
This is a question I get asked quite often. I believe you respect your mother and father. But that doesn’t mean you do it at your own financial risk.
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In a recent online discussion, one reader wrote, “My mom is a financial disaster. She doesn’t like to work and struggles to keep anything but minimum wage, part-time jobs, but she likes to spend money on shoes, jewelry, restaurants, and gifts. My sisters and I warn each other when she wants money for car repairs, insurance bills, or any other emergency she can’t afford.
“As children, the facilities were closed regularly and calls from creditors were frequent,” the reader said. “She would come home with a new pair of shoes while the phone and gas were off. After our home being closed, she moved in with her mother, who allowed her to continue wearing while not working.”
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“Mom inherited a small sum when grandma died.” It wasn’t enough to retire comfortably, but certainly more money than she’d ever had access to before. We tried to talk about saving money and planning for the future, and as a result she didn’t talk to us for almost a year. I don’t know what’s left, but I know she went to very nice restaurants regularly and there’s no reason to think she would change her habits.
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To borrow from William Shakespeare’s The Merchant of Venice, the financial sins of this mother will be passed on to the children.
“She seems to think she’ll move in with one of us until we’re taken care of. I am not willing to accept it. I can’t support her. In the past I have turned inside out trying to help her. If we ask about budgets and belt-tightening, it gets bad very quickly.”
So the reader says: “How do we prepare and prepare when she inevitably runs out of money and appears on our doorstep?”
■ Forty-seven percent of workers said they had less than $25,000 in domestic savings and investments, excluding the value of their primary home plans and direct benefits.
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■ Fifty-seven percent said they weren’t sure they would have enough money to pay for long-term care if they needed it.
■ Only 41 percent of the workers surveyed said that they and/or their spouses have tried to find out what they need when they are retired.
There are many reasons why people don’t save for retirement. Regardless of why your parent is a bad money manager, it may be up to you and your siblings to pick up the financial pieces.
In the case this reader posted, I recommend hanging out with sisters only. Think of it as a pre-intervention meeting. Adult children should be clear about what they can and cannot do to help.
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If you have some sibling conflict issues to work through, try to put your arguments aside – as best you can – before meeting your parent or parents. You want your interactions with your parents to be respectful and calm. You want to stay standing.
You also want to present a unified front. This is a time for brothers and sisters to support each other. Someone may be able to cover the utility bill, which would have to be paid directly to the utility company. Someone might be willing to bring their parent(s) in if other people would help them. Explore live-in options if no one is willing to let them move in.
Once you have a plan, make an appointment. Choose a stress-free time for the discussion – meaning, don’t try to do it during the holidays. Be honest and sincere about what you have to offer. If you are an only child, there will be all the more reason for such a meeting.
If you have been helping out with money, and the reality is that you need to continue doing so, you have the right to ask about your parents’ finances. Make it a condition of your help. No budget, no information, no more rescue. That is the price your parent pays for his misdirection.
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Finally, remember that an irresponsible parent is still your parent. Budget for the help you can afford. But don’t let your financial sins be your burden. It is not yours to wear.
Black News Hour presented by The Boston Globe Hosted by black journalists at The Boston Globe, “Black News Hour,” a new radio program, delivers reliable news that connects with our community and which expands on the deeper issues that affect our city. Financial challenges rarely exist in a vacuum. They are often caused directly by – or at least in conjunction with – reckless behavior. Keep reading as I break down 25 signs of financial irresponsibility to look out for and address as soon as possible.
This behavior means spending more than you can afford. And it’s not limited to seemingly frivolous purchases like over-the-top vacations and designer clothes.
In fact, the worst manifestations of living beyond your means often involve buying more house or car than you can afford. Yes, these are the basics. However, buying them can cause incredible stress and financial hardship.
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Additionally, living beyond your means indicates deficiencies in your understanding of the purpose of money. You may be more interested in influencing others than building wealth. This leads nicely to my next point.
Why? Well, status symbols like luxury cars and fancy clothes are rarely big assets. More often than not, they quickly become depressed.
It’s not that you shouldn’t buy status symbols. Trust me, I’m the last person to make that argument because I wear a Rolex.
However, I paid cash for the watch without breaking a sweat. Her worth is becoming increasingly irrelevant to my net worth, which is growing exponentially every year. In other words, my watch is the tip of the iceberg.
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Another sure sign of financial irresponsibility is routinely racking up credit card balances that you can’t pay off in a month.
Unfortunately this is common. According to NerdWallet, the average American household has a revolving credit balance of more than $7,000. With the average credit card interest rate at 14.65%, that adds up to thousands of dollars in annual interest payments alone – just for the dubious honor of borrowing money.
These numbers can be normal. However, as is often the case in personal finance, what is normal is not healthy. It is definitely not responsible.
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