I’ve watched as my own generation has struggled to make ends meet, and now my generation is incapable of instilling financial values in their offspring, as they’ve never learned to manage money themselves. Thirty percent of the people in my own inner circle, in fact, still live with their parents or their spouse’s parents. Ninety percent of these people have children to support financially or physically living with them. Now, this is my own little microcosm, but the statistics across the board show that more and more “children” in their late 20s and well into their 30s are stilling living with their parents. Many of these people may contribute to groceries or help out with chores, but they are not helping with the mortgage or utilities. Effectively, their parents are still paying the bills and may never be able to retire. How do you effectively raise children to have a strong concept of independence and financial stability when you, yourself, are living at home and receiving financial support from your aging parents?
Financially Dependent: The Hand You Hold Is The Hand That Holds You Down
Don’t get me wrong…for some people, it’s the best solution. For others, not so much…
I love my parents, but I was ready to move out when college was over. Even if I hadn’t been, my dad was willing to charge me substantial rent to ensure that I was ready to get out on my own. That’s right. If I wanted to keep my own bedroom and shack with my folks, it came with a price tag: $400/month, in fact–half of their monthly mortgage. That was back in 2002, but equated to the rent of a small apartment. It seemed like a fair request to me. I owned my own (used) vehicle, had a steady job, and was only paying for gas and my cell phone at the time. However, I’ve always been quite the money saver (or, hoarder) and never really squandered the excess. So, I also had a pretty nice padding of $6,000 in my checking account at the time, as well. That was a no-brainer for me: “See ya.” I was 22 at the time; I’m 36 years-old and I never moved back in. I thank my Dad for that. I’m so glad he wasn’t an enabler and encouraged me to fly on my own.
I used to be a little envious of the stay-at-home-for-free plan. If it is executed correctly–what a great set-up! You can stay at home (virtually, free of charge) and pay off your student loans, save for your first house (and maybe even buy it out-right in cash). Essentially, you could stay at home and end up debt-free and living in a home that you own while only paying taxes, utilities, and basic living expenses. Imagine how much you could save, then! You could hold a little back from each paycheck for “entertainment/personal” expenses and the rest could be placed safely in an interest-bearing savings account or a ROTH IRA. I have to admit, I was (in the beginning) a little envious of the possibilities. However, I’ve never (personally) known one individual to continue living with their parents and end up benefiting financially in this manner… Not one.
To these people, I’d like to scream and lecture, and tell them what they’re doing wrong. So, here it goes:
Pitfall #1: Credit card debt. Even though you’re living at home, with minimal expenses, you seem to keep buying crap you can’t afford. If you HAVE to use a credit card to pay for the item, you can’t afford it!
Pitfall #2: Car payments. If you’re living off of your parents or they are helping you in any way, you do not need large, voluntary monthly expenses. Think of what you could save back if you could keep that $200 to $400 car payment in your pocket. That’s $2,400 to $4,800 per year! Buy a solid cash car in good running condition that you can afford to have regular maintenance on–spark plugs, oil changes, etc. And, especially this: If someone has to cosign with you so you can buy your brand-new car with high payments… You can’t afford the car! If you can’t or don’t pay a rent or mortgage payment and depend on someone else financially in any way, yet have a car payment… You, my friend, have some jacked up priorities.
Pitfall #3: Pissing away funds on intangible garbage. Insist that your parents install cable TV and you’ll pay for it? Did you get a data plan with all the bells and whistles for your cell phone? Did the cell company give you an iPhone that you, essentially, pay for every month? Are you paying interest on a credit card or an item that you’ve financed? Do you end up paying overdraft fees or other bank fees every month? Do you go out to eat at lunch every day of the week or out drinking with friends regularly? At the end of the day, do you know what you have to show for these expenses? Absolutely nothing. Cable is a luxury or a wasted expense, depending on how you look at it. More and more channels of junk to distract you from the fact that you’re 34 and still living at home. Is your phone bill (for one line) $80+ a month, yet you live with a parent? I have unlimited voice, text, and data for $43.50 per line (including taxes and fees).
I’m not perfect. When I was laid off, I was concerned by my dwindling savings account. I haven’t always adhered to the rule of putting 10% of every paycheck in the bank. I’ve spent too much on Starbucks, electronics, clothes, and restaurant food at times… I think everyone falls off the wagon from time to time. However, when you do, just hop back on track: Make a spreadsheet of your monthly expenses (don’t forget prescriptions, medical copays, food, and gas) and subtract those from your net income. Consider that to be your savings goal for that month. All of it. Once you get back on track, then you can factor out some spending money again for those little luxuries you want, but don’t need. Also, when you know you will have large expenses ahead–like a big medical payment or huge holiday expenses, pay it in advance when you can. Save a little back for the surgery that you know you’re having in April. Buy your Christmas presents throughout the year–as the sales happen and you can get a deal on your purchases. I’m no expert, but I’ve paid off $15k of $17k that I left owing on my student loan. I put down 30% on my house (which keeps my mortgage payments lower than my apartment rent), and I’ve never carried a balance on a credit card or owed a car payment. And, before you ask–I’m married with only my own income and my husband, while unable to work due to medical reasons, does not collect disability. It’s not always easy, but it can be done. There’s no secret; I’m not rich. My bills are paid, though, and I can sleep at night.