Financially Irresponsible Parents

[Danoff]

So, I've started a few threads about finances in the past, and some of you may be aware that I have financially irresponsible relatives. Well, the deal is that it's my parents who are the worst off. They make quite a bit of money, but they spend it all and more. My father feels entitled to spend because he makes a good living (juts not good enough to spend like he does). My mom then feels entitled to spend because my father does.

They don't communicate well and can't seem to manage any self-restraint. The result? Financial destitution. We're talking about serious debt here, for people who are quickly approaching an age where they'll have to retire.

My parents have hit up their parents for money (both sides), and have taken money from their children (joint checking accounts can hurt). My wife and I make a decent living, and I know eventually my folks are going to be knocking at the door with their hands out.

The question is, how do I handle this? What's the most financially responsible way to deal with out-of-control parents? This article:

http://moneycentral.msn.com/content/CollegeandFamily/Caringforparents/P106450.asp

At least lets me know that I'm not alone. But it doesn't give any tips.

I can't tell them how to spend their money right now, because they won't listen to me (and it would be insulting). But when they're out of money, I don't want to pick up the check because they refused to help themselve when they could.

I guess the biggest question is whether I should try to steer them in the right direction right now - while some good can be done. I'm inclined to say no because every attempt that I've made at discussing finances has been a complete dissaster. On the otherhand, how do I tell my folks to take a hike when they come to me asking for 5k to just get them over the hump "this month"?

I do have something of a plan, but I'd love to hear advice or if you're in a similar position.

 

[F1GTR]

This may sound silly, but how about giving them a monthly allowance?

 

[Omnis]

That's ridiculous, Dunc. They need to learn some self-control. Tell them to stop spending so much, especially because they don't need to provide for you anymore. People should only go into debt because of the cost of living, not the cost of spending.

If you must, try introducing them to some hardcore buddhism/asceticism. Haha.

 

[Danoff]

This may sound silly, but how about giving them a monthly allowance?

That's probably not a bad idea for the end of the line (after they've declared bankruptcy and are completely drained). But the beginning of this whole dissaster is going to be them asking for a one-time loan/gift to cover some sort of emergency, after which they'll claim everything will work out.

 

[Danoff]

That's ridiculous, Dunc. They need to learn some self-control. Tell them to stop spending so much, especially because they don't need to provide for you anymore. People should only go into debt because of the cost of living, not the cost of spending.

That'll be pretty tough on the family and isn't likely to have any real impact. In fact, it might actually encourage spending as my Dad's most likely reaction will be "I can afford it, look at THIS!" as he buys something really extravagant.

My big concern is that they simply do not look ahead a few years to retirement, and they'll be wiped out completely in short order.

 

[Zrow]

I'd at least let them know up front that it's there responsibility to get their finances in order as much as they can still salvage, or you're not going to be their to bail them out.

 

[Danoff]

I'd at least let them know up front that it's there responsibility to get their finances in order as much as they can still salvage, or you're not going to be their to bail them out.

They don't have the foggiest idea how to get their finances in order. If they did, they might be doing it now (apart from the whole lack of self-control issue). I really don't feel that it's my place to say anything until they come begging (which seems to be rapidly approaching). Once that happens I've decided that I'll attempt a complete financial takeover.

I've already told my sister to direct them to me when they come begging. I don't want them dragging her down.

I've given them lots of advice. Things like "sell the boat". "Get more economic vehicles". "Stop paying for storage". "Pay off your credit cards". "Invest in mutual funds" (rather than uninformed speculation on the market).

None of it gets listened to.

 

[DQuaN]

That's ridiculous, Dunc. They need to learn some self-control.

Eh?.... Wha?.... Eh?..... Me?....


Is danoff's name Dunc?

 

[xcsti]

You HAVE to say something now so that if you decide, when they come begging, that you can't help them, you can tell them you already tried to help.

 

[Pako]

It's tough to just sit and watch. Other than suggesting professional financial services to help them budget debt load and to help them come up with a solid retirement plan (although it sounds like they might be too late for that). You can do what you can do, but you also have to be careful not to enable bad habits and maintain your responsibility to your own family. Helping them is more than just giving them money. It may seem like a fix for them, but that won't solve anything. At the end of the day, we all have to be accountable for our own actions.

I have a brother that makes great money! He doesn't have a pot to piss in. He makes 150% more than I do and has living expenses that are 67% lower than mine yet the state almost foreclosed on his house because of defaulting on payments. This makes absolutely no sense to me and have offered my advise. I even offered to manage their money for them. Maintain an entire budget complete financial statements at the end of each month. I offered to do this until their finances got put back in order then I would teach them how to maintain the working budget. This has not materialized yet, but it could be an alternative for you as well.....although parents often have too much pride to take help from their kids. Every situations unique.

Good luck!

 

[Keef]

Dunc, he knew your answer would be wacked out and influenced by alcohol, he was just preparing ahead of time. Better now than later, right?
Anyway, I would be stern. It's hard to do with your parents, but you're what, 25, 30? Maybe you should take control and pay some stuff behind their backs. You know, call the cable company and tell them to downgrade your parents from digital. get rid of the T1, DSL is good enough. They sound like packrats, too, if they have to store stuff. How the hell did they get you through college? Or was that part of their spending problem? Maybe you could scare them into stopping by saying you won't offer them any support and your siblings won't, either. You could send them to a money counselor type person, but go with them, so they'll actually go.

 

[Danoff]

Anyway, I would be stern. It's hard to do with your parents, but you're what, 25, 30?

25

Maybe you should take control and pay some stuff behind their backs. You know, call the cable company and tell them to downgrade your parents from digital. get rid of the T1, DSL is good enough.

The internet connection over there is a problem. But I can't simply get the provider to downgrade them. It's their service, I can't really tamper with it, the company won't let me.

They sound like packrats, too, if they have to store stuff. How the hell did they get you through college?

I got myself through college. They took money from me while I was putting myself through college because they had access to my checking account.

Maybe you could scare them into stopping by saying you won't offer them any support and your siblings won't, either.

They'll know it's a lie. Plus, they don't think they'll need support right now. If they understood the kind of financial hardship they were in for, they probably wouldn't be so irresponsible right now.

You could send them to a money counselor type person, but go with them, so they'll actually go.

I'd be less concerned about them not going as I would be about them simply not taking the advice.

I offered to do this until their finances got put back in order then I would teach them how to maintain the working budget. This has not materialized yet, but it could be an alternative for you as well.....although parents often have too much pride to take help from their kids. Every situations unique.

Yea, this is the plan when they come begging. I'll tell them that the price of any financial assistance is to allow me complete access to all fincances and I will personally gut their possessions. This should keep them away from my door for a few years. They'll probably go bother my sister (which is why I've already prepped her). But eventually they'll be desperate enough to let me in to their books. And I'll make them make some tough choices (possibly file for bankruptcy).

I just wonder if there isn't something I can do ahead of time to prevent this. But I can't figure what it would be.

 

[skip0110]

I got myself through college. They took money from me while I was putting myself through college because they had access to my checking account.

They don't feel bad for putting you through that hardship?

Seems like it may be hard to get through to them....perhaps you could remind them that they were taking your money...

No matter how you address it I don't think it will be, er, "all smiling faces".

 

[Danoff]

They don't feel bad for putting you through that hardship?

Seems like it may be hard to get through to them....perhaps you could remind them that they were taking your money...

My father doesn't know. My mom lied to him and told him that they were helping me with college tuition. Meanwhile she used the cash she told my dad they were spending on me to offload some of the credit card debt she didn't want him to know about. Then she had the audacity to tell me that they helped me with college tuition... like I can't see the totals of the loans in my name. My mom thinks she didn't take anything from me because she gave me some of the money back (and acted like it was from her). She just didn't keep track of the cash like I did.

My folks may sound like trailer trash after a discussion like this, but combined they make over $150k/year. It's just that they spend even more .

 

[Pako]

*snip*

My folks may sound like trailer trash after a discussion like this, but combined they make over $150k/year.

I think I'm getting sick....

The more you got, the more you gotta get rid of, eh?

 

[skip0110]

My folks may sound like trailer trash after a discussion like this, but combined they make over $150k/year. It's just that they spend even more .

Well, sorry, I don't have much advice but a similar thing happened to my inlaws (aunt's parents) and the aunt and uncle were living with us for a while (I was much younger then, don't remember much). I don't know the details, but the bank eneded up foreclosing their house and they were living out of a car for a while. So at least you know you're not alone....

 

[Duke]

Dan, I'm fairly amazed that you've overcome the upbringing you must have had. Excellent work.

I don't really know how to tell you to approach your parents. I can't even stop my crazy mother from getting a dog she can't possible care for.

But one thing I will suggest is that you keep most of your own money tied up in various 6-month CDs with staggered maturity dates. That way when they come calling, you can tell them that the money is invested and you can't afford the early-withdrawal penalties to get at it.

 

[Max_DC]

Take your parents to a place where they can't run away, for example you could drive to a restaurant or you go with them on a walk in nature on a nice sunday. Just make sure to use your car and get some distance.
And then just tell them your worries and ensure that they listen to you. Force them to that discussion.
Mind though that I wouldn't recommend that way if your dad for example has issues with his heart or so... in that case you should talk to them seperatly, again maybe in a restaurant ( that might prevent an escalation ).
Last thing ... welll... try to stay as calm/cool as possible and avoid emotionalizing the situation, keep to rational arguments instead.

That's how I would do it.

 

[Touring Mars]

I can't tell them how to spend their money right now, because they won't listen to me (and it would be insulting). But when they're out of money, I don't want to pick up the check because they refused to help themselve when they could.

I guess the biggest question is whether I should try to steer them in the right direction right now - while some good can be done. I'm inclined to say no because every attempt that I've made at discussing finances has been a complete dissaster. On the otherhand, how do I tell my folks to take a hike when they come to me asking for 5k to just get them over the hump "this month"?

Tough situation, and credit/respect for the fact that you haven't turned out the same way as your parents... it sounds like you've tried hard to show them the folly of their behaviour.

The best thing you can do is to keep your house in order and protect it at all costs... this doesn't mean that you need to turn your back on your parent's predicament completely, but they cannot be left in any doubt that your investments and savings are not a part of their resources that they may avail themselves of...

First and foremost, you (and your wife) have your own life to live together, and you can't feel guilty about trying to do whatever is necessary to protect that - and if that means refusing to bail out your broke parents, them so be it. I don't see that it would be 'insulting' at all to try to help your parents out by offering advice on their spending (esp. if they don't take it on board anyway!)... maybe you should tell them that unless they agree to seek help (and demonstrate it in a tangible way) that you simply won't bail them out... the fact that you may be able to afford to bail them out doesn't mean that you should... what happens when they've wasted all your cash too? I think you should stick to your guns and try to get them sorted out now before it gets even worse... how do you tell them to take a hike when they come asking for the money? That might be harder, but you're perfectly justified in saying that you must look after yourself and your wife first, otherwise you will ultimately be left in a position where you can't help, even if you wanted to...

 

[Danoff]

Ok here’s the plan for dealing with my parents. I’d say they have about 5-7 years before they’re financially in trouble. When they come begging it’ll be for $2-5k to tide them over through some bills or some sort of immediate financial emergency. I plan to tell them that I won’t help them until they open their checkbooks and let me make some serious changes.

They’ll probably be insulted (depending on how desperate their financial need is) and go away. That might save me a year or two, but eventually they’ll be desperate enough to let me control their finances.

Once they do that I’ll put them on a monthly budget for spending. I’ll get rid of their excessive monthly expenses – which is what’s really holding them down. I’ll make them liquidate their boat (pun!), though I may have to sink (pun!) my own money into it for repairs before they can do that… oh oh! I’ll take it back out of the sale price, perfect!

Ok let me see, they'll save $25-50/month when they get rid of their storage, $200/month in boat insurance, probably another.. I don’t know $100/month in the docking fees for the boat. Plus, since I’ll make them use the boat money to pay off ~$15k in credit card debt (which probably accrues at 18%) it saves 18% of $15k which is $2700/year. There should be a little left from the boat sale to eliminate another loan… maybe a car loan (or two). So that should save another 5% on 20k, which is $1000/year.

So let’s see, that brings to total to ~8k/year in (post-tax) savings – which may not be enough.

But those are examples of the kinds of games I’ll play (assuming they have things left at that point for me to sell off and consolidate). If it gets bad enough, I’ll make them sell their house and move. My role in this will be to put in money to make repairs, and then take it back out after the house/boat/whatever has been sold. They’ll love that, because they don’t have bridge money like that lying around to get things in good enough shape to sell (which is why they’ll end up in a financial emergency in the first place).

All of this may or may not be enough to put them in a position to get out of their debt (if not, it's time for them to file for bankruptcy). But it isn’t enough to get them through retirement. It doesn’t matter how much I save them if they don’t have any income.

That’s why I need to take drastic measures.

Money that I give them is gone. They’ll spend it, and I’ll never see it back. When they die, if there is anything left over, taxes will ensure that I get nothing. Plus, I can only gift them so much before I’m taxed on the gift. So to protect my investment, I need to maintain as much control over the money I give them as possible. That’s why the master plan is to purchase a house for them when they’re destitute in retirement. I’ll retain ownership of the house, so whey they die, I get to keep my investment (plus it might actually go up in value). Now, I haven’t even bought a house for myself yet, but by the time they need this level of help I’ll be in a much better position.
Purchasing a house for them is perfect because the only money I’d lose on it is property tax (which I’d make sure was low by putting my folks in the middle of nowhere – they’d like that anyway), and tax on a loan if I needed to take one to get their house (but that’s tax deductible) - though I don’t know if you accrue special tax penalties when you have multiple houses.

So if everything went perfectly I’d have lost very little on them. A lot of it depends on the shape they’re in when they finally can’t make their monthly payments.

The only thing my plan lacks is pro-activeness. Every time I’ve made suggestions to them, they give me the same reasoning – not enough bridge money. They pretend that they’re stuck in their debt situation, but the real reason is that they aren’t frugal enough to save enough bridge money to make these things happen.

Ok, anyone see problems with my scenario? Other ways I can minimize the damage here?

 

[Pako]

It sounds like your on the right track!

 

[Sage]

Maybe you could buy new parents?

 

[Danoff]

Maybe you could buy new parents?

Now that would be a good investment.

 

[TB]

My wife and I fell like we will be in a similar situation with her parents in the near future. Her dad owned his own business. Things were doing all right, I guess (this was before I came into the picture). Then the business started to tank. They did the right thing and sold the shop. The business got moved into their garage for a while, then they built a new building for the business. Guess what? That building eventually got sold. In the same time frame, they had declared bankruptcy twice in 5 years.

They used to live 2 hours away from us. Far enough to have to plan a trip, but far enough to not do it that often. Now they are less than 5 minutes away. He is working for someone now, and I'd imagine he's doing well enough. Then I found out recently that they are going to use the money from selling their old house to go on a trip to Europe. They know how we feel about their lack of common sense when it comes to money, so they didn't tell us about the Europe trip. Too bad my sister-in-law slipped up and told us. We asked her mom about it and she got all defensive.

Is it wrong that I enjoy making them uncomfortable?

They were living with us for a while, also. We told them they could stay for 2 weeks, until they found an apartment. Six weeks later, they were still there. When I finally put my foot down and told them they had one more week and then they were out, they said "Well, I guess we could go buy a tent." My reply was "They have some nice ones at Sears." Petty, I know, but I really didn't care.

We know eventually they'll end up at our door, but unfortunately for them, I'm no longer interested in helping them out. My wife is getting more and more upset at them, also.

It's a wonder she turned out as good as she did. She put herself through college (a few times) and now makes a fair amount per year. We live in a 3 year old house we had built and we're driving a 2005 Pilot. How? We don't go on $6000 trips we cant afford.

 

[Danoff]

In the same time frame, they had declared bankruptcy twice in 5 years.

Ouch.

They know how we feel about their lack of common sense when it comes to money, so they didn't tell us about the Europe trip. Too bad my sister-in-law slipped up and told us. We asked her mom about it and she got all defensive.

My folks have done that too. They don't like to tell me about some of their expenses. But they don't understand all of their mistakes enough to even know when to hide it. So I find out about a lot of it. They still don't feel the need to hide $200 here and there.

Is it wrong that I enjoy making them uncomfortable?

Not at all, especially when you're footing the bill for their decisions.

We know eventually they'll end up at our door, but unfortunately for them, I'm no longer interested in helping them out. My wife is getting more and more upset at them, also.

So what are you going to do? Eventually it sounds like they'll have nothing. I guess you really don't have to do anything. They can probably afford a broken down trailer home on their social security checks. But eventually they're going to start accruing medial expenses that they can't pay. Any ideas on what happens then? (I don't know how to handle this one either)

 

[Omnis]

Eh?.... Wha?.... Eh?..... Me?....


Is danoff's name Dunc?

Hahahah, I'm so sorry. I must've been looking at one of your posts before getting back to writing my post for danoff. I always browse gtp multi-tabbed. I like how everyone's calling him Dunc now as well.

 

[TB]

So what are you going to do?)

My wife has 5 brothers and sisters (as do I) but she is the most financially stable of them all. One for sure has mental problems, and we're pretty sure a few others do also, to a lesser degree. Since we are the best off, we probaly should help them out and when the time comes I more than likely will. Right now, though, I'm not the least bit interested in helping out someone who won't help themselves.

That's why I let them stay at our house. I figured in the long run, it would be well worth it. I know it helped them out, unfortunately I don't think they learned anything from it. I forgot to mention before that when I told them they had to go, they found an apartment in 2 days. Amazing, huh?

I guess all in all, I know we'll help them out, but my wife and I have agreed it will not be financially. If it does come to that, I'll take over their accounts before I just start handing out cash.

I also forgot to mention that before we were married, her dad took out a credit card in my wifes name because he couldn't get one. When we went to buy our first house, it showed up on our credit report and she was pissed. At that point, we had been married for 6 months. We had him take care of taking it off our report, but I really havn't forgiven him for that.

 

[FoolKiller]

Your parents are leading an addictive lifestyle and acting in the same manner as an addict. Consider the same type of action for them as you would for a drug addict or alcoholic that was destroying their own life. Perhaps you and your sister (I am assuming she isn't making the same mistakes) could lead an intervention-style session. If their two children and all their closest friends and family have them there and are telling them the same thing they can't deny it forever. It will sink in on some level when everyone they are close to are telling them the same thing.

If you think it is too soon for something that hardcore do small things like giving them financial planning books at birthdays and Christmas.

Whatever path of action you take do not give them any money. You wouldn't do it if you knew they were doing drugs, treat this the same way. It is tough love and it must be done in situations like this.

If they have yet to ask you for money it means they are getting it from someone else. Get them to stop. Work to make sure everyone cuts them off now and then use your plan of helping them by running their finances if you have to. If you can stop others from giving them money you will decrease the time between now and when they have to let you take over their finances. That means they will have more time between then and retirement so that they might be able to pay for their own house and live on their own retirement savings.