Helping a friend getting BAD financial lessons from parents

[CheapScholar]

Hoping someone here can give advice as to how to talk to a friend who is getting very poor financial advice from his parents, and even getting roped into some very unethical and potentially disastrous financial moves.

So, my friend is about 40 years old. He makes good money (six figures), is married, but spends nearly every cent he earns. That is not the issue. As we know, FIRE is not for everyone, and I've given up the idea of him joining the FIRE movement and maxing out all of his tax advantaged accounts. He will work until a "traditional" retirement age like a typical consumerist sucker and hey I guess that's what most people do.

But here is the situation: His parents are teaching awful financial practices and trying to rope him into their shady ways. Backstory. His parents are still married and in their 70s. They have made basically every financial decision anyone can make and then some. Spent all their money on any shiny thing that comes their way. They take the same lame super expensive vacation every year, eat out for what seems every meal, refinanced mortgage over and over to where the still have a mortgage at their age, have tapped 401K money to pay credit card debts, and even bungled their Social Security by filing too early (the father still works and so gets taxed on SS and of course gets smaller contributions than had he just waited). The parents probably have a $0 net worth or barely positive.

OK, so you might be thinking that is pretty bad, but maybe not even that atypical in America. Well here is where it gets worse. My friend's mom was executor of the estate for her mother years ago. There was over one million dollars to be divided equally to the mom and the mom's sibling. The mom kept all of the money and pissed it away on all kinds of stupid shit. The mom was sued by her sibling and so she has a court judgment against her for a half million. The mom filed bankruptcy years ago and since then does not keep a dime in her own name. Any money they do have (that is not pissed away immediately) is in my friend's dad's name. This includes the title to their home.

So my friend's parents asked him if he would BUY their house so it would be in his name. As of now he has said no, but I am afraid they might persuade him eventually. To make things even worse, the dad moved out of the house recently and rented an apartment (which they can obviously not afford). The parents also want to "leave something behind" for my friend, so each of them took out a $250,000 life insurance policy years ago. You might think whatever. But they have my friend paying the premiums on the policies.

I'm sure most people on this forum would agree the parents are sick. They are thieves and downright sleazy. No decent person would be friends with people like this, but of course you choose your friends NOT your family. I'm worried that my friend might get suckered into their house buying idea. Again, I'm not trying to get my friend to join the FIRE movement. He knows me as a fringe FIRE person who is ultra frugal and goes to the extreme. So I am worried that any advice I give will be seen by him from the FIRE angle. Although, I think anyone with common sense would tell my friend to cut any kind of financial ties with his parents. There's even some stuff I am leaving out, like the dad committing serious insurance fraud years ago.

What can be said?!

[Dicey]

SMH.

Not your circus.

[Miss Piggy]

"Bob, if I were in your shoes, this would be a 'hell, no' for me. There is zero benefit and a LOT of risk for you. No is a complete sentence, and there is no good reason for you to risk your own financial security and your own retirement because of your parents' lifelong financial mistakes. Now, say it with me...NO."

[LaineyAZ]

It sounds like you've discussed financial goals with him before and he's rejected your suggestions, or at least is not motivated by FIRE to make changes.

Also sounds like he's still emotionally tied to his parents and isn't seeing their actions as manipulative. 

Have to agree it's going to be difficult to reverse that. 

Sometimes people can be motivated by jealousy - is he envious of your financial status and/or the early retirement lifestyle?  Or would he be open to a basic Dave Ramsey-type seminar to start to remove the blinders? 

If you've given it a fair shot and he's still determined to stay on his potentially disastrous course, I'm afraid you'll have to walk away. You are a good friend, though, for caring.

 

[Laura33]

I think all you can do is ask questions and hope that he follows down that trail to the right answer.

"Why would they want you to buy their home?  Can they not afford the mortgage any more?  Are they hoping for a bunch of cash to live on -- and if so, wouldn't that just give them something that the aunt could try to grab?  How much would it cost you to buy given that they apparently still have a mortgage on it?  Is the house worth that much?  What would your mortgage be?  Who is going to cover the ongoing property taxes, utilities, insurance, etc. -- you?  Would they pay you rent?  Would they pay the utilities and such?  Can you afford that?" 

And the way you communicate effectively without being dismissed as some crazy tightwad is to frame up your concerns around the things that are important to him, not you.  E.g., "I know that you've worked hard to be able to afford a really nice lifestyle [vacations/eating out/hobbies/whatever it is], and that is important to you and makes you happy.  I'd really hate to see you get sucked into a situation where you can't afford to do any of that any more."  Or "gee, that sounds like it would be expensive to own a whole second house -- would you still be able to [take X vacation" if you took that on for them?"  Etc.

People are always more persuaded when they feel like they have reached the conclusion themselves, rather than having it thrust upon them.

[Dave1442397]

If he's not likely to take advice from you, tell him that if you were in his position you would consult an estate lawyer. Pay for an appointment to get the pros and cons of buying the house from someone who knows what they're talking about, and then decide what to do.

I know I wouldn't want my name attached to their accounts in any way, and paying for their life insurance policies is nuts.

[clarkfan1979]

Hoping someone here can give advice as to how to talk to a friend who is getting very poor financial advice from his parents, and even getting roped into some very unethical and potentially disastrous financial moves.

So, my friend is about 40 years old. He makes good money (six figures), is married, but spends nearly every cent he earns. That is not the issue. As we know, FIRE is not for everyone, and I've given up the idea of him joining the FIRE movement and maxing out all of his tax advantaged accounts. He will work until a "traditional" retirement age like a typical consumerist sucker and hey I guess that's what most people do.

But here is the situation: His parents are teaching awful financial practices and trying to rope him into their shady ways. Backstory. His parents are still married and in their 70s. They have made basically every financial decision anyone can make and then some. Spent all their money on any shiny thing that comes their way. They take the same lame super expensive vacation every year, eat out for what seems every meal, refinanced mortgage over and over to where the still have a mortgage at their age, have tapped 401K money to pay credit card debts, and even bungled their Social Security by filing too early (the father still works and so gets taxed on SS and of course gets smaller contributions than had he just waited). The parents probably have a $0 net worth or barely positive.

OK, so you might be thinking that is pretty bad, but maybe not even that atypical in America. Well here is where it gets worse. My friend's mom was executor of the estate for her mother years ago. There was over one million dollars to be divided equally to the mom and the mom's sibling. The mom kept all of the money and pissed it away on all kinds of stupid shit. The mom was sued by her sibling and so she has a court judgment against her for a half million. The mom filed bankruptcy years ago and since then does not keep a dime in her own name. Any money they do have (that is not pissed away immediately) is in my friend's dad's name. This includes the title to their home.

So my friend's parents asked him if he would BUY their house so it would be in his name. As of now he has said no, but I am afraid they might persuade him eventually. To make things even worse, the dad moved out of the house recently and rented an apartment (which they can obviously not afford). The parents also want to "leave something behind" for my friend, so each of them took out a $250,000 life insurance policy years ago. You might think whatever. But they have my friend paying the premiums on the policies.

I'm sure most people on this forum would agree the parents are sick. They are thieves and downright sleazy. No decent person would be friends with people like this, but of course you choose your friends NOT your family. I'm worried that my friend might get suckered into their house buying idea. Again, I'm not trying to get my friend to join the FIRE movement. He knows me as a fringe FIRE person who is ultra frugal and goes to the extreme. So I am worried that any advice I give will be seen by him from the FIRE angle. Although, I think anyone with common sense would tell my friend to cut any kind of financial ties with his parents. There's even some stuff I am leaving out, like the dad committing serious insurance fraud years ago.

What can be said?!

Based on the content, it doesn't seem to be bad financial advice. The parents are just being manipulative with an adult child.

I got bad financial advice from one set of parents from birth to age 32. My parents are divorced and both re-married. I finally stopped listening when I realized they were broke at age 32. I ended up getting a job closer to them and spending more time with them. I immediately noticed how much they complained about not having enough money and fighting about it constantly. They are now 75 years old, instead of 62 years old. They are still bad with money but complain about it less. They slowed down and do much less activities, so I think their lifestyle is cheaper.

I'm very glad that I stopped listening to them. Looking back on the last 13 years, we went on two completely different financial paths.

[Louise]

Does your friend have children? If so, owning an extra property could affect college financial aid down the road. That might be enough of a deterrent if he is under pressure from parents.

[Metalcat]

Back when I was working in a financial advice capacity, I can't tell you how many times I had to say "I don't care what your dad says."

I've spent many, many years of my life trying to pull people out of the clutches of their parents' nonsense. It's not an easy task, and that's people who pay me for my advice.

This person isn't paying you for advice, they're not even asking you for advice.

Remember, there's tons in your life that you do that tons of other adults think is foolish. This is universal, we all have different priorities that seem irrational to others.

This person, an adult in their 40s, cares more about pleasing their parents than getting well-informed financial advice. There's a reason for that. It may not be a healthy reason, but the average adult out there isn't terribly healthy, so that's no surprise.

But they do have very clear internal reasons to over value their parents advice/opinions, and you aren't likely to override a lifetime of internal logic about their parents by imposing a bit of your own internal logic on them.

These are the people who programmed this 40 year old to think and behave this way. His behaviour is absolutely, entirely consistent with the internal reasoning system he's always had because of them. He's going to take them more seriously than the person he didn't ask for help.

His internal logic is very, very different from yours, so you can't just assume that if you explain your reasoning that it will make sense within his logic. You have to first respect that listening to his parents actually makes logical sense to him.

Literally all you can do is try to understand him. If you get to a point of truly grasping why listening to them sounds like a good idea to him, you may find opportunities within his logical framework to insert questions and ideas that could give him insight into how you understand the situation, and he might feel understood enough to actually want to listen to you and may seek your input.

But people know when they're talking to someone who doesn't understand or respect their reasoning, and they just tune you out.

So either take the time and energy to more deeply understand this person and why they would make decisions so different from those you would make, or just leave an autonomous adult alone to make his own autonomous decisions that make sense according to his own internal logic, even though you would make different decisions for yourself.

[AccidentialMustache]

This is for sure a lawyer situation. Is that 500k dischargable in bankruptcy? If not, life insurance on the mother may go to satisfy that debt before it goes to the kid. If dad dies, mom is going to inherit everything, or if not there's going to be more court battles over playing games to avoid the 500k debt.

[sonofsven]

"What can be said?!"
The truth? Can you lay it out like you did here, only slightly less insulting to the parents?
Are you concerned it would harm your friendship to tell the truth?
If so, then maybe just stay out of it.

You could try sending your friend some choice Caleb Hammer "Financial Audit" videos, (try to find some with some relevancy). Maybe your friend can see the crazy easier in someone else's situation and apply it to themselves. Maybe this would push them to be more financially savvy in general.

If you're unaware, the Financial Audit Youtube videos are a train wreck of horrible financial decisions and justifications. Dave Ramsey also has some pretty horrific scenarios on his YT channel. In fact, Dave Ramsey's aggressive style might be just what your friend needs to hear.

[roomtempmayo]

I don't know if your friend still has any relationship with his aunt (the one his mom owes $500k), but colluding with his parents to try and cut her out of any hypothetical estate would clearly be the end of family ties.

Even if the money doesn't matter to your friend, maybe family relationships do.