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Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: 10gallontank on October 29, 2015, 12:25:47 PM

Title: Money and Family: How do I bridge the gap in understanding?
Post by: 10gallontank on October 29, 2015, 12:25:47 PM
Hi there!

I need some mustachian advice on how to handle this situation.

I'm 24 in SoCal with no debts and a well paid job that leaves me with around 2k a month to save/invest.

My dad who is extremely generous (and stubborn) has gifted me 20k to help with a down payment on a house (or 2,3, or 4 unit). However, we both know that I would need to build up a substantial pile of money for emergencies or other costs with taking on real estate. I also intend on paying back his gift, as I see it as a loan with an unknown interest rate and undefined due date.

I have tried to explain to my dad my goal to FIRE, which means looking at a wider array of investments, including retirement accounts and stocks (and not working my whole life).  He doesn't "believe" in long-term stock investments and insists that I buy real estate (meaning that I would also need sit on my spare 2k a month for those future unknowns). From a financial standpoint, my 2k a month would be better used in a deferred compensation plan at work and index investing, rather than just sitting on it. Secondly, SoCal multi family properties don't seem to have the cash flow to justify the investment.

I want to be FI, and have cut my spending way down and killed my student loans. I want to invest for this, which makes me consider all my options.

My dad, though well intentioned, expects that I only invest in real estate. Which means he is heavily influencing how I handle the 2k a month from work. I recognize it might be pride at work, making a thoughtful discussion about money more difficult. I don't want this to snowball into something worse.

Any outside perspective?

Thanks so much!
Title: Re: Money and Family: How do I bridge the gap in understanding?
Post by: mamagoose on October 29, 2015, 12:30:07 PM
Why does it have to be a rental? Could you use the 20k for a down payment on your own house, and rent the extra rooms to help you pay off the mortgage at light speed? Owning a home without a mortgage is a big part of our FIRE plan, so maybe you and your dad could both get what you want, without you sacrificing investing to be a landlord.
Title: Re: Money and Family: How do I bridge the gap in understanding?
Post by: kendallf on October 29, 2015, 12:54:03 PM
Speaking as somebody with a 24 year old, maybe he wants you out of the house?  :-)

I kid, I kid.. although if you are living at home consider that as a factor. 

20k, although significant and generous, is probably not enough to get you to 20% for a property in SoCal.  You don't want a crappy mortgage and PMI, or maintenance expenses with no savings to cover them.  So mention that you're grateful, you're going to continue to save, and then invest as you see fit.  When you've built enough of a nest egg to consider real estate, maybe you'll want to diversify, or maybe you'll want to stick with stocks only.  Either way, you'll have a track record of saving to help you make your point.
Title: Re: Money and Family: How do I bridge the gap in understanding?
Post by: okits on October 29, 2015, 12:56:00 PM
It seems like you're letting your father overly influence your investment decisions.  If you're keeping the $20k then I get it.  But you're an adult and the $2k a month is your money.  Why can't you give back the $20k, tell him you're not ready for what he wants for it, and go your own way?  If you're not allowed to have your own opinion and invest your own money as you think best, there seems to be something wrong in your family dynamics.
Title: Re: Money and Family: How do I bridge the gap in understanding?
Post by: MayDay on October 29, 2015, 01:23:40 PM
If 20K isn't enough for a 20% DP in your area and/or you don't want to buy even if it is, tell him that.  Let him know you can't accept it at this time, but you will let him know if you plan to buy property in the future.

Then keep saving/investing your 2K a month however you want to. 

Title: Re: Money and Family: How do I bridge the gap in understanding?
Post by: RyanAtTanagra on October 29, 2015, 01:55:37 PM
It seems like you're letting your father overly influence your investment decisions.  If you're keeping the $20k then I get it.  But you're an adult and the $2k a month is your money.  Why can't you give back the $20k, tell him you're not ready for what he wants for it, and go your own way?  If you're not allowed to have your own opinion and invest your own money as you think best, there seems to be something wrong in your family dynamics.

Everything there.  That $20k is less than a years worth of savings for you.  I'm sure you like the idea of using it to jump start your savings, but if it comes with strings and expectations on what you use it for, I would give it back.  You're 24, too old to have to worry about doing what your parents want.  A check isn't worth that, imo, no matter the amount.

Edited to add: Never invest in anything you're not comfortable with, no matter who's telling you to, even if they're loaning you money to do it.
Title: Re: Money and Family: How do I bridge the gap in understanding?
Post by: 10gallontank on October 29, 2015, 01:57:22 PM
mamagoose:

I'm probably absolutely as stubborn as my dad! He owns multi family properties as investments and I was following in his footsteps. But I hadn't thought about how a sfh could be a part of my FIRE plan. I'll keep that in mind.

 kendallf:

Don't worry, that thought isn't far from my mind since most of my friends pay rent to live at home. But my parents insist that I not pay them, stay home to save, and buy properties like they have.

As for why I was gifted 20k? Well that's the minimum down payment for an FHA loan I was preapproved for. So the hard part is finding a property.

okits:

The influence definitely concerns me, but I'd be lying if I said I don't try to exert my influence in my loved ones lives. It truly does come from a place of love, but I'm learning this needs to come with boundaries. My main reason to FIRE is to spend more time with my family here and my family abroad. So having a healthy family dynamic is my number one priority. I just need to figure out how there have "the talk".
Title: Re: Money and Family: How do I bridge the gap in understanding?
Post by: Kris on October 29, 2015, 02:21:51 PM
mamagoose:

I'm probably absolutely as stubborn as my dad! He owns multi family properties as investments and I was following in his footsteps. But I hadn't thought about how a sfh could be a part of my FIRE plan. I'll keep that in mind.

 kendallf:

Don't worry, that thought isn't far from my mind since most of my friends pay rent to live at home. But my parents insist that I not pay them, stay home to save, and buy properties like they have.

As for why I was gifted 20k? Well that's the minimum down payment for an FHA loan I was preapproved for. So the hard part is finding a property.

okits:

The influence definitely concerns me, but I'd be lying if I said I don't try to exert my influence in my loved ones lives. It truly does come from a place of love, but I'm learning this needs to come with boundaries. My main reason to FIRE is to spend more time with my family here and my family abroad. So having a healthy family dynamic is my number one priority. I just need to figure out how there have "the talk".

10:

This is one of the hard parts of growing up: eventually, you have to realize that your decisions are fully your own.  And then you have to point that out to your parents.  Gently, but firmly, and showing that it is not up for discussion.

Give your father back the money. Because if you take it, you are allowing him to have a part in your decisions.  If you have not yet taken it, tell him that you won't be.  State to him that you have already explained to him what your plans are, and that your decision is made.  Then stop talking about it and change the subject.  If he tries to go back to it, smile and say no.  Then change the subject again.  Rinse and repeat until he gets it.

And then -- this is important -- stop talking to him about your finances.  Just because he is your father does not mean that he has any "right" to know about things like your salary, your investment portfolio, hiw much you are paying in rent/mortgage.  The sooner you deeply realize this, and act accordingly, the better.

Good luck!
Title: Re: Money and Family: How do I bridge the gap in understanding?
Post by: ShoulderThingThatGoesUp on October 29, 2015, 02:25:03 PM
I think you should move out. Your parents will be frustrated with you at home but not doing what they think leads to success, and you'll be frustrated with the pressure to invest some way you're not comfortable.
Title: Re: Money and Family: How do I bridge the gap in understanding?
Post by: Frankies Girl on October 29, 2015, 02:47:33 PM
It's really very simple: return the money if there are any strings attached. Tell you dad that you're grateful for his gift, but if he has any requirements to how you use said gift, then you would rather not accept it. And tell him any future cash given (and really any gift) needs to be freely given, or else you would prefer he not offer them in the first place.

Or tell him up front that you understood that the money was a gift, and you appreciate their advice of what they think you should do with it, but do what you feel is right. Once a gift is given, technically it is no longer any of the giver's business what you do with the gift.

But if it was me, I'd give the money back if they insist it has to be used the way they say.

And stop sharing details on what you do with your own earned money. Tell him it's fine, and change the subject or flat out tell him that you don't want to talk about money right now. He should not be ordering you or pushing you to share details of any part of your life you're not comfortable with sharing, let alone making you feel bad about how you spend or save your money.

Just because he distrusts investing, doesn't mean you have to be the same way.

You can't become a full fledged adult if you're still allowing your parent to direct your actions contingent on gifts/bribes/whatever. And if they get upset with you, that's on them. It sounds like your dad is not accepting your growing up, and it can cause lots of problems until you stand up for yourself and cut off the financial control he has over you. This does not have to be done rudely, just make sure to thank him for his help and concern but you need to stand or fall on your own, and this is one of the things you need to take a step back from - getting money from him that comes with strings attached.

Title: Re: Money and Family: How do I bridge the gap in understanding?
Post by: 10gallontank on October 29, 2015, 03:09:45 PM
Thank you everyone for your thoughts. It's helpful to hear ideas other than my own.
 
I freely and happily share my finances with my parents, as I learned about FIRE and killing my loans. It's hard to hide the excitement and they're proud of me too. But I didn't realize it gives them this influence over me.

Do you all think a good middle step is to teach them more about other investments? And I in turn learn more about their side with real estate? It seems too harsh a line to draw, to not talk about money at all, when the decisions behind it are driven by more significant and important values. And as I'm reading the responses, I don't think we disagree on the premise,
I think we aren't seeing eye to eye on the details of how.
Title: Re: Money and Family: How do I bridge the gap in understanding?
Post by: Kris on October 29, 2015, 04:55:15 PM
Thank you everyone for your thoughts. It's helpful to hear ideas other than my own.
 
I freely and happily share my finances with my parents, as I learned about FIRE and killing my loans. It's hard to hide the excitement and they're proud of me too. But I didn't realize it gives them this influence over me.

Do you all think a good middle step is to teach them more about other investments? And I in turn learn more about their side with real estate? It seems too harsh a line to draw, to not talk about money at all, when the decisions behind it are driven by more significant and important values. And as I'm reading the responses, I don't think we disagree on the premise,
I think we aren't seeing eye to eye on the details of how.

No. I think a good middle step is to stop involving them in your financial life.  There will always be an uneven power dynamic until you establish yourself as an independent adult.  In other words, they will keep believing they have the right to make your financial decisions for you, until you stop giving them the impression that the decisions are theirs to make.
Title: Re: Money and Family: How do I bridge the gap in understanding?
Post by: ysette9 on October 31, 2015, 08:11:50 AM
They may be too old to change at this point in life, but even if they are eventually in a place to open up and learn about investments other than real estate, it would go over much better if you talk about that from a position of experience. What I mean is, go off and start investing in index funds (or whatever) and give that a few years so you have a track record before broaching the subject with your parents. Even then though I would only do it very cautiously and in a limited way.

As a personal anecdote, I had a somewhat similar experience at a similar age. It comes from a good place because your parents want you to succeed, they want you to have what they have, and they want to give you a leg up on that. My family came up with a down payment on a condo to help me live in and rent out when I started my career. It was nice in the beginning but over time I grew and matured and realized that I wanted to be free of my family to go my own way and make my own decisions. The property that we chose no longer fit the lifestyle I wanted to live and instead of becoming this financial launching pad, it became this weight on my shoulders that I longed to get rid of. Financially speaking it is my biggest regret. It is also such an important lesson to become independent of your parents at this age.

Good luck.
Title: Re: Money and Family: How do I bridge the gap in understanding?
Post by: Malum Prohibitum on October 31, 2015, 08:53:49 AM
Thank you everyone for your thoughts. It's helpful to hear ideas other than my own.
 
I freely and happily share my finances with my parents, as I learned about FIRE and killing my loans. It's hard to hide the excitement and they're proud of me too. But I didn't realize it gives them this influence over me.

Do you all think a good middle step is to teach them more about other investments? And I in turn learn more about their side with real estate? It seems too harsh a line to draw, to not talk about money at all, when the decisions behind it are driven by more significant and important values. And as I'm reading the responses, I don't think we disagree on the premise,
I think we aren't seeing eye to eye on the details of how.

No. I think a good middle step is to stop involving them in your financial life.  There will always be an uneven power dynamic until you establish yourself as an independent adult.  In other words, they will keep believing they have the right to make your financial decisions for you, until you stop giving them the impression that the decisions are theirs to make.

He lives at home!  They are pretty involved in his financial life.  Food, shelter, etc.

Maybe it is time to spread your wings and fly out of the nest?
Title: Re: Money and Family: How do I bridge the gap in understanding?
Post by: K-ice on October 31, 2015, 10:42:58 AM
Are there cultural issues at play here with the family involvement?

Maybe an Asian, Indian or Medeterrerian family. There is nothing wrong with that, but the family dynamics and control may be hard for others to understand.

I think it is perfectly acceptable for the 20K gift to be earmarked for real estate.

Long term, do you want RE to be a part of your portfolio?
Owning property, letting the bank take the risk & having renters pay it off is a pretty good deal.
It sounds like your family can help you crunch the numbers.

Maybe you are just not ready for that step yet.

Maybe you want to travel & RE will tie you down. Your parents know this too ;)

I have been gifted money from family as well, and it was always for a specific reason.

There is almost always strings attached to family money. Examples are  tuition, cars, RE, marriage & maybe even the promise of Grandchildren.

I don't think any parent ever said "Here is 20K, sure you can spend it on horses, hookers & blow."

Not that you will, but your family sees stocks as gambling  = horses.

So for the 20K don't take (or spend) it until you are ready to buy realestate.

For your own 2K per month. Do what you want. Share your plan quarterly with your family. Invest in safe things like Vanguard etc. Show your family how your investments are balanced. Show them how dividends are like a monthly rent check. You will even loose money some months. That's kind of like that surprise pipe bursting & causing 2K damage.

Does your family have any other investments? You may be able to show them how their small stash of mutual funds could grow faster if they had lower fees.

They should be proud that you are good at saving. Every month you can say "I put away another 2K." They don't need to know exactly where you put it.

Once your stash grows, you can chose to use it towards RE when the time & property are right.

In the mean time, keep listening to your parents. They have done something right if they have 20K to spare.

Title: Re: Money and Family: How do I bridge the gap in understanding?
Post by: starguru on October 31, 2015, 01:36:32 PM
Is the 20k gift a taxable event?  I thought the max was around 14k/yr.  Might want to be careful about that.
Title: Re: Money and Family: How do I bridge the gap in understanding?
Post by: Catbert on October 31, 2015, 03:29:56 PM
Is the 20k gift a taxable event?  I thought the max was around 14k/yr.  Might want to be careful about that.

A gift is never a taxable event to the recipient - and very rarely for the giver.  His parents could each give him up to 14k a year without triggering anything.  If they went over 14K each they would need to file a form (in theory) and the excess gift would count against the 5 million they each can leave in their estate
without owing any inheritance tax.

The figures above (14K and 5 million) change upwards yearly based on inflation.  I'm to lazy to look up the exact figures for 2015. 
Title: Re: Money and Family: How do I bridge the gap in understanding?
Post by: coffeehound on November 01, 2015, 09:36:03 PM

STOP TALKING TO YOUR PARENTS ABOUT YOUR MONEY (phew, face punch completed). Y'all have a major case of unhealthy boundaries.

This is not about your parents.  You cannot change them; you cannot bridge the gap.  The only thing you can do is change your own behavior, so, if this is truly a problem for you (and I hope it is, because this thing where your parents tell you what to do with your money is fucking unhealthy), go get yourself a place to live, and get out from under them. Your future spouse will thank you.