Author Topic: My parents' financial situation  (Read 4685 times)

alexf

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My parents' financial situation
« on: December 10, 2013, 09:01:31 AM »
Hi MMM Community,

This is my first post. I'm a recent convert to frugality and the early-retirement mindset. But now I'm worried about my parents. They continue to live with debt and I don't see how they'll ever reach financial independence. As the kid it's not my place to tell them what to do, but I also don't want to see them work until they drop. So I'm curious what other MMM readers think. Their outstanding debts are:

Mortgage: $77,000 at 4%
New car: $26,000 at 1.9%
Student loan (for me): $20,000 at 5.7%

They nearly paid off the house several years ago, but they refinanced to pay for my sister's college education. They earn about $130,000/year before taxes and I think they have about $160,000 in a 401(k) that is managed by a financial planner. The house is valued at $165,000 on Zillow. My dad is 63 and my mom is 58. They both drive about 25 minutes from the suburbs to their jobs downtown. Those are all the numbers that I have.

What should they do? I think at a minimum they should sell the car and move to a smaller house. But I'd like to hear from more experienced MMMers. Any thoughts would be greatly appreciated!

SwordGuy

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Re: My parents' financial situation
« Reply #1 on: December 10, 2013, 09:55:39 AM »
At that income level, they could pay off all their debt in a few years - if they had a mind to. 

If not, then not.

If you're that worried about it, why not volunteer to pay off the student loan they took out for you?  It would be a great way to open the conversation about them paying down their debt before they retire...

And it would be the right thing to do, too.

kms

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Re: My parents' financial situation
« Reply #2 on: December 10, 2013, 10:04:32 AM »
If you're that worried about it, why not volunteer to pay off the student loan they took out for you?  It would be a great way to open the conversation about them paying down their debt before they retire...
I was about to suggest the same thing.

impaire

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Re: My parents' financial situation
« Reply #3 on: December 10, 2013, 10:05:57 AM »
Agreed, the student loan is a no-brainer, you should tackle it.

From then open the conversation to see if they are open to hear you. Their car sounds like the one really horrible choice, but I don't think we have enough details to tell you much more.

frugaldrummer

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Re: My parents' financial situation
« Reply #4 on: December 10, 2013, 10:50:35 AM »
Chances are, your parents don't want to move from their neighborhood/ friends.  Their income is high enough, they could knock that mortgage out in a couple of years if they wanted to. 

Do you think your parents would be open to a frugal lifestyle?  Or are they spendthrifts by nature?  My answer about the student loan depends on your answer.

If you think they will be amenable to a frugal approach - take over payments on the loan.

If you think they'll continue not to plan for the future - or if they insist on paying the loan themselves as a gift to you - put aside the money for the loan repayment in a separate account, and give it to them as a gift when they retire or when you feel they need it.

If they paid off their house and car loan, they could probably live ok on their social security.  Do they have any pensions?

alexf

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Re: My parents' financial situation
« Reply #5 on: December 16, 2013, 09:03:38 AM »
Thanks for the replies, everyone. It sounds like a common recommendation is that I should start by taking over the student loan and then proceed from there. I agree with this, and I certainly feel responsible for the loan since it paid for my education. I will see if I can transfer it to my name, or I could just mail a check every month for the loan amount. Then maybe I can talk with them about how best to use that spare cash every month.

It's good to hear that they could dig themselves out of this hole in a few years if they committed to it. I was feeling hopeless about their situation, but you're right. With their income they could clear their debt within five years. They just need to commit to it :)

SunshineGirl

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Re: My parents' financial situation
« Reply #6 on: December 16, 2013, 09:38:35 AM »
Alex, I wouldn't worry so much about your parents. Your post shows evidence that they raised at least one good kid. I agree you should pay that school loan off and encourage your sister to repay what it cost for her.

They might have many more assets than you know about, and they are in no means in dire straits. It doesn't seem as if they've taken on any consumer debt of high interest and they're not living paycheck to paycheck.

Another way for you to help would be to ask if you can live at home for a year and pay a third of all household expenses.

Welcome to the forums!

Argyle

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Re: My parents' financial situation
« Reply #7 on: December 16, 2013, 12:52:10 PM »
Do they also have pensions?  And they'll be eligible for considerable Social Security.

They may not be Mustachians who are going to retire early, but they strike me as being in a pretty good position.  No credit card debt, and their only non-house, non-car debt was made to pay for their kids' educations.  I wouldn't have bought a new car and taken on a car loan, but they're not really in an unaffordable situation.

Moving is a huge hassle and costs money itself, and they are not anywhere near the kind of emergency situation where they should move.

My sense is that they're fine and that you can relax and let them go forward and handle their finances themselves.

Capsu78

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dmdunca

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Re: My parents' financial situation
« Reply #9 on: December 16, 2013, 03:55:36 PM »
Unless your parents have asked your opinion or advice, I'd tread carefully.  They may well resent having their child tell them they need to sell the car or downsize...

I agree with previous posters that paying off the loan taken out for you is a very good idea.  You can tell them it's your way of expressing your appreciation.

While your parents' savings does not seem like much, considering their ages, if they will be getting pensions, they won't need as much.  Do you have any idea whether they will be pension eligible?  Have they brought up the subject of retirement?

gillstone

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Re: My parents' financial situation
« Reply #10 on: December 16, 2013, 04:52:04 PM »
I agree.  Offer to pay off the student loan debt and don't start nagging them on finances.  When you have your own stache to show and they wonder how you did it you can talk otherwise you'll just annoy or offend them.

HamhockHammock

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Re: My parents' financial situation
« Reply #11 on: December 16, 2013, 05:02:07 PM »
Don't be this guy!

http://www.theonion.com/video/man-doesnt-know-how-parents-ever-going-to-pay-off,34657/

Arghghg!!!! I wanted to post this! First thing I thought of when I read the OP. Touche, Capsu78.