Every time I type the word oversave into Microsoft Word, the ugly red line appears to let me know the word doesn’t exist. But when I type overspend, no red line appears. As a society, we recognize and frequently discuss the dangers of overspending, and yet oversaving is hardly ever mentioned. In a search of Google, overspend has 1,760,000 results, while oversave only has 374,000. Why is that?
I was recently discussing this topic with a group of financial planners. The consensus among these highly skilled and respected advisors is that oversaving isn’t a big deal. “So what? They get to retire earlier than expected” was the general opinion of the group.
I believe that oversaving is just as destructive financially as overspending, and is something that we must address. Read more..
The number of parents and grandparents co-signing student loans is on the rise. As college costs rise, students may be forced to take out student loans in order to afford their degree. Banks and credit unions that issue private student loans typically require a co-signer before they will give a student money, and even some government student loans require a co-signer. Here are some things to consider before you agree to co-sign a student loan.
What does co-signing mean?
Many people have no idea what co-signing a loan actually means. They simply sign their name on the dotted line, and assume the student will eventually repay the loan. Co-signing means you are an equal borrower, meaning it is as if you are personally taking out the loan. You are guaranteeing that the loan will be paid.
If your child/grandchild can’t, or doesn’t, make the payments on their student loans, it is your responsibility to pay them off. That ‘s right… you are on the hook for 100% of the loan principal and accrued interest. Even though you didn’t receive or spend the money, you are responsible for paying it back. Read more..
We have been hearing alot about the Boomer generation, Gen X, and Gen Y, but I think we will begin to hear more about the Sandwich Generation over time. While the Boomers, Gen X, and Gen Y are classified based on their age, The Sandwich Generation is a life stage that can encompass a very wide range of ages. The term Sandwich refers to being stuck between aging parents and financial dependent children. It represents one of the most financially difficult times that we will experience in our lifetime.
Our aging parents were told many years ago that they would be taken care of financially. Combine increasing longevity with much higher than expected health care costs, and you are left with an entire generation that can’t afford their lifestyle, no matter how meager. Watching their parents suffer in poverty is simply not an option for most adults, and therefore they contribute to their parents care. Responsibility for expenses such as assisted living facilities, medicare supplement insurance, and even basics such as groceries, have fallen to their children.
Parents have always been responsible for the expenses of raising children, but I’m not sure that many could foresee the level of financial responsibility they would endure. College costs are rapidly rising, and a huge percentage of college graduates are moving back in with their parents. It was only a few years ago that once kids were out of college, they were financially self-sufficient. Now, parents may continue to be responsible for their children, and many are assuming financial responsibility for their grandchildren as well.
The Effect Is No Retirement Savings:
Parents that planned to save for retirement after their kids were out of college have found themselves unable to put extra money away. Combine the financial responsibility of taking care of parents and children, and many are left taking on debt and/or decreasing their lifestyle.
What Can You Do?
The thought of moving mom into a government funded facility, or telling your unemployed college graduate that they can’t move home, is just not going to happen. There are some steps you can take however to protect your own financial future.
1. Continue saving for your own retirement
Have a plan in place so that you can retire comfortably. Continue saving into your 401(k), or other retirement plan, and do not even consider stopping.
2. Make a spending plan
After you know what you need to be saving for retirement, make a spending plan so you know how to divide up the remaining money. Earmark a certain amount for your parents, and another amount for your kids. Although you may have a difficult time communicating with your aging parents about how much you can contribute, you can certainly tell your kids what they can expect.
3. Put EVERYTHING in writing
If your child moves home and agrees to pay rent, draw up a lease and have them sign it. If they are expected to buy their own groceries, write it down and have them sign it as well. The benefit of putting everything on paper is it ensures everyone is on the same page about expectations. If you just assume they will pay rent but never discuss it, it isn’t exactly fair to be upset when they don’t!
4. Learn to say “No”
Saying no to your parents and/or kids is incredibly hard. But once the basic necessities are paid for, you have to be willing to say no to additional expenses. Parent wants to go shopping for some new clothes? Kids want to skip paying rent so they can take a spring break vacation? Tell them no… I bet they won’t be nearly as offended as you think. It may be a “this is going to hurt me more than it hurts you” type of situation.
In the end, if you don’t find a way to take care of your own financial future, you will end up being a financial burden on your children. If you aren’t too thrilled with the difficult position you are in with your aging parents, do your best not to do the same thing to your kids. The greatest gift a parent can give their child may be to remain financially independent.
Are you in the sandwich generation? How are you handling the limited money and seemingly unlimited expenses? Would love for you to share how you are managing!