You know there are smart purchases and downright dumb ones. You have dreams, goals, and plans to hit FI. You wouldn’t be caught dead over-spending due to failed planning or impulse buying that fancy widget you just saw on TV. No, you are smart with your money.
I bet you know a few who aren’t.
I’m about to jump on my soap box and look at the stupidity that some exert over their finances. Why? To acknowledge everyone out there that is sacrificing their desires and continuing to pursue their goals no matter how hard life gets or how much they want that shiny new toy. After all, dreams of financial security and climbing the financial freedom ladder aren’t easy. Let this be a reminder and a checklist of “what not to do” when seeking FI.
At least once per month over the last few years, I’ve received a disturbing text from my sister about her latest drama or latest financial mishap. From my vantage she always seems one step away from financial ruin. I had suspicions of financial chaos for years, but my involvement didn’t really start until the day her husband tragically passed away.
The phone call came one early afternoon. I could hear the sobbing, could feel the heartache. He was gone.
Things progressed quickly. Funeral plans, sorting out financial obligations, family notifications, and trying to console the kids their father was gone. The evidence mounted quickly that one income was going to be a stretch to maintain their lifestyle. A small amount of life insurance, a dependent father-in-law, large mortgage, two kids and 3 pets would be too much for anyone to handle, let alone a newly minted widow.
I knew I needed to jump in and help my sis as much as possible, and she was open to it (getting involved with finances prior to this point had not been requested, although I wish she had asked). This involved understanding the spectrum of her assets and liabilities, arranging for bills to be paid, assisting with getting a variety of paperwork filled out, and researching her options for the future.
Anyone who has untangled the finances of a loved one knows how stressful it can be. And then, to have to tell your sibling that money will be an issue after a death is an additional, complicating burden. Problems were uncovered, some that were too late to fix. One example is a $40K loan she had made from her 401K to upgrade her patio. It was not paid back in time and would subsequently be taxed as an early withdrawal (with penalty).
Looking forward, a reasonable budget was put together that would allow the house to be kept (for now) and everyone in the family would be financially secure, including the kids, father-in-law, and multiple pets, on just one income.
The “easy” decisions started off with selling a pair of Mercedes that were purchased on credit and downgrading to one gently used Toyota. It involved paying off high interest, joint credit card debt with life insurance proceeds, refinancing the mortgage, and mindfully allocating funds for groceries, restaurants, and travel.
Most everything else could stay the same. The only caveat being that over the next 5-7 years, a further downsizing or a promotion would be needed to keep the finances in the black. There was plenty of time to make sure it happened.
The plan was in place and agreed to. I naively congratulated myself on providing a clear path for success (without deprivation), and life slowly settled back into a semblance of normal. That is, until the texts and Facebook updates started coming a couple months in.
It started out innocently enough. Tickets to concerts with the kids (it’s great to take your mind off the hurt and pain of a missing a loved one.)
|“Front row tickets at Katy Perry concert tonight with the kids! CELEBRATE”|
|“Headed on vaca! The kids need a break from school, we’re at DISNEY!”|
Then the impulse buying started (or perhaps, never really stopped). Old habits are tough to break.
|“Just bought a Mercedes, check this baby out!”|
Sigh. Guess that Rav 4 just wasn’t going to cut it.
|“New dress and getting my hair done tonight for the partttttay!”|
|“Just got a new puppy today, Jax, Spot and Rusty needed a new companion and I need a pet to call my own!”|
|“Vegas baby Vegas!!”|
Ok, you’re right. Vacations and puppies are not the worst thing in the world. They can really boost your emotional state. At the same time, we can’t ignore the average lifetime cost of owning a dog is $27K to $43K, depending on the breed. I won’t tell you how much I can make compounding that money over time in a diversified index fund, because that would make me sound heartless, right?
What followed next was a string of vacations, unexpected house repairs and general overall chaos. To this day, I believe that chaos just follows some people.
|“My youngest drove into the house today…she hit the gas instead of the brakes, car’s totaled, house repairs off the charts.”|
|“Came home found ALL the lights and the back door WIDE open with the air cond set to 67…I had it set at 73. Electric bill will be off the charts”|
|“Last minute trip to San Fran, fun times ahead. Woot woot!”|
|“Had a new furnace installed they FORGOT the pan underneath so water ran all down from second floor to basement…soaking hardwood floors, everything destroyed.”|
|“Back in Vegas this weekend!! WAHOO.”|
|“Computer software issue with the car because I didn’t get it updated, fuel pressure gone, car in shop, no warranty.”|
|“Car broke again, lost acceleration, RPM’s wonky, Engine light lit up like a Christmas tree. Waiting for tow truck.”|
|“Back in Vegaaaaaas baby.”|
|“Heard a noise this morning and found a bat under my bed. Ewwwwwwwww.”|
|More noises coming from the house a contractor is coming over to look at the attic.”|
|“EWWWW OMG bats EVERYWHERE IN THE ATTIC. Got an estimate for $10K to get fixed. Ugh. Get me out of here.”|
Somewhere along the way, a new boyfriend came into the mix which explained all the trips to Vegas and SF. Maintaining a long-distance relationship gets expensive, fast.
Let’s say that things progressed quickly.
|“I’m getting married! Going to relocate to Vegas and quit my job!”|
|“Vegas weekend, super excited to be back!”|
|“Re-modeling the kitchen, time for an upgrade!”|
|“Taking time off this week to head back to San Fran.”|
|“In two weeks, we’re eloping in Vegas, hope you can make iiiiiiiittttttt!!!! EEEEE SO EXCITED”|
|“Decided my hubby’s moving to me so the girls can stay in school, but he’s quitting his job.”|
Each new text brought a new roller coaster of emotions, and a quiet tallying of all the money I knew was flying out of the account. That 5 to 7 years, could be reduced to 1 or 2 in a hurry.
|“Made a down-payment on a new house today SOOOOO EXCITED … still a ton of work on the old house before listing.”|
|“Moved into the new house, dishwasher broke today, gas leak at the old house contractors say it will be thousands to fix.”|
|“Hubby financed a $72K car today. I just charged $15K on my cc for house repairs.”|
There went my hopes of a financial savvy and responsible new hubby coming into the mix to fix all the financial woes.
|“Father-in law moving out, he can’t stand being around my new hubby. Refuses to take my youngest to school stuff or appointments anymore.”|
|“Back in Vegas with my hubby! He’s not ready to move out here yet.”|
|“My boss is threatening to fire me because I’m always gone on appointments now that my F-I-L is gone and can’t take care of the errands.”|
|“Spent another $10K on my CC trying to get the house ready for sale, no end in sight, the extra mortgage is killing me.”|
I bet you’re thinking it’s overly harsh for me to criticize her spending habits. After all, you may say many of these things were out of my sis’s control. Sure, you would be right.
Bat infestations, gas leaks, contractor negligence, that can happen to anyone. So can the death of the primary breadwinner or an inexperienced child driver making an error on the road.
But the regular, last minute trips across the country? The front row tickets at concerts, the Mercedes, deciding to buy a new house before your old is even marketable or making the choice to bring another pet into the house? Those expenses could have been avoided or drastically cut back with a little planning.
It’s like a never ending bad reality TV show that I’m powerless to turn off or influence in any way.
The budget has long been blown. Maintaining three households, extra pets, fancy cars, exotic trips and lavish entertainment is expensive. It’s the complete opposite of FI.
To me, it’s a life sentence of endless stress and being beholden to an employer who can terminate your sole source of income in a moment’s notice. To my sis, it’s just another day in her seemingly hectic life.
There are always trade-offs to be made in this world and I would feel much worse for anyone who wasn’t given advice or help to manage through these difficult decisions. For my sis? She was given help and advice by her loved ones. She chose to ignore it to her own determinant.
I’ll admit, maybe I’m the sucker from wasting so much time planning and scrimping and saving to enjoy FI. Maybe everything will be OK and I should “live a little” as she always says.
Until that unlikely day arrives, I will learn from the experience of others and make far different choices with my finances. The stress, anxiety, and uncertainty from the roller coaster of madness that I see from her, is far too much for me.
As far as my sis goes, I dread the day the call comes when I have to make the tough choice of ponying up to help put her life back together or showing tough love and denying her a bailout. Maybe that day will never come and maybe it will be here sooner than I think.
All the while, this thought will forever linger in my head… “Am I responsible for bailing out my all irresponsible family members? Should I delay early retirement to make sure they’re taken care of?”
Do you have family members like this? Are you afraid they may come knocking one day and asking for money? Would you like to, or feel obligated, to help them and fear your financial freedom is going be delayed?