Wealth is relative, but it shouldn’t involve relatives

Have you ever been in such a financial bind that you are forced to rack your brain for desperate solutions? If you haven’t, you will. I’m not trying to ruin your day, I’m just stating the important facts. No matter how much money that you have, you will someday (if you haven’t already) be forced to scramble. Millionaires are sent scrambling everyday to cover financial obligations. College kids all over the planet are sent scrambling every single day to make sure that they have enough money in their checking accounts to cover a late night “run for the border”.

How do your backup plans flow through your head? If you need more money than you have, how would you react? Would you go into debt? Would you get a second/third job? Or, would you call your family and friends? Many people choose the family and friends route because it is the least painful to the borrower. The other options (get another job, or go into debt) are less than ideal for the person in trouble, but “borrowing” from a family member or friend creates financial shrapnel.

Everyone has money problems. Everyone. Your parents do, their parents do, and their parents…are dead. See, so you either have money problems or you are dead. But, I digress. Your parents (should) have more money than you, but they have bigger financial problems that, many times, they have never taken the time to understand. You want numbers?

Let’s say that you are 25, and your parents are 50. Your parents have a household income of $120k per year, and your income is $45k per year. Your parents have $357k to their name, and you have $1k to yours. They are in a much better financial position than you, but they have to be because they have some major stuff coming up: retirement, healthcare, and prescription costs. I’m just being real. I see it everyday. You are welcome to tell me how your situation is different than this, but most likely it is some derivation of my example.

Let’s assume that you need to be “bailed out” of some weird financial situation. You need to pay off some debt fast. You need a down payment on a home because you are “wasting” money on rent. Etc. Over the last 10 years I have seen this scenario no less than 100 times. And invariably, the parents are in a lot less secure position than they think they are in. So while they certainly can afford to help their adult children now, it is actually a very bad long term financial decision.

My point? I don’t have one. Have a good day…kidding. My point is that the easiest decision for you is often to go to your family and friends for financial assistance, but it actually is the worst thing you can do.  Create your own solutions without creating problems for others. It will hurst worse at the time, but it will be the smartest thing that you ever do.

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