Long-Term Vision Helps You Cope Through Short-Term Changes

Your Financial Future Family ties are amazing. These connections, based in DNA, history and genuine care, can prompt many to support their loved ones through times of need, be it emotional, physical and even financial. It is natural to want to support your family, but the players involved can double (or even triple or quadruple in cases of blended families), increasing the financial strain. Since these familial situations can snowball quite quickly, I urge you to focus first on your own financial independence and be sure not to let your parents and your children squeeze your financial future. While many hate to be a burden on their family, it’s actually quite common for people to financially assist other family members. According to Ameritrade’s Financial Support Study, one-fifth of Americans are Financial Supporters, meaning they provide financial support to a parent and/or an adult child.1 A survey conducted by GoBankingRates found that 63 percent of children plan to financially support their parents in some way once they retire.2 On the other end, parents are also financially supporting their grown children. Per Financial Planning OWS, 24% are helping with rent and 39% are paying cell phone bills.3

My primary advice is to always pay yourself first. Be sure to establish a healthy emergency fund and contribute to your retirement. It’s similar to what you hear on airplanes about placing the oxygen mask on yourself before placing it on others. You need to be sure that you are fiscally secure before you provide for those who are financially struggling. This is very sound, logical advice, which can be difficult to follow once emotions come into play.

Most of the decisions I see my clients struggle with are when the emotional and the financials are at odds. When your daughter wants to go to that expensive, out-of-state college that you didn’t save enough for, it’s tempting to try to make it work, whatever means necessary. Or perhaps your son is going through a costly divorce, and the only way you feel you can support him and ensure you see your grandkids is to borrow from your retirement to hire him a good lawyer. These are the moments when you need to be able to tell your child and yourself, “No”. In most cases, there are other options and alternatives in place. They may not be the dream situation, but they will still get the job done. Don’t sacrifice your future for your child’s dream, no matter how compelling. Don’t let emotions cloud good judgment.

On the other end of the spectrum, is a harsh reality. When dealing with parents who may not have planned sufficiently or are in the midst of a financial crisis, be sure that you are communicating as one adult to another. If possible, you may want to tackle those financial conversations early. Some of these difficult financial conversations with parents are tied to medical issues, so be sure to discuss before physical situations become dire.

When you find yourself in the midst of these difficult situations, please don’t forget about your support system. Your financial advisor can act as an unbiased referee in moments of disagreement or emotional struggle. They will likely remember the important financial issues that may slip your mind and will be ruled by numbers rather than nostalgia. At the moments when you need a pragmatic perspective to shine through the cloud of emotions, a trusted financial advisor can be invaluable.

In a time where many people find themselves part of the Sandwich Generation, taking on financial burdens can seem inevitable. Yet, so much can be avoided and accomplished when you act in advance. Start chatting with mom and dad while they’re still in good physical and financial health. Start saving for colleges as early as possible. When you’re proactive, you can prepare. When you’re reactive, people and finances can take a hit.

1. https://s1.q4cdn.com/959385532/files/doc_downloads/research/TDA-Financial-Support-Study-2015.pdf
2. https://www.gobankingrates.com/retirement/planning/kids-plan-financially-support-parents-retirement/
3. https://www.forbes.com/sites/carolynrosenblatt/2018/07/09/aging-parents-helping-adult-children-financially-unhealthy-results/#321bb1e2ef39

Awareness is key to change, but you also need action. In fact, you need focused, decisive and immediate action to see change and to get yourself back on the road to financial independence.

There are a lot of decisions to make when forging your way to financial independence, there are also countless paths to each destination and countless solutions to each problem. Most folks are also juggling more than one financial goal: retirement, emergency funds, college education for children. How do you prioritize? How do you find the right solution for retirement or long-term care? All the decisions can be overwhelming, which causes many to check out of their own financial situation. While taking a step back when one feels overwhelmed is a natural response, refraining from taking action can ultimately do more harm than good.

Definitive action can both propel you towards financial independence and protect the traction you’ve already made. The sooner you start investing in your financial future, the more your funds can grow due to compound interest. The longer you wait to address any financial problems, the more these minor issues can snowball into larger issues, which can often be the case with debt. Also, if you haven’t taken decisive action to establish an emergency fund or invest in the proper form of insurance, an unexpected event can derail you further from your route to financial independence.

Our Advisors at Trilogy try to help you take the guesswork out of making a decision. Some of the worst indecision is born from not knowing the results of choosing Option A over Option B. However, our Advisors /Life Planners can run various scenarios for you, showing the consequences of different courses of action – helping you see which decision may be the right one for you. More importantly, they are here to support you through difficult situations, so the rest of your road to financial independence will be smooth sailing.