As I have alluded to in previous posts, I have recently become interested in personal finance and investing. Cash flow is now net positive (as opposed to in medical school) and for the first time, I have the opportunity to spend earned money, rather than federal loan money.
Like the writer of Debt Sucks,if I publicize my financial situation and become accountable to the ether, I might have a greater impetus to eliminate my debt, so here goes…
My post-medical school debt is $86,800, fairly low, considering the national average is ~$158,000. I was fortunate in that my four-year BA from an Ivy League university was only about $12,000, thanks to very generous scholarships (need-based).However, life during medical school in Manhattan cost a bit more than was provided in those loans, so I entered residency is with ~$8500 worth of credit card consumer debt. A few months into residency, I got into a very minor car accident (at literally 10 mph) that ended up totaling my inexpensive compact, I ended up financing a new car, something that every personal finance book tells me not to do, but given that I needed a car ASAP, I had little choice.
I recently became interested in personal finances and investments (since I started making a salary after graduating) and came across Vanguard and index funds. I had been amassing enough money to fund an IRA since my 401(k) has no match and offers a poor selection of funds, but had an emergency that required me to essentially deplete my savings and I’m working on saving up again (thank goodness I had saved up an emergency fund!). However, I have 40+ years until I will retire and while I know all about the time-value of money and “the time to invest is now” and “if Sally put $1000 away right now and never did anything else while John started 10 years later and put $5000 a month away who’d have more money” etc, I’m more concerned about my parents.
I remember my mom’s dad selling his CDs to my father to help him through a tough time (and thinking at the time, “how can music help my dad?”) and him subsequently moving in with us after a stroke for my mom to help take care of him. My dad’s mom had nearly zero assets, living from social security check to check and lived with my parents and me for awhile too. It was never said, but I recall a general feeling of “these grandparents, they’re so much work to take care of and I wish we didn’t have to do it… but I guess it’s better than being a nursing home.” They’re both gone now and any inheritance they left to my parents is nearly gone: it was put into a money market account (read “safe”) and continually withdrawn from.
My parents have always suffered from a “it’ll just work out” mentality, and for the most part, things have worked out. We’ve always had food on the table and the bills were always paid, we bought what we wanted – the only thing that we didn’t have as part of “the American Dream” was the annual vacation to someplace warm. But the word budget was never in my family’s vocabulary and especially now after the 2008 stock market crash, my parents are extremely wary of anything that sounds like “investment.” My mom just bought Suze Orman‘s “The Money Class” and I hope she reads it – I’m not sure exactly what it suggests, but it’s surely more than what they’re doing now.
I’m an upwardly-mobile young guy with a “bright future” and all that and am also fairly risk-averse, wanting to buy the best insurance I can afford, be it health, disability, auto, etc. But I don’t want to be in the same situation as my parents, either taking money from them to support myself, or having them be a burden to me as I try to care for them while I try to grow my own self/family/life.
I’ve tried to impress upon them the gist of Harry Markowitz‘s Modern Portfolio Theory, how stocks are not evil and deserve a role in any portfolio, that it’s never too late (they’re 63 and 64 years old but plan on working until 70), and Long-Term Care Insurance might be something worthwhile to buy… although I’m not sure if it’s available to them at their age. But they still think buying a house and renting parts of it out is the way to go. As a renter, one of the conveniences is just to call the landlord when something doesn’t work and expect it to be fixed within a reasonable amount of time. As the landlord, I’m sure he gets frustrated or tired of complaints from tenants, and I’m a pretty good tenant I think. I can just imagine the nightmare a bad / noisy / destructive / non-paying tenant could be and don’t think that’d be a good way for my parents to go. He justifies it by saying “well, if we get enough money to pay for the fixed expenses, then Social Security and the rest will cover any other expenses we have.” That may be true, but it needs an up-front investment of six-figures plus to get a rental property, with no guarantee of tenants. The stock/bond market has no guarantees either, but it’s probably the only way to ensure enough return to support yourself in retirement.
At the end of the day, whatever I say will fall on deaf ears, with the typical response of “these young kids, they think they know everything.” I just don’t want to be in the situation where I have to take care of them by sacrificing my own assets. Wealth is supposed to flow down the generations, not back up. Don’t think I’m heartless and don’t want to do anything to help them, but I’m concerned that my foresight to start saving early will be punished by their lack of tangible planning.