Another text conversation with my daughter today about budgets and finance.
With her fiance’s new job, better income, and actual benefits, she was doing number crunching and revising their budget. Their focus is paying down debt (fiance’s credit cards and student loans) and saving for a house. C has a car payment, but it’s at 0.9% and her car is not underwater, so it’s a lower priority than A’s debt. We texted back and forth about what to do with the extra money A is now getting and also the surprise salary bump at her job.
Once we went through everything – A’s benefit package, the 401K she is now eligible for, how much matching she receives, have they thought about opening Roth IRA accounts – I provided my best practical financial advice. First, put away minimum 3% into her 401K to get the matching 3% contribution from her employer. No brainer. Second, funnel the additional income from A’s new job to the credit cards, get them paid off, and close the accounts (they each have another credit card that they use for rewards and pay in full each month). After that, divide the excess money into extra payments on the student loan debt and the house savings.
I also recommend they both start a Roth IRA, but I have more of an upsell discussion on that right now when they are in pursuit of their first home. The focus is building up more downpayment savings, and while my argument that it’s better to be trying to save something in an IRA now before they have a mortgage, I understand the limitation of my influence. But she/they have surprised me before and may pursue that as well. This advice relies on the fact that my daughter inherited money from her grandmother and because of that has a very healthy emergency fund as well as a “life happens” fund for periodic (insurance, medical copays) and unexpected (flat tires, broken windshields, pet crises).
What is frustrating both of them, but particularly C, is that friends and extended family members are not understanding their frugality and prioritizing their savings goals. As an example, there is a party this weekend celebrating one of A’s cousin’s engagement. It’s at a restaurant and involves dinner, drinks, gifting. C is uncomfortable attending and not staying for dinner or bringing a gift, and A does not really feel like any of that is necessary if they stop by, having a beer, and then depart before dinner begins. Except every time they try to make their escape, the family insists they must stay, then C feels cheap because they did not bring a gift and they get roped into staying and paying for dinner and more drinking.
A money-leaking cycle.
A trying to explain this to his family results in hurt feelings. His mother’s “but you’re making good money now” has a tone of accusation, as if C is somehow turning A into a cheapskate. They both agreed they want to purchase a home in the next year and they feel the need to save more money. Not just for the downpayment, but for what I term as “house goodies” … all those things you want to buy when you move into your mortgaged home.
I have limited advice as to how to stand firm on their priorities. I agree with her that she/they should not have to defend their choices, and I am all in favor of the “none of your business” reply when pushback is an issue. I am also not marrying into the particular tribe A is from, and from my limited experience I get that it’s hard to stand firm when faced with a tsunami of emotions from family you love.
Since the problem is not coming from A, I advise letting him handle his and letting him absorb more of the discomfort of their reactions and pressure. He is a big boy. He is engaged. If the situation and shoes were reversed, she would never dream of asking or letting him stand up to me in the face of our pressure on them. Of course, M and I are not pushy, especially about personal matters. C shares with me because I tend to look at it like a math problem. Plus I try very hard not to pass judgment on whatever she confides in me. So basically, pressure from us is like finding bigfoot in the backyard, possible but not very likely.
And so it goes. It’s is wonderful my kids talk to me about stuff, especially when I can do little other than offer some ideas and listen.