Five Awkward Money Questions From Your Family and How to Deal With Them
With the holiday season approaching, your family is going to make the most of their time, which can be great on the one hand, but a little excruciating on the other. Because let’s face it, for every relative you are happy to meet, you have another one that asks you uncomfortable personal questions – and you may already be coming up with a strategy for getting out unscathed after being cornered. great-aunt Martha. It’s no wonder psychologists find holiday gatherings a source of stress for many of us.
This post was originally published on LearnVest .
While we may not be able to come up with exit strategies for political debate or romantic issues, we can offer a few suggestions on another hot topic of conversation: your finances. For some reason, uncomfortable monetary issues seem to be very relevant during family get-togethers at the end of the year, whether it’s siblings who pay you money, or parental pressure about why you aren’t a homeowner yet.
To help you placate annoying relatives and at the same time boost your financial life, we’ve come up with several strategies to prepare for five common (and painfully uncomfortable) monetary questions you may be hearing this holiday season.
When grandma asks how your egg is doing
Your golden years may seem like a lifetime to you, but the older family members swear they’ll be here before you know it. And the truth is, they’re partly right – so the sooner you start saving for retirement, the better.
But what if you’re not quite on the right track? Well, if you haven’t started saving yet, it’s time to brush up on the basics and familiarize yourself with the intricacies of different types of retirement accounts, such as the IRA or 401 (k) . Then find out what options may be available to you along the way. If you have access to a 401 (k) retirement plan or other type of employer-sponsored retirement plan and you haven’t signed up yet, you’re overlooking, especially if your workplace offers any kind of eligibility, which essentially means for you free money. …
If you’ve already started saving your retirement savings, set a goal to increase your retirement contribution on New Years. Maybe it’s just 1%, maybe that’s enough to meet the company’s requirements, maybe it’s any amount you can choose from after trying one of these simple strategies . Whatever the amount, any small jump can have a potentially large impact between today and retirement.
Then, when Grandma asks about your nest egg, you can tell her about all the crucial things you are doing now to build your nest egg (but you can skip the part where you give her your balance).
When your parents want to know why you are still renting an apartment
This is very important, especially for renters in their 30s or older, but retaining their rental status is not unusual for millennials: the share of people under 35 years of age in property is declining, according to NPR , from 42% to a decade ago. up to just over one third now.
We know you are likely to hear, “But you are throwing money away!” when you tell people you are in no rush to buy. But home ownership doesn’t have to be something you want if you’re not financially prepared for it.
For starters: are you planning to move in the next five years? Have you got a great rental deal in a great area? Will buying a home turn into a long commute? If you answer yes to any of these questions, it will likely make more financial sense to rent at this point.
The down payment is also an important factor. If you can’t deposit even 20%, you may end up paying private mortgage insurance as well as a higher interest rate, which will increase your monthly payment and eat up in the long run. (This cool calculator New York Times will help you calculate the various housing costs, so you can understand when it makes sense to rent or buy.)
So be honest with your parents in explaining how the rent is best for you now and how much better your finances are as a result. (For example, a large mortgage payment could mean you can’t afford to buy a plane ticket home.) Hard-earned dollars and preparing your finances to fulfill your dream of home ownership.
When your cousin asks you to jump on a hot spoon
We all have one family member who loves to suggest better investment opportunities instead of holiday ham. Maybe it’s a company that’s sure to be the next big thing, or a real estate business that’s sure to grow to its maximum. Whatever the possibilities, these conversations can end with the words, “Do you want to do this?”
Well, your answer is likely to depend on a number of factors, including your risk appetite, what the ultimate goals for your investment dollars are, and the timing of those goals.
But if you are like many people, you probably are not looking to make a quick investment on the investment; rather, you have a longer-term goal in mind, such as buying a house or retirement. In fact, we do not recommend that you invest to fund a target unless it has been met after at least five years because of the risk associated with the investment (the shorter your schedule, the less time you will have to recover from a market crash).
But if you think you’re ready to dive into the market, you probably shouldn’t start with cousin Dan’s investment plan. First, learn about the basics of investing, as how you invest can affect other areas of your financial life, such as taxes. Then see if you have collected all the financial affairs in a row. Have you already started saving for retirement? If not, then this should be the first goal for which you are considering investing. Do you have a debt settlement plan? Are you making good progress with the emergency fund? If so, then you can start considering investing outside of a retirement account.
Do you already have an investment portfolio? You’re lucky! You could dismiss cousin Dan by telling him that you prefer an investment strategy that is not based on the “high performance” of one or two stocks, instead preferring to remain diversified (which means that your investments are spread across different asset classes and categories. risk). You can even go even further and tell him about the types of mutual funds or ETFs that you invest in and how they give you access to many different types of companies.
Maybe this will encourage him to keep his hot tips to himself.
When a younger brother asks for a loan from you
Nothing makes a gala dinner as inconvenient as getting money from a family member. This potentially unpleasant situation can develop in different ways. At best, you are helping your loved one get through a difficult time while keeping the relationship – and your own finances – intact. But what if the family member in question is unable to repay the loan?
Understand the situation by honestly explaining if you can make loans at all. Even if you are completely confident that the recipient will return the money to you over time, depleting your savings only puts you in potentially dire financial straits.
If you can take responsibility, determine how much you are willing to offer. In other words, only borrow what you can afford to part with. After that, set a clear payment schedule and write the agreement. The dessert table is probably not the best place to go for more details, but make no mistake in saying that these conditions are necessary when lending money to family members .
If the idea of lending money to your little brother makes you uncomfortable, trust your intuition. It’s polite to say that you can’t afford it right now is better than a broken relationship in the future.
When your aunt wants to know if you are ready for a rainy day
It seems like well-meaning family members get out of line during the holiday season, so if Grandma Martha asks how well your emergency fund is stowed away, it’s probably because she really cares. However, if this question is causing you concern, you should ask yourself why.
Is it because you are not quite sure where you are standing? If your emergency fund is not strong enough to cope with unexpected job loss or unanticipated pop-up expenses, it might be time to re-prioritize your financial goals. A good rule of thumb is to save three to nine months of your salary , depending on your situation. Making this pillow is vital to your financial well-being, so at least you should save at least one month before you get aggressive with your other financial goals, be it saving for a European vacation or finally paying more. than the minimum for student loans.
Not sure where to leave your emergency fund? Look for a high-yielding savings account so your money can earn interest until you have to dip into it. Typically, online savings accounts offer higher interest rates because there is less overhead than a regular bank; just make sure you meet any requirements to get the best interest rates, such as maintaining a minimum balance, or if the account has any restrictions, such as the number of monthly transactions allowed. And consider choosing a savings account that is different from your main checking account so that accessing cash will not be easy. Once you have opened an account, increase your savings by setting an automatic monthly deposit from your check.
Then, when Grandma Martha gives you the $ 10 annual check she has given you since fifth grade, you can tell her exactly where you will put it – in your fund for a rainy day.