Thursday, February 21, 2013

What I've Learned About Finances From My Family ... Part One

I've watched every episode of TDDUP and one common couple type that comes up is where one is the spender and one is the saver and they get into constant fights about money. But there's also the couple where one is an "ostrich" and doesn't know or pay attention to the money so there's less fights but they're no better off. That was my family.

My Dad was (he passed away in 2009) an extremely hard worker. He worked right up until he was 75 and right up until the week before he died.

He got into a lot of debt due to his "business" - he was a courier in a company where you work as a contractor, he made OK money but almost all of it went towards maintaining his car (it wasn't UPS or something where you drive a company car) and gas. Yes, he could write these things off, but when you spend more money than you make on a monthly basis then you go into debt. I prepared his receipts for 2009 for his accountant and only 1 month did he make more money than he spent. But of course, there's the mortgage and food, etc to pay for so it was even worse.

He did like to talk about money. He taught me some good rules (buy low, sell high) and some bad (businesses should always be in the red - sure for income tax purposes, but see above). He was a perpetual optimist, things were always going to get better ... next month, next year, after tax time, etc etc etc I see a lot of this when people think that they will pay off their debt when they make more money, but it almost never happens. He was always waiting for a windfall (despite being a hard worker) and always played the lottery and scratch tickets.

He was a very giving and trusting person, he thought everyone was his friend - including his banker, where was Money Rules when my Dad was around? He often took bad advice and it wasn't until I started working in the financial industry before I could convince him that it was bad advice. He didn't have an emergency fund or car maintenance fund or even insurance. It cost my Mom a lot to pay for the funeral. He wasn't a good planner, more reactive than proactive.

He was 100% in charge of the money. When he died and my Mom had to look over the bank account for the first time in years she was overwhelmed and asked me a lot of questions, most of which I couldn't answer, only he could.

He left my Mom with a $80K Home Equity Line of Credit and a $90K mortgage at 59.

My Mom is pretty frugal, she doesn't like to spend money. This is good and bad. Sure she saves the money she doesn't spend but a lot of the time its to the detriment of home maintenance and debt repayment. Her house is practically falling apart around them, since no one living in the house is particularly handy and they don't want to pay for repairs, I really worry about what's going to be left of this house if its ever going to be sold.

As stated above, she has $170K in debt (OK, less now that its been 4 years, but not much less) anytime I suggest paying more down on the LOC she has a mini panic attack and wonders what she's going to live off of. It took me a long time to even get her to stop keeping all of her money in her chequing account. She was getting zero interest and putting herself in a bad position if she ever lost her debit card.

She is not a very hard worker, but she works at a hard job (crossing guard where you have to be outside the whole time you work) but only works 3 hours a day and goes home in between shifts. She has very little ambition, even when she was left with this debt, she didn't try to find another job or any other source of income. Yes, its hard to try and find a job at 60 but she didn't even try. She does crafts but has never tried to sell any of them (other than at my uncle's retirement home where she would get none of the profit anyways). When she lost her job in the manufacturing industry in the 90s, I can understand not finding another job in that field (thanks NAFTA! *sarcasm*), but she didn't try to take other courses, get her GED (she finished grade 10), learn computers or anything else that would upgrade her skills and get a new job/career.

She always let my Dad take care of the finances, even though it was pretty obvious that he wasn't good at it. When I started selling investments and was talking to my Dad about investing $5K into a GIC. We had to do a full financial overview. That's when I discovered he had $80K of debt spread out over 11 credit cards. My Mom only knew about 1 and she didn't even think it was maxed. He was recycling his payments(using the room created from a payment made on one card and then take out a cash advance and use that to pay off the next, etc) just to make the minimums. It was me that took them to the bank to get them the LOC otherwise they were paying ridiculous amounts of interest (I never fully calculated it out but I imagine it was an average of 19% down to 4.5%). My Mom then told me that he had racked up a ridiculous amount of credit card debt in the past (about $60K and they had rolled it into the mortgage and then took out a second mortgage). You think she would have taken over the finances at that point, or at least looked them over every once and a while!

My Mom is a hoarder. She practically never gives anything away and takes whatever people give her. She is now the proud owner of other people's crap. I've inherited this and am working on it. Where this has affected my finances is that I would buy stuff that I didn't need to replace other things that I didn't use or don't work but still don't throw out what I have. It makes up for a lot of storage space being used rather dumbly but like I said, I'm working on it.

But she does live very frugally and is a saver so now she's doing a bit better, she's paid down at least some of the debt (LOC is at about $50K and mortgage at $80K), has a $5,000 emergency fund and paid for a $4K roof repair in cash. A lot of this is things that I've been trying to help her with as I'm not sure she would have gone to the bank herself to ask for the LOC payment to be increased, to open a TFSA, change her mortgage payments to accelerated bi-weekly, and invest her LIRA (locked in retirement savings from when she had a pension) in things other than GICs - but still very safe income producing investments, she's too close to retirement to be taking on too much risk.

She will probably have to work until she's at least 70 to get this debt paid off.

Part 2 tomorrow ... My brother, Me, My Husband and My Final Thoughts :)



  1. OH my goodness. Reading this is like .. reading about my family before I got a hold of them.

    Same deal, same parent, but opposite values.

    My dad is cheap, a lazy person, pessimist, doesn't like to spend money, wastes it on lottery tickets hoping for a windfall, was 100% in charge of finances, and didn't care about clearing the mortgage soon (credit cards were clear though). He doesn't make enough money (works less than part-time. Quarter-time?)

    My mom is generous to a fault, optimistic, and a very hard worker, likes to spend money but can also be frugal/save (she grew up with nothing), had nothing to do with finances in the house, and now is on track to clear her mortgage in 2 months. She makes all the money.

    I got a hold of them 2 years ago, and basically laid down the money law. My father was understandably upset (he was scamming money from her, and using it to gamble), and my mom was surprised and very happy to finally learn something about money.

    She's a tough woman, and now that their money is on track, I'm happy that she won't be stuck with debts she had no idea about.

  2. I definitely think it was strange that he would work so hard and at the same time want a windfall so badly that he spent a lot of his money on the lottery. He didn't gamble as far as I know, but it could explain at least part of the debt levels (on top of the not making enough money to cover his expenses every month) but we'll never know for sure.

    I'm glad you were able to get a hold of your parents before it got to where my Mom is. I tried to warn my Dad that he should pay more than the minimum on the LOC and quit his job (hell he would have been better off to be a Walmart greeter or to live off his government pensions).

    I also tried to convince my Mom to sell the house, pay off the debt and move in someplace smaller (or with her sister(s)) but with my Mom, one Aunt, Uncle, and Brother all living there she can't be convinced to sell. We even were going to let us move in with us when we buy a house but she had too many demands so I'm not sure its going to work out.

    Well, she's trucking along and hopefully will be able to pay off this debt and actually enjoy some of her money before she dies.