Family financial crisis
Hi Terry.
We have a financial advisor but he doesn’t do a whole lot for us. He sort of inherited us when our initial financial advisor left the company (our current one happens to be the third person that inherited us). I want to talk to someone else but have no idea other than asking a friend who they use. We would like to have someone point my wife and I in the right direction on what we should be doing to cut our credit card debt down, save for a bar mitzvah, try and get out of our house to move into a smaller house because our mortgage is too high, try and help out kids with college even though we know we won’t be able to because we haven’t put away money for them due to having so much credit card debt, etc.
I’m starting to freak out because our oldest son is a Junior in high school and looking at college visits. I feel so lousy that we can’t help at all with him and college because we just spent too much over the years on our 3 kids, causing our debt to slowly rise to a horrendous amount. I have a pit in my stomach because I know we did it wrong from the beginning.
Any help?
— Brian
Terry Says
That doesn’t mean you can’t do it right — starting now. I don’t know who your “financial advisor” is — but what kind of advice was he/she giving??? Oh well, that’s down the drain. But do you have any money in an investment account? I’d need a fuller picture before giving you any specific advice, but here are my general thoughts.
Number 1. Call the National Foundation for Credit Counseling. Call 800-388-2227. That will connect you to the nearest local office. Make an appointment and go in. They are non-profit, free (or only a very small fee), experienced –and you can trust them. You don’t need to go through their debt consolidation service, but they will help you create a budget and prioritize how to pay down your debt.
Number 2. Call a family meeting right now This is the most important time to have an open discussion about money with your kids. Assuming they are age 8 or older, you will be doing them a big favor. Do this right after you go for counseling — but as soon as possible. By then you will have a clear view of your finances. You don’t have to go into detail with your children, but you do have to explain that you need to re-organize and spend less. If, after counseling, you decide to sell your home, this is the time to break the news. Do NOT do it if your son would have to change schools in his senior year!
But tell them that everyone in the family will have to cut back. The kids will have to work hard and study so they can get a scholarship. Or else they will go to a community college and live at home for the first two years, then transfer to a larger school if possible. There is absolutely NO point to going on a college tour since there is no way you can pay for those schools. Instead, meet ASAP with your son’s high school guidance counselor and explain your situation. Ask what schools may be affordable They will help our son qualify for scholarship money. Do NOT take out Parent Plus loans. They will bury you.
Tell your younger child there will be NO bar mitzvah party, because you are saving that money for his college. But do offer to do something small for his friends after the ceremony — maybe a light lunch for his friends ONLY (and the grandparents) after the ceremony. Let him know far in advance so he can adjust his expectations. And stop thinking you’ll be e3mbarassed by no big party. You’ll be more embarrassed if you go so far into debt you face bankruptcy!
Believe me, these lessons will go a long way to making them better people when they grow up. NOW is the time to face reality — and do it with all of your family on the same page, with a clear understanding that you will all be OK, because you have a PLAN (which you developed with NFCC).
You WILL get through this if you face up to the facts, get some guidance from NFCC, and are honest with your family members. Please write back in a few months and let me know how it’s going so far!
