Family is a Fixed Expense

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I just returned from a drive to see Grandchild #1 (Ava) play soccer on her college club team two-and-a-half hours north. A wave. A smile. I stuffed some cash into her hand. She laughed and thanked us because she knows that’s what we do. Then, she headed to Texas Roadhouse with the team, and we headed home, two-and-a-half hours south. We may have paid for her dinner (with a popcorn booster purchase the week prior). I didn’t check what I was funding because she’s a grandchild.

Since Hurricane Jackie moved back from Florida to be near me, I feel it’s my job to buy her groceries, sundries, and home maintenance items. She always offers to reimburse me. I always refuse and tell her to save my inheritance, fully expecting her to live to 150 and spend down every dime of her assets. I don’t keep track. It’s what I do. She’s my mother.

To date, I have five grown nieces and nephews, three adult stepchildren and five grandchildren. Everyone gets a holiday gift and a birthday gift. And whether it’s Venmo or a gift card or payment for their whole life insurance premiums, it adds up. It’s what I do. They’re family.

According to the Society of Actuaries, three in five adult children help parents with groceries and transportation. According to Employee Benefit Research Institute (EBRI), 50% of working caregivers and 58% of retiree caregivers provide financial support of more than $5,000 per year. But we think of the amount we “casually” spend out of love or duty to our family as discretionary. I’m here to tell you it’s not.

I bet, if you’re like me, your discretionary spend goes on top of funding of your family. And if you’re not yet in a position to be financially free, you may be undermining yourself by failing to account for that family spend as part of your fixed expenses, both up and down the generational spectrum.

This is especially true when our kids are college age, semi-independent but still on the “payroll.”

It’s also true when we help an adult child furnish their first apartment or help pay the first month’s rent while they get used to repaying student loans and navigating the cost of living alone.

It’s true when we use both time and financial resources to ferry parents to doctors and see that they have what they need in their homes to be safe. (These appointments are often followed by a quick lunch, snack, or added “side trip” to pick up a few necessities, all of which we pay for.)

And this is doubly true for first-generation wealth: high cashflow households who feel an obligation to support younger siblings and extended family members, simply because they’ve “made it” and want to do their part by bootstrapping the entire generation.

The challenge of doing this, none of which is wrong, is we run the risk of undermining our own financial security. And that’s why, when I do cash flow planning with clients, I always create a short-term savings bucket for family obligations and include the spend in the “fixed expenses” category, NOT in the “discretionary spend.” And you should too.

Aside: If you keep your fixed expenses to 60% or less of your income, you’ll be a happier camper.

There is joy in spoiling family just because we can. We feel good about doing for others we love. And we plan to continue to help family members for a long, long time. The emphasis is on the word plan. Because even more than the gift of financial support, we can role model excellent financial planning by accounting properly for our fixed expenses. #WeRescueOurselves #NotYoungNotDone

Attended:
Aging, Caregiving, & Financial Costs: Finding Resources & Improving the Pathways Forward
April 10, 2024, Hosted by WISER and the Consumer Financial Protection Bureau (CFPB)

Copyright © Madrina Molly, LLC 2024. All rights reserved.

The information contained herein and shared by Madrina Molly™ constitutes financial education and not investment or financial advice

Sherry Finkel Murphy, CFP®, RICP®, ChFC®, is the Founder and CEO of Madrina Molly, LLC.

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