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Learning how to manage your finances is sometimes, not just for your own benefit. It is also for others who are depending on you.
As a family, we usually try to be there for each other. We try to be there for emotional and moral support, physical assistance, and even financial help. It is nice to know that when you are in deep trouble, you can count on your family to bail you out or at the very least, give you that little push towards the right direction.
It seems that relying on our loved ones became more popular after the Great Recession. Take for instance the new graduates. In the past, young adults who graduated would move out of their parents and live on their own. They will pursue their own life and take care of their own needs. In recent years, this practice is steadily decreasing. While it is not done by the majority, a lot of Millennials are moving back in with their parents. According to the data gathered by PEWSocialTrends.org, the rate of young adults living with their parents is up to 26% in 2015 - a 2% increase since 2010. The age bracket of this group is currently 18 to 34 years old. Only 67% of them are living independently - a 2% decrease since 2010.
You may think that these young adults are moving back in because they have failed at financial management. That may seem like the case but a new study shows that it is not entirely true. At least, not anymore. Apparently, some of these young adults are actually at home because they have opted to financially support their aging parents.
Dealing with the financial issues when you are providing financial support
A recent study released by TC Ameritrade revealed that more Americans are supporting their loved ones than before. For some, they support their aging parents. Others support their adult children. There are also others who are supporting both.
Now when you intend to financially support someone else, you need to learn how to manage your finances so you can take care of both of your needs. It is not something to be taken lightly. Even if your financial resources are going well, you need to keep yourself from splurging. Instead, you have to ensure that you will prepare for the times when your resources become limited. In case something happens to your finances, you will not be the only one that will be affected. Even the loved one depending on you financially will also suffer the consequences.
According to the study published on AMTD.com, one out of 5 Americans serve as financial supporters of a loved one. On an average, they spend $12,000 in the past 12 months. Surprisingly, Millennials have spent more - averaging at $18,000 in the past 12 months. It is revealed that in most cases, mothers receive the most financial support from their children. These financial supporters also take on the burden, usually, because they were asked to. Based on the survey done, these supporters are happy with what they are doing. But when it comes to choosing between an aging parent or an adult child, most of them would choose to support their parents and leave their adult children to financially fend for themselves.
Of course, you know that helping out financially has its limits. This is why you need to manage your finances well because if not, you will be forced to make some sacrifices that can cost you a secure future. While your intentions are noble, you do not want to become a burden yourself when you retire. The respondents admitted that they had to make the following sacrifices:
- Delaying life milestones. Since they have to put their extra money into helping their loved one, a lot of the financial supporters delayed major milestones. These milestones included buying a home, retirement, getting married and having kids.
- Borrowing more money. Because the financial load is greater, some of the financial supporters end up owing a lot of debt. The average debt that they owe amount to $100,000 - including mortgage. In terms of credit card debt, they owe an average of $22,000.
- Living a frugal lifestyle. Another sacrifice - that may or may not be one, is to live a frugal lifestyle. If you have the right perspective, you can actually look at this as a blessing in disguise. There are many advantages to living frugally and you may be able to learn a lot as you are forced into this lifestyle.
- Using up their savings. The last sacrifice that they admitted to making is to use up the savings that they have put aside all this time. It is bad enough that they cannot save for their future. Having to dry up their existing savings is a really great sacrifice to make.
To avoid these sacrifices from ruining your future, you may want to manage your finances well so you can maximize what limited resources you have.
Financial management practices to help you support a loved one financially
There are couple of things that you can do in order to help in your money management efforts. That way, you can continue to help your loved one without making it too hard for your finances to carry. Here are some tips you should implement.
- Use a budget plan. This is always a big help regardless of your financial situation. This plan will help you understand your income and expenses. It will give you more control so you can decide what your financial priorities are and you can ensure that they will always be met.
- Track your spending. Another tip that you need to implement is to track your spending. This should be an easy task if you have a budget plan. This will help make you a smart spender because you are more cautious of what you are spending on each month. You can cut back on the expenses that you think is unnecessary.
- Lower expenses. Once you have tracked your spending, you should be able to identify those that you can live without. There are various ways to slash your expenses so you leave more room in your budget for the unexpected expenses.
- Plan for your future. Although your finances are tied up at the moment, that does not mean you should stop planning from your future. If anything, this is the right time for you to do that. You need to manage your finances not just for the present expenses, but for your future too. If you think that it is hard to financially support someone, you do not want to be on the other end when you retire. After all, you cannot be sure that someone would be selfless enough to make the same sacrifices that you are doing right now.
- Save up for retirement. As you plan for your future, the most important task that you need to do is to save for your retirement. There are a lot of retirement plans out there that you can tap into. Choose a plan that your budget can afford.
- Research benefits you can get as a financial supporter. When you are supporting other people, you need to research certain benefits that you can avail because of that financial responsibility. You can look into Medicare and Medicaid to see if you can get health assistance. You can also visit sites like ElderCare.gov to find out where you can get help.
These should help you manage your finances so you can create a more secure financial position for yourself and those relying on you.