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Good or bad advice for niece that can’t save
05-15-2018, 07:57 PM
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#1
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gone traveling
Join Date: Nov 2011
Location: The Deep South Bay
Posts: 744
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Good or bad advice for niece that can’t save
My mom recently cashed in an annuity and kicked my brothers kid down 35k. She is 35, single and is terrible with saving but she is responsible enough to keep the same job for 10 years, pay the rent/utilities and general living without using credit. My mom has given her money before just to find that she blew it all on junk so this time she gave it to my brother for him to invest in her name, I don’t know what they bought stocks or funds or IRA.
The advice I gave my mom was that she would have been better off
Putting the $35k into a house, i added that it’s the perfect way for her to save money through equity, in essence she is being forced to save by making the mortgage payment and the house would act as a savings account. She is already 35 and the sooner she starts a 30 year loan the better.
The whole subject came up because the 35k was already invested last year but she just told my mom that she’s interested in buying a house with her partner. My mom wants to help her again get into something.
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05-15-2018, 08:36 PM
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#2
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Apr 2010
Posts: 5,856
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I learned a long time ago that you cannot live someone else's life for them. Nor is there any point offering advice to people who really do not want to know.
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05-16-2018, 05:28 AM
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#3
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,263
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Rather than just give the grandaughter who can't save a big chunk of money, the grandmother might offer to match any saving that she does.... ideally in a retirement account so the grandaughter can't go an blow it right after the match is deposited or with a condition that if the money is blown then the matching stops.
FWIW, I think of my home as a place to live and NOT savings... if it works out that I sell for more than what I paid then great but who knows what will happen 20-30 years from now.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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05-16-2018, 06:46 AM
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#4
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Recycles dryer sheets
Join Date: Jan 2015
Location: Rural VT
Posts: 307
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Could be a bit dicey down the road if House is purchased “ with her partner” if there is a split up. May come down to who put how much in and if the house loses value could be a bad situation.
Agree with PB, my house is a place to live, not an investment. Not all houses appreciate in value, especially after maintenance is figured in....
Just sayin’
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05-16-2018, 06:50 AM
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#5
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Thinks s/he gets paid by the post
Join Date: Sep 2009
Location: Hong Kong
Posts: 1,688
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There's a reasonably well balanced article on the pros and cons of a mortgage as a form of forced savings here: https://www.reuters.com/article/us-c...81L1X320120222
I suspect that the answer comes down to their ability to service the loan.
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Budgeting is a skill practised by people who are bad at politics.
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05-16-2018, 06:53 AM
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#6
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Moderator
Join Date: Nov 2015
Posts: 13,879
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She's your niece so you have no real influence here. At best I'd say pick your favorite entry level saving/investing paperback, and have your mom put the next check inside it with a note "do not cash until you've read this!". And that's it.
35 with no debt is better than most 35 year olds. She'll figure it out on her own, you can't learn it for her.
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05-16-2018, 07:54 AM
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#7
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Thinks s/he gets paid by the post
Join Date: Oct 2016
Location: The Shire
Posts: 1,504
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Danger, Will Robinson!
Stay out of it unless directly asked.
The whole issue of parental gifting to adult descendants is a thorny one. The number of ways it can backfire is legion. However well-intentioned your participation, I'd say the odds are high that it will end up damaging some family relationships.
You're better off saying a silent prayer that the beloved niece gets her act together.
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Paying it forward is the best investment.
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05-16-2018, 08:35 AM
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#8
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Thinks s/he gets paid by the post
Join Date: Jan 2017
Location: Hog Mountian
Posts: 2,077
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Before anyone gets a house boner, consider this (and yes, we do own a home). Why your house is a terrible investment
As for your niece.... You can't teach a cat to bark. Brett said it well.
__________________
Never let yesterday use up too much of today.
W. Rogers
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05-16-2018, 12:51 PM
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#9
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Apr 2003
Location: Hooverville
Posts: 22,983
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Quote:
Originally Posted by Choices
Could be a bit dicey down the road if House is purchased “ with her partner” if there is a split up. May come down to who put how much in and if the house loses value could be a bad situation.
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I feel that many of these situations depend on whether one is maximizing possible good outcomes, or minimizing possible bad outcomes. These are different goals.
To minimize bad outcomes, avoid many or most entanglements. Still, some co-habiters do stay together many years or a lifetime, and if they own a house in an area with job growth and government no worse than the average, these people are very likely better off owning. It is however usually easier to get out of a non married partnership than a married one. So not unexpectedly, married ones tend to last longer. This says little about the partners satisfaction, but more about their anticipated pain on exit.
I may be more sensitive than many others to difficult to undo situations, including home ownership. Still I bought a condo, to put some limits on my col growth rate, and I am glad.
In this niece case, I would let her run her life however she wants, even if she runs it into the ground. In general one's own children prefer to make their own decisions, though many will accept donations. Relatives other than parents? YMMV, but I would expect that while the money would be welcome, it might be resented as a bid for control.
As helpful Auntie, I might however send her $500 to take her boyfriend out to a nice meal, or for her to buy some attractive clothes, or just a better bottle of wine on the table for a while. Auntie might also put aside a small fund to buy a nice wardrobe for niece to ease her re-entry into the dating market in the not unimaginable event of a split. Kind of an altruistic version of Blow That Dough!
Ha
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"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
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05-16-2018, 01:00 PM
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#10
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Thinks s/he gets paid by the post
Join Date: Aug 2017
Location: Champaign
Posts: 4,689
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Quote:
Originally Posted by Red Badger
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Absolutely. We did a major rehab, pay ridiculous property taxes, are constantly doing something that costs money. In no way, shape or form will we ever get back what we put into this house. But it's our house. I don't think we will ever sell. We've moved so much over the years, I just want to stay here.
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"Do not go where the path may lead, go instead where there is no path and leave a trail."
Ralph Waldo Emerson
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05-17-2018, 05:06 PM
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#11
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gone traveling
Join Date: Nov 2011
Location: The Deep South Bay
Posts: 744
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Quote:
Originally Posted by Red Badger
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I don’t know, I just looked at the past history on the homes to my immediate left, right and across the street all 3 bought in the 2010/2011 timeframe and all 3 have doubled up in price. 2 of them bought in the low $300 range and are valued in the low $700’s, the one house to my right is a big 5 bedroom 3 bath bought for $520 and valued at 1mil+. My investment properties have realized even bigger gains. I don’t know a single person who lost their home or turned upside down during the last crash, it’s the ones that were sold on refinancing and spending the money on toys and those sold on variable adjustable rate mortgages and zero down interest only financing that were upside down, traditional 30 year mortgages from this time period are still going strong.
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05-17-2018, 05:24 PM
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#12
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Moderator
Join Date: Nov 2015
Posts: 13,879
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Depending where you live, many people are just barely above water again vs where they were pre-crash. Our house is zillow-estimated still about 20k below 2006/7 highs. Most anyone who bought in a year or three before that, even with a normal 30 year non-adjustable, spent the past decade underwater and are now just "ok".
I got lucky and bought a place in 2002, sold in 2005 for a 100% gain. But that was luck.
Sure, if someone bought in 2011 they were just at the start of the housing recovery, which lagged the stock market a bit in picking back up. I personally know 3 people who had to just rent+hold their homes, when they needed to move. The alternative would have been selling for a 200k loss (if selling from 2008 to 2011).
Yes, real estate investing can be great. But for someone with zero savings or investments I would not be pitching a home as an investment. I'd be pitching it as stability from rent increases, etc. But she knows that.
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05-17-2018, 05:33 PM
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#13
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Thinks s/he gets paid by the post
Join Date: Jan 2017
Location: Hog Mountian
Posts: 2,077
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Quote:
Originally Posted by 97guns
I don’t know, I just looked at the past history on the homes to my immediate left, right and across the street all 3 bought in the 2010/2011 timeframe and all 3 have doubled up in price. 2 of them bought in the low $300 range and are valued in the low $700’s, the one house to my right is a big 5 bedroom 3 bath bought for $520 and valued at 1mil+. My investment properties have realized even bigger gains. I don’t know a single person who lost their home or turned upside down during the last crash, it’s the ones that were sold on refinancing and spending the money on toys and those sold on variable adjustable rate mortgages and zero down interest only financing that were upside down, traditional 30 year mortgages from this time period are still going strong.
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I think you're missing the point. The article was very tongue in cheek for most of us. I was aiming at the irresponsible niece who might very well end in up in financial ruin from home ownership. For some folks, a mortgage is a tragedy. On the flip side, I know from volunteering that a Habitat home lifts many, many people from working poor to solidly middle class (or better).
I observed several occasions in 2008-2010 where families lost homes from a combination of job loss and a large, but conventional, mortgage. They were just typical Americans unaware of the risk of living paycheck to paycheck (despite very large paychecks).
YMMV!
__________________
Never let yesterday use up too much of today.
W. Rogers
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05-17-2018, 10:59 PM
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#14
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,263
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Quote:
Originally Posted by 97guns
I don’t know, I just looked at the past history on the homes to my immediate left, right and across the street ....
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The guy that lives downstairs from us in our Florida condo told my wife just a couple months ago that he thought we got a "great deal" on our condo... same footprint as his.
I looked it up... he bought in 2005. We paid 86% of what he paid when we bought ours two years ago and he is still 7.5% underwater based on recent sales comps.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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05-18-2018, 04:22 AM
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#15
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Thinks s/he gets paid by the post
Join Date: Dec 2015
Location: Michigan
Posts: 4,962
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Owning a house does not guarantee that one will be saving. It is an asset that you can borrow against, and many do.
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"The mountains are calling, and I must go." John Muir
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05-18-2018, 05:47 AM
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#16
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Thinks s/he gets paid by the post
Join Date: Dec 2010
Location: Midwest
Posts: 1,789
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Quote:
Originally Posted by Choices
Could be a bit dicey down the road if House is purchased “ with her partner” if there is a split up. May come down to who put how much in and if the house loses value could be a bad situation.
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Yep!
Plus, the news is filled with stories about co-owners forging sigs and refinancing houses then running off with the equity.
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05-18-2018, 06:05 AM
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#17
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Thinks s/he gets paid by the post
Join Date: Dec 2010
Location: Midwest
Posts: 1,789
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Quote:
Originally Posted by Aerides
Depending where you live, many people are just barely above water again vs where they were pre-crash. Our house is zillow-estimated still about 20k below 2006/7 highs. Most anyone who bought in a year or three before that, even with a normal 30 year non-adjustable, spent the past decade underwater and are now just "ok".
I got lucky and bought a place in 2002, sold in 2005 for a 100% gain. But that was luck.
Sure, if someone bought in 2011 they were just at the start of the housing recovery, which lagged the stock market a bit in picking back up. I personally know 3 people who had to just rent+hold their homes, when they needed to move. The alternative would have been selling for a 200k loss (if selling from 2008 to 2011).
Yes, real estate investing can be great. But for someone with zero savings or investments I would not be pitching a home as an investment. I'd be pitching it as stability from rent increases, etc. But she knows that.
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Yeah, so much of home appreciation depends upon the timing of purchase and time in the home.
I would dare say that your "luck" depended, in a large degree, upon your prior history of buying homes, your knowledge of the economy in general, and your ability to say no to high pressure sales pitches (on radio, in the mail, TV, etc.). Your sub conscience, based upon "gut" feeling or prior experience, may have had more to do with it than you even realize. Those of us on this forum may recognize "too good to be true" a little quicker than the ave. Joe/Joanne.
People get into and out of the stock market, while timing, losing tons of money, every day. Some lose everything. Rarely are their stories on TV, since there is no moving van in the driveway, and no outward appearance of loss-unlike foreclosure to tip of the loss. Yet few of us would tell them that stocks should not be purchased-we would tell them to get more knowledge.
If you have figured out the housing "game", and many here have, you will advise youngsters get into a home ASAP and stop losing money to rent. If your experience is more negative, you will promote renting.
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05-18-2018, 07:12 AM
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#18
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Moderator
Join Date: Nov 2015
Posts: 13,879
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Quote:
Originally Posted by brucethebroker
I would dare say that your "luck" depended, in a large degree, upon your prior history of buying homes, your knowledge of the economy in general, and your ability to say no to high pressure sales pitches (on radio, in the mail, TV, etc.). Your sub conscience, based upon "gut" feeling or prior experience, may have had more to do with it than you even realize. Those of us on this forum may recognize "too good to be true" a little quicker than the ave. Joe/Joanne.
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Ah you flatter me. Nope to all the above (ok maybe gut). First house I ever bought myself, and it was in a prior life when I had no clue about economics or investing. It was just the perfect little place for me. I don't think anyone went wrong buying in 02 and selling in 05.
90% timing, 10% instinct (and I made it look pretty nice).
ETA: Oh, and more on the luck thing: A month after I sold (closed) we had a hurricane and the patio screen got ripped up which would have made me have to repair and wait to sell, and within months the S.Fla RE market started to go wobbly.
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05-18-2018, 08:30 AM
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#19
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2011
Location: West of the Mississippi
Posts: 17,169
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Quote:
Originally Posted by Choices
Could be a bit dicey down the road if House is purchased “ with her partner” if there is a split up. ’
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I agree.
I won't go into the gory details, but an Uncle of mine effectively gave 20K to a woman who cheated on his son.
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Comparison is the thief of joy
The worst decisions are usually made in times of anger and impatience.
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05-18-2018, 08:46 AM
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#20
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gone traveling
Join Date: Nov 2011
Location: The Deep South Bay
Posts: 744
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Quote:
Originally Posted by Chuckanut
I agree.
I won't go into the gory details, but an Uncle of mine effectively gave 20K to a woman who cheated on his son.
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I’m well aware of the downsides of partnerships and that money itself is the root of evil. I would love to advise her of pitfalls but I really don’t ever recommend anything to anyone, what’s right for 1 person is not right for the next person. I’ve learned this from my brother that will recommend anything and everything, his last recommendation to my mom was a simple printer, the greatest printer ever made, mom used it for 2 months and kaput.
This topic was only a conversation with my mom of my thoughts of what I would have done with $35k, especially now that my niece is actually looking to buy a house.
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