Relatives do the dumbest things...

[Christine]

I think my uncle who is now about 60 could qualify. He is a kind man but with something like dyslexia only it affects his ability to manage money.

The one good thing he did was to become a teacher and keeping his work at the college where he first started working. So he will get his pension in a few years.

He started well by getting max student loans during all his education. Including a couple of extra years to complete all the exams. And sleeping on friends sofas since every year he went on holiday as soon as the new loan hit his account.

When he got his diploma he heard about the deal where the state will refund half his student loan payments each year if he agrees to teach in a college where they lack teachers. So he moved to this small remote town and started working. Only he did not send in the very simple application required for his student loan refund so he never got any.

So he started paying only half anyway "since the state should pay the other half". But as you know loans don't work that way. They start growing. So at 60 he owe more than when he started.

One good thing about moving to a small remote town is that you can afford buy a house much earlier. So his siblings and parents adviced him to do just that. But to him it was too much hassle. Around 15 years later they found oil nearby and the house prices skyrocketed and all his friends earned 20x or so on their houses. But he had no house. Only his rent skyrocketed.

I don't see him very often because he can't afford the plane tickets to come visiting and he is too proud to let his brother pay for him to come. I suggested to his brother I could go visiting him - but he said I'd better not - he is too ashamed of where he is living. Won't have his siblings visiting either.

But when I see him - years apart - he is the most easygoing and nice uncle you can imagine. And very smart and clever in his field. Just not with money. It's very strange this.

[youbet]

Quote:

Originally Posted by ERD50 I wonder if the "the union has taken care of him and he'll be set for life at 55 years old" mentality played a role in this? Not a union issue specifically, but just the idea that 'someone else' will take care of you, so you never learn how to fend for yourself, never learn even the basics. So you are helpless. -ERD50

I've noted the same thing from MegaCorp types, especially managers and professionals who toiled at the same company their entire careers. Used to MegaCorp policies and the provided benefits (pension, HI, 401k match, etc.) they seem lost when contemplating life in the real world, say when trying to open their own business, etc.

Not everyone, of course.

[youbet]

Our family genes don't seem to foster the types of behavior being related here. Lotsa friends and acquaintances who seem to have lost a french fry or two from their Happy Meal, but the relatives generally seem to be doing OK.

[Hermit]

Quote:

Originally Posted by Music Lover I can't think of any family members that have done anything that bad, but I know of one co-worker who blew it. 4 years ago he pulled his pension from MegaGovt just before age 50 when it gets locked in, and of course took a bit of a tax hit. At the time he was 6 years away from a monthly pension, while not large, would have been more than enough to live on comfortably with his wife who also will be receiving a govt. pension. One of the reasons he pulled his pension was that his wife was going to continue working and they'd have the salary and benefits. 6 months after he pulled his pension his wife caught him cheating and they divorced. They had a large mortgage on their house and neither one could afford to buy the other person out so it was sold and they split what little was left. After all the dust settled and all the debts were paid, he was left with about $200k from his pension, an 8-year old car, and monthly rent of $1000. At age 50. He's now 54 and that $200k is quickly running out and he's been working minimum wage jobs (he has no transferable skills from the govt. job). Had he stayed at work, he'd now be 2 years away from a monthly COLA pension and set for life.

I agree that it wasn't the best of moves, but I can relate. At 35 I left the government employment with exactly 15 years of service. I pulled the money out of the retirement system (all 10K) and never looked back. I pulled the money out to make sure that bridge was burned. For some, including me, working for the government is not a good thing to do. And by the way, we purchased our first IRAs with that money.

[Dash man]

Quote:

Originally Posted by travelover It seems to me that the union delivered a good pension to him, the problem was that he took it as a lump sum and squandered it.

I agree the pension benefit was good, but they let him down in how to manage it once he left the job. From my experience in Megacorp, we were offered plenty of information and planning tools to help us understand the best way to manage our benefits. The tax consequences of taking a lump sum from a pension payout or 401k distribution were prominent in the material. But my hard headed BIL never received any advice and plunged ahead with his actions. At least his health care is taken care of as long as he uses their limited network of providers.


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[marko]

Quote:

Originally Posted by ERD50 I wonder if the "the union has taken care of him and he'll be set for life at 55 years old" mentality played a role in this? Not a union issue specifically, but just the idea that 'someone else' will take care of you, so you never learn how to fend for yourself, never learn even the basics. So you are helpless. -ERD50

That was the first thing I thought the minute I saw the word "union". A BIL has a similar mentality.

[travelover]

Quote:

Originally Posted by Dash man I agree the pension benefit was good, but they let him down in how to manage it once he left the job. From my experience in Megacorp, we were offered plenty of information and planning tools to help us understand the best way to manage our benefits. The tax consequences of taking a lump sum from a pension payout or 401k distribution were prominent in the material. But my hard headed BIL never received any advice and plunged ahead with his actions. At least his health care is taken care of as long as he uses their limited network of providers.

Judging from your BIL's other actions, it would seem that he would have ignored any warning. I'm skeptical that he was given no warning, but you evidently saw every document.

[HFWR]

Money management is a mental block for many seemingly intelligent individuals.

[H2ODude]

Quote:

Originally Posted by youbet I've noted the same thing from MegaCorp types, especially managers and professionals who toiled at the same company their entire careers. Used to MegaCorp policies and the provided benefits (pension, HI, 401k match, etc.) they seem lost when contemplating life in the real world, say when trying to open their own business, etc. Not everyone, of course.

I saw this very much in local government where it's all about security and the pension. I assumed I'd never stay long enough to materialize one (and in fact was terminated for political reasons 15 years into first) hence loaded up the 457 and 401. Was able to buy in the years in 2nd to do fairly well though.

I used to counsel folks to do tax deferred but it was like talking to a brick wall. Since I've retired, the state has elected to not do any cola last 4-5 years (which is fine by me, it's one of the more secure state systems) and I feel sorry for those laborer folks who rely on that and SS.

[Walt34]

Quote:

Originally Posted by Walt34 I'll save the story about my stupid idiot moron nephew for later....

Quote:

Originally Posted by DROPOUT Its later!!! I'm ready for it!!!

Okay, the dumb nephew.

He majors in Fraternity for 4 years at U of MD and parents (wisely) stop paying after that. He gets a job at the university and later graduates with a degree in marketing because employees can take two classes a semester for free. So at least he was smart about that, but I suspect he did it so he could stay involved with fraternity life. He and his wife were later houseparents at a sorority. For about ten years.

So he has his marketing job at UMD, until the position is eliminated and he is now jobless. I later found out that during this time he's lost two houses to foreclosure, been kicked out of rentals because he didn't pay the rent, and has been sued for back taxes five times by the state for nonpayment of those. During this time he did have a steady income, there was no reason for it.

Did he think these bills were just going to go away?

During the housing boom he gets a job selling real estate with (you guessed it) a former fraternity brother and for a while does very well, selling something like $4 million in oceanfront condos in a year. Buys the Lincoln Navigator and some other toys, nice restaurant meals, etc. but he doesn't save a nickel. Oh, and he doesn't takes care of his diabetes, he does like his beer. Now, as he puts it, he "gets a 10% discount on a pedicure" having lost a toe to gangrene. He may also go blind.

We all know how this turns out. Oceanfront condos stopped selling. Now he and his wife are bagging groceries at a grocery store.

The guy is great at getting along with other people and to talk to him he seems reasonably bright and is very knowledgeable about some things. But apparently he can't plan past next Tuesday.

[haha]

Quote:

Originally Posted by Music Lover I can't think of any family members that have done anything that bad, but I know of one co-worker who blew it. 4 years ago he pulled his pension from MegaGovt just before age 50 when it gets locked in, and of course took a bit of a tax hit. At the time he was 6 years away from a monthly pension, while not large, would have been more than enough to live on comfortably with his wife who also will be receiving a govt. pension. One of the reasons he pulled his pension was that his wife was going to continue working and they'd have the salary and benefits. 6 months after he pulled his pension his wife caught him cheating and they divorced. They had a large mortgage on their house and neither one could afford to buy the other person out so it was sold and they split what little was left. After all the dust settled and all the debts were paid, he was left with about $200k from his pension, an 8-year old car, and monthly rent of $1000. At age 50. He's now 54 and that $200k is quickly running out and he's been working minimum wage jobs (he has no transferable skills from the govt. job). Had he stayed at work, he'd now be 2 years away from a monthly COLA pension and set for life.

Finally the taxpayers get lucky!

[harley]

Quote:

Originally Posted by mystang52 In the interest of brevity, I'll just say that over the years we've had numerous personal finance discussions, and he's made innumerable colossally stupid decisions.

I just don't understand this. Without going into details, my brother and his wife have made so many financial decisions over their lives together (and after he died), and with every opportunity for a decision they make the one that to me seems obviously the worst possible one. Why? How? I understand (as DW constantly tells me so) that what I consider patently obvious logic isn't always the same as someone else's logic. But to make THE worst decision over and over? How does that happen?

I also had a coworker back before I FIREd who was very interested in the fact that I was going to be able to retire by 50. He wanted to know how we had done it. I spent a few lunches with him over a couple of months explaining about maxing out the 401(k), saving outside of that, paying yourself first and living on the remainder, low cost investing, LBYM, basic stuff. He really enjoyed the conversations and I felt good about helping a buddy move toward FI. Then bonus time came. We both got somewhere around $5K. Mine went into savings, minus a small celebration. I came in to work the next Monday and there he was on a new Kawasaki Ninja, that easily cost twice what he got for the bonus. I just slapped my forehead and walked on. I didn't even say anything when, a couple of months later, he got a major speeding/reckless driving ticket and ended up having to ride the subway and bus for a year. I was proud of my restraint.

[Souschef]

You cannot fix stupid

[harley]

Quote:

Originally Posted by Souschef You cannot fix stupid

My immediate response to this was going to be that the people I know aren't stupid. Fairly intelligent in fact, but they make stupid financial decisions. So if we're going to drop into trite quotes, and "stupid is as stupid does", then I guess they are stupid, but are able to make some intelligent, non financial, decisions.

[Olbidness]

My Ex-FIL cashed out his retirement and bought goats. Gave a whole new meaning to the "stock market" . Unfortunately his money management skills were passed along to his daughter also.

[haha]

Quote:

Originally Posted by Olbidness My Ex-FIL cashed out his retirement and bought goats. Gave a whole new meaning to the "stock market" . Unfortunately his money management skills were passed along to his daughter also.

It could have been llamas.

Ha

[Olbidness]

Quote:

Originally Posted by haha It could have been llamas. Ha

Or Emus. The in-laws always had some get-rich-quick scheme they were working on. It wouldn't have been so bad except they were always trying to give me financial advice. I just about bit my tongue in half.

[brett]

I think that most people have a friend and/or a relative that fits the description. We do-and more than just one.

As someone else noted, you can't fix stupid.

[MRG]

It's not stupidity, least for some. A buddy of mine will never be able to retire, but he's smart.

He'd told me once he and DW staged a divorce. They actually legally divorced each other with no intention of dissolving their marriage. No one moved out of the house! Why? So they could get a QDRO and collect his profit sharing! Guy had a couple of hundred thousand that he could not access so they stage a divorce(they did the entire process) so she gets the money and pays the penalty. I just shook my head in disbelief, then he gave me credit for their hair brained idea. Seems years prior we had talked about how a person could access the money and that was a thought I had. I NEVER said it was a good idea, just it could work.

Really a smart guy about some things, money isn't one of them.

[aja8888]

I have three step children from my wife's former marriage. They are in their late 40's since she had them right out of high school. The three kids started out fine with marriages, jobs, purchasing houses, etc., but after several years, all three got divorced within 2 years of each other and seemed to get the lousy end of each divorce. This was due the their ignorance about how to go about the process.

Now all three are hooked up with spouses/SO's that are worse off than the ones they left. All three are living from paycheck to paycheck, ended up losing their former houses in the divorces, have no retirement savings and have occasional had to "borrow" funds from us to slide them over a rough patch, which there have been several.

DW is beside herself over their ignorance and lack of planning. This is an ongoing process with them (after 3 years) and there is no good future for each of them in sight. One kid has already completed (we think) another divorce. Like someone above said, you can't fix stupid!