Many people get into financial trouble overspending on themselves. But a significant minority gets there by overspending on others.
"My husband and I are having a rough time making it from paycheck to paycheck. We make pretty good money. We have four (adult) children and end up helping them every month. We cannot seem to make it without going in the hole in our checking account. Could you please help me with what we should do?"
The answer, of course, is obvious to everyone but the questioner.
Far from heeding basic financial-planning advice -- live within your means, pay yourself first -- some people pay for others first, to their own detriment. Examples include:
- Parents who spend fortunes on their kids' educations but who don't save enough for their own retirements.
- People who co-sign a loan for someone who's not creditworthy or trustworthy, but who can't afford the payments when the borrower defaults.
- People who give away big chunks of their income to charities or religious organizations as they sink deeper into debt.
You have a future, tooI'm not the only one hearing from these people. The financial planners I consulted rattled off their own examples, from the widow whose retirement funds were squandered on her children's ill-considered business ventures to the guy who lost his house because he wouldn't consider a less expensive school for his son.
"He was committed to this private school for his son," even after suffering a big drop in income, said Spencer Sherman, the author of "The Cure for Money Madness" and a planner is Sebastopol, Calif. "Eventually, their house got foreclosed on, and they had to take the son out of the school, so (the boy) had to move and leave his school at the same time."
If you have plenty of money and choose to spend it on others, that's one thing. I'm talking about something else: It's akin to refusing to put on your own oxygen mask before helping others. You may think you're being selfless by placing others first, but you're setting yourself up for financial failure -- and you're probably not doing the recipients of your largesse any favors either.
The message you're sendingTake the example of parents who prioritize their children's educations over their own financial well-being.
"What's the message you're teaching your children?" Sherman asked. "What is the best education if you're teaching them (it's OK) to spend more than they earn?"
Parents who sacrifice their own futures often don't think through how very much this decision will cost them, planners say.
One of planner Delia Fernandez's clients was a nurse who put two children through graduate schools instead of saving for retirement or buying a home. At 60, she turned to Fernandez to find out how she could retire.
"If she had saved in a 401k and scraped up enough for a down payment on a house, she could have had a decent retirement," said Fernandez, a planner in Los Alamitos, Calif. "As it was, we were talking about (how to qualify for) low-income housing."
The two kids she educated? They weren't volunteering any help. Even if they were eager to pitch in, though, Fernandez would argue that it isn't fair to saddle your adult children with expenses you should have saved for on your own.
And speaking of self-sufficiency: Your efforts to help may be undermining other people's ability to take care of themselves.
It's what Thomas J. Stanley, the author of the best-selling books "The Millionaire Next Door" and the more recent "Stop Acting Rich," calls economic outpatient care, and he argues it debilitates far more recipients than it helps.
"The subtle message is that the kids can't make it on their own," said planner Ross Levin of Edina, Minn. "That's an unfortunate thing to relay."