The right thing may be wrong
Anyone who reads self-help books is familiar with the idea that “should” is the dirty word of the 2000s. Thoughts like “I should love to exercise and be 20 pounds thinner,” or, “I should be a stay-at-home mom,” or “I should be a working mom” drag you down and make you see your life through the lenses of others.
“Should” can be just as dangerous to your financial bottom line. Let’s look at some examples where “should” needs to make way for common sense.
“You should refinance your mortgage to a 15-year loan.”
With today’s interest rates hovering near 3 percent for a 15-year mortgage, everyone from radio personalities to your barista is telling you that you must refinance so you can pay your loan off early.
I am a huge fan of the no-mortgage retirement. However, even with a lower interest rate, a 15-year mortgage comes with a higher payment than the 30-year one you currently have. What if you lose your job or have a large and unexpected expense? That 15-year mortgage could come with a payment that you cannot make. What if, instead of retiring that mortgage early, you end up losing your house because you are unable to make the higher payments?
How about just paying twice as much on your mortgage within the 30-year loan and directing the extra to principal? The effect will be almost the same. You’ll pay the mortgage off much earlier than 30 years. However, if you encounter bumps along the way, you can always scale back to the minimum payment on the 30-year loan until things are looking up again.
“You should drop everything to care for your aging parents.”
I know your parents are great people and sacrificed a lot to raise you. However, if you interrupt your career to cook, clean, bathe, attend medical appointments, wrangle with insurance companies and otherwise act as caregiver, there are long-term repercussions.
Here are some potential pitfalls to an interim career as caregiver:
• Your Social Security benefits will be lower.
• Your retirement nest egg will be smaller.
• Skills and professional networks could become rusty and reentry to the workforce difficult. • Your health could suffer. • The relationship between you and your care recipient may become strained.
• Your marriage and relationship with your own kids might suffer.
If you are thinking that I am a cruel, money-is-everything financial person who would leave my parents out to be eaten by wolves when they become infirm, don’t worry for my mom and dad. There is another way.
Thanks to our aging population, there is a new group of professional caregivers in society. For a fee, they can help you with medical payments, finding in-home care, nursing home shopping, driving to appointments, bill paying and more. A professional can quickly and effectively handle caregiving activities that might take you several hours. This allows you, beloved daughter or son, to remain gainfully employed, mentally fulfilled and enjoy a more pleasant relationship with your parents.
“You should pay any amount for your child to get a good education.”
The average young adult is graduating with $37,000 in debt for an undergraduate degree. Since many are graduating with no debt, that leaves plenty with a tab of $80,000 or more. Without a medical or advanced degree. Where were their parents when these students were makings these financial choices? Unfortunately, they were probably cosigning loans and sabotaging their own retirements.
Listen up, parents. If you haven’t yet learned to say “no” to your children (“No, you can’t have the latest iPhone,” “No, I won’t pay $200 for your blue jeans.”), start before the college application process. Junior wants to attend Faraway Private University for an English degree he can get an hour from home for half the price? The answer is, to quote Meghan Trainor, “No.” Or, “Yes, but you have to pay for it and I’m not paying off your loans because if I do, I will have to move in with you because I can’t afford my own retirement.” Something like that.
Peer pressure wasn’t productive as a teenager, and it’s no better for adults. Don’t let the “shoulds” of the world stand in the way of making sound, long-term financial decisions that are best for you.