The Ripple Effect

It’s 3AM on a weekday morning and I’m having a bit of trouble getting to sleep – great time to be writing right? There’s some stuff bothering me and I thought getting it out in the open would be good and would perhaps result in some useful advice for this situation.

Source of this beautiful photo listed below article

A short history
I wrote a blog post called “Gen E and why I’m one of them” in January, in that post I told you a tidbit about my family and my parents’ financial history.  I’ve also mentioned before and I’ve stated on my About page that I blog anonymously, I want to share details of my life with you without revealing too much. I guess I’m a little paranoid or something. Keeping that in consideration I really felt I needed to write this post even though it possibly reveals more about me than I want it to:

I moved to Canada at the age of 16 with my parents and siblings. My parents have always been – not quite freespirits – but very much enjoying freedom, self-reliance and logically have been self-employed for quite some time. We moved to Canada as a family because my parents saw more opportunity here than they could foresee in the future in our home country. (Please note, we are not rich, I am not rich and we are not farmers of any kind) So we packed up everything and landed here.

My parents have done pretty well for themselves. They live comfortably and can even afford a few luxuries now. The thing is that lately… it hasn’t been smooth sailing. My parents (and their business) got very royally screwed in January of 2010 by some other companies they dealt with. 99% of this was out of their control.  It’s been downhill ever since. Mid-2010 the lovely CRA notified my parents – while they were paying a portion of their 2009 taxes – that their 2010 taxes would be due in installments soon after. In one 12 month period my parents were forced to pay two years worth of taxes on two business ventures. As you may understand, since it had already been a difficult year this has been next to impossible.  The CRA’s stance on this issue is that everyone should be aware of any possible law that may apply to them *sigh* Let’s not get into that huh.

The current situation
So, that leads us to 2011. They’ve been working hard to keep up with the regular bills and the tax payments and it almost looks like an end is in sight. But there’s still a long way to go… My parents are at this point extremely cash-poor. From what I can see they have really bad cash-flow as most of their equity is tied up in property at the moment. If anything major were to happen right now they would not have the liquidity to deal with it. This lead me to The Ripple Effect, I’ve sung Dave Ramsey’s praises all over this little blog and gave my mother one of his books to read. She enjoyed it and liked his ideas. The change that has occurred in my life with regards to becoming debt-free is spilling over into the life of my friends and family.

I’ve become a bit of a Budget-Nut now that I’m tracking every penny… I preach The Budget to anyone who will hear . As I was leaving my parents house recently we were having yet another discussion about money and I finally pushed them into beginning to track their spending so we could get out of this mess.  I’ve got two laptops so I’ve set up a YNAB file for them on my work-laptop and plan to input everything with them over the next few weeks but I don’t really know where to go from there… and that’s where you come in.

At one point my mother told me ‘You’re ONLY 25 what do YOU know about money?’ I know my parents aren’t stupid and I know they weren’t able to do what they did without some sense of how-to, but I think that at this point I’m a little farther ahead of the game than they are and can perhaps lead them in the right direction. My parents need to get a grip on their debt, become more liquid and improve their situation NOW before it’s too late. I’m worried, my gut-feeling is telling me that this is not a good place and that we need to get out of this situation asap.

My mother has set herself up with an ING account and has begun putting together an emergency fundbut I’m having a hard time convincing her to go for it 100% aggressively fund the e-fund and then move on to debt. We’ve talked about how to tackle their private and business debt but have no game-plan. The problem is that I’m a tad bossy and if giving full reign… I will take the reins. Lol, I don’t think that’s the point here so I need your advice: My parents are willing to do anything it takes to get back on top but are dragging their feet a little at the moment. How do I advise my parents? I’ve told my mother about my budgeting program but she insists  she knows where her money goes, should I really push them into tracking every penny? I just think it might be a useful tool for them… It did wonders for me. In what other ways can I help them, have you gone through this? My parents own several real estate properties, would you sell a property? Do we do Dave Ramsey’s baby steps? My gut is telling me Yes!

PS: I am close with my parents and I organize 90% of their paperwork for them, I am legally authorized to act on their accounts on behalf of them and we trust each other 100%, so that won’t be an issue. The books are generally kept by me and year-end is done by a certified accountant so everything is in proper order in that regard, we have an accurate picture of the financial situation.

IMG source here.

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6 Comments

  1. Andrea
    I think you should try your best, but if they dont decide to do what you suggest, you cant beat yourself up over it. You can lead a horse to water, but you cant make it drink.
    Maybe you should think about framing this through a future lens – projecting future cash flow if there was no debt, using leftover to reach goals previously viewed as unreachable, etc.

    • “You can lead a horse to water, but you cant make it drink.” Hey thanks for that, I know it’s just plain old common sense but it’s hard to see sometimes because it’s so close to me.

      My father is working extra now to get out of the hole, now that I’ve got all the accounts in a row I think they can definitely get out of this with hard work and without having to sell a property but for comfort sake at this point they have made it clear to our Realtor they are open to selling one property to help with future cash-flow, so that’s great! (too bad the potential buyer didn’t show *sigh*

  2. Maybe you should take them to see a financial advisor, or a consolidator – my parents have a very, very similar situation & they always use the “your so young, you don’t even know that much about money yet” line – I think maybe somebody professional to reinforce what you’re saying might help.
    Also, there are a few shows – till debt do us part is one of them – that outline how to deal with large amounts of debt. They’re great to show them that they’re not alone, & they show tips & tricks on how to deal with them.
    There are many methods to deal with debt, but they’re very individual. Some things work for some people, others don’t.

    • My parents LOVE watching Gail! My mom especially gets a kick out of the show ‘Princess’.

      I know I definitely deal with debt differently than my parents, my father is more comfortable with it than I am but my mother still believes that debt can be used as leverage. (oddly, my corporate finance prof is also trying to teach me this and I’m sorry, I quite disagree!!)

      We know a financial advisory, I might pop in with him to see ifhe has any tips, thanks! (Debt consolidation isn’t really an avenue they would want I think, they don’t have much consumer debt, just a vehicle and mortgages and business debt. The way I see it we can wipe all the debt except the mortgages in about a year orso, especially if a property sells… that would be the best I think!)

      I gotta say, it feels better having posted this and looking at it some more… having things clear and lined up makes it so much less scary and confusing and their balance sheet isn’t as bad as I thought it may be!

  3. Andrea, it’s great to see that you’ve had success with your parents. I talk freely about finances with my parents and we help each other out, but there are some things that I think they should do but they seem resistant too. It may just take more time before I can convince them, but I’m working on it. It’s great to see that you’ve had success though.

  4. Wow. This post hit a little close to home. My father as the ability to do well for himself and as a matter of fact, did while I was 19-21. He does well for himself when he lives by himself and I’m there as a constant reminder that he is not in this by himself. Whenever my father is with a woman and gives them control of his finances, he gets ran into the ground. His wife and him bring in 4,000 a month and live somewhere where the cost of living is pretty low. And it drives me crazy because I preach about a budget and all they do is go through money like water!

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