Financial Pitfalls: Failure to Establish Financial Independence

One important step in managing your finances is to become independent of outside help. Usually parents or in-laws offer this help and it may be small amounts of money monthly or it may be large gifts of money annually. If your parents are in a position to give you money this is can be seen as a blessing. Many parents are able to help their children with a down payment on a home. They may also help with the purchase of your first car.

While these gifts are nice. It is important that you do not become dependent on them. It is okay to accept gifts from your parents, as long as they can afford them. This article is not intended as a criticism to parents giving their adult children money, but rather as a caution to those involved. The authors of “The Millionaire Next Door” speak extensively about the dangers of becoming reliant on these gifts.

The gifts can lead to overspending by those who receive them. Often they become reliant on the gifts. When their parents pass away, they find themselves in financial trouble, because they never learned self-discipline or how to budget accordingly. Many use the gifts to increase the quality of their lifestyle. This can mean a more expensive house, and cars. It can mean private school for their children, or it can mean long vacations.

If your parents choose to give you financial gifts you can choose to use that money wisely. Instead of spending it all you may choose to invest it. You may choose to pay off debt. It would be wise to set aside money for your children’s education, and your retirement years. If you do not allow the money to enter your monthly budget, then you are not reliant on it. You should still be putting your own money away into a savings account as well.

I personally have seen the devastation that this cycle can cause for a family. It is difficult to change old habits. It is important to begin practicing wise spending at the beginning of your marriage, so that you can enjoy your later years in life. This can also put you in a place where you can help your children through school.

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