Dear Pete,
My son lives with my wife and me, and it seems like there’s no end in sight. He’s 25, takes home about $2,000 per month, yet he claims that he never has any money. He has student loan payments of $400/month, but he doesn’t have any other significant bills. He’s not even paying us rent. I feel like he’s taking advantage of us. He hasn’t saved a dime. How do we fix this? — Martin, Champaign, Ill.
Dear Martin: I view adult children living with their parents the way I view spelunking. There’s nothing wrong with entering the cave, but there’s a big big problem when you don’t have a legitimate plan to get out.
He is taking advantage of you, Martin. It wouldn’t bother me if he were leveraging your kindness to produce a favorable outcome such as paying off his student loans quickly or accumulating bundles of money, but he’s doing neither. That scares me, and I think it scares you, too.
The temptation is to make excuses for him. He just graduated. The economy isn’t good. We like having him around. None of these common excuses solve this very common problem. But to be fair, he’s never had to do this before. So show him, and then send him on his way.
It’s time to launch him. As tempting as it may be to stomp your feet and say get out, don’t do that. It’s in both of your best interests to create a sustainable plan that will prevent him from boomeranging back under your roof. He has no savings, no clue how to control his spending and he can’t find rent money buried deep inside of his $2,000 monthly income.
You can help him fix all three of these deal breakers in just three months with just three simple steps.
Begin by researching apartments in your area. Good news: I already did that for you. He can find a place in Champaign for about $700/month, or he can reduce that by getting a roommate and help solve some other parent’s failure-to-launch problem. He shouldn't really spend any more than $700, based on his income. He can easily get away with spending less. It’s his first place. It’s not going to be the Waldorf. Which is part of the point. He needs to earn his living. Sure, an $1,100/month apartment would be much nicer, but he can’t afford that.
Next, help him free up $700 of cash flow every month. There are two ways to do this. He can either start paying $700 more per month toward his student loans, or he can put $700 into a savings account separate from checking. If he gets paid bi-weekly, just have him peel $350 from each paycheck right off the top. If he waits until the end of the month to find $700, he’ll only find himself a fistful of disappointment and a seat in your recliner.
He needs to pay down debt or save money for a minimum of three months. I prefer the savings route. If he can’t do it, everyone involved is in serious trouble. As it stands now, your son simply needs to learn how to handle money. If he can’t create $700 per month of positive cash flow, then money isn’t the problem. You have to teach him how. Leading by example can win half the battle, but detailed instructions are necessary as well.
There is an alternative: You carry on with no plan. If that’s your choice, which is a choice by the way, there is no path to victory for you or your son. You will simply continue banging your head against the wall, and his financial habits will get worse and worse.
Schedule a meeting with your son today. Remember, he’s never done this before and you’ve never been on this side of the table before. Acknowledging this will help keep emotions in check. Discuss the concept with him, set a timeline, and get him excited about finding a place to live that will cost him $700/month.
The best case scenario is your son moves into his own apartment in three months. He’ll have $2,100 in his savings account, he will have broken his addiction to spending money on consumables, and you can walk around your house in your underwear again.
Peter Dunn is an author, speaker and radio host. Have a question about money for Pete the Planner? Email him at AskPete@petetheplanner.com
