When the bank of Mom and Dad closes up shop

Recently, I had a long email exchange with a reader who asked me not to reprint her story, but gave me permission to discuss it in general terms (I showed her this post and she approved it).

This reader – let’s call her Annie – is 38 years old. For almost all of her adult life, she had been a stay-at-home mom while her husband tried to start several businesses, failing each time. Yet, not only had they survived, they had thrived thanks to a large amount given to them each month by her parents, who were exceptionally well off.

Recently, within a year of each other, her father and her mother passed away, with her father passing on just a few months ago. When the estate was evaluated and the will was read, she found that her parents had almost no money left, as they had lost quite a lot in the housing bubble and the stock market downturn in 2008. What little they had left was used to resolve some remaining debts.

In short, aside from some personal items, she and her family received no cash at all from the estate. Their biggest source of income had vanished from the face of the earth.

Obviously, this family is struggling right now. They had been living an extremely unsustainable lifestyle and, now, they’re being forced to change that lifestyle. What can they do?

First, you both need to find stable income-producing work. I know from their story that their children are now school-aged, so it is acceptable for them to either come home after school and be watched by the oldest one or perhaps find child care for them for that after school period. The parents need to replace that income and the first step in that path is to get income streams coming into the home immediately. The easiest way to do that is to find a job.

Yes, I’m aware that the husband is a budding entrepreneur, but entrepreneurial income streams are neither quick nor are they guaranteed, two factors you need right now. I absolutely encourage him to continue to follow his entrepreneurial dreams in his spare time, but this should not be relied on as an income-producing stream right now.

What jobs should you get? Honestly, it depends on your education and what you can actually apply for. I would suggest, though, that you focus on getting any job rather than “holding out” for the “right” position. You need income streams. You don’t have them.

As with the entrepreneurship, you can always keep searching for the “right” job in your spare time, but for now, you need to be establishing an income stream as well as a work history.

Next, cut the fat – big time. I usually encourage people to eliminate all the excess, figure out which ones you actually miss, then restore them slowly. You’ll find that, surprisingly, you don’t miss a lot of the things very much at all. Ditch your cable/satellite. Ditch your cell phones. Ditch your other services. Clean out your closets and sell the stuff you don’t regularly use, then use that cash as an emergency fund. Then, spend your time doing more family-oriented stuff. Have a family board game night. Watch a movie together. Go to a state park together.

It’s worth nothing that many families are in this situation to some extent. They rely on regular gifts from their parents or grandparents to make ends meet and, because of that, they can afford to live well beyond their means.

If this is you, it’s vital to recognize that at some point, the gravy train will end and that a little less material stuff right now will mean that your life won’t abruptly end when the time comes. Start living on what you actually bring in right now and do your best to save what you’re being given. Put it away somewhere so that it’s not easy to access. Then, just sit on it. Wait until the tides of your life change and you actually need that money, not just want it for something fun.

You will be glad you did, both now and also later on when you actually need the money.

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