Big Changes to Public Service Loan Forgiveness Program
Today we have a guest post from OP who is a 28 year old social media marketing manager in Dallas, Texas who makes $80,000/year in income and has $60,000 in student debt, $25,000 in retirement, $5,000 in credit card debt, and $10,000 in emergency savings. She gives her realistic take on why giving to her family is a must, and Snowball chimes in with what we’ve learned through our community!
Ever since I was young I was taught that family comes first. This meant that, if my mom got sick and someone needed to help out with our family business, I would take a semester off from school to help (no questions asked). If a family member had a medical bill that was going to go into collections, I would dip into my savings to help pay it off. When I graduated from college and landed my first real job, giving back a certain monthly amount to my parents was an absolute given. My cousins before me had all done this with our aunts and uncles, and this was seen as a sign of respect and honor for everything our parents had sacrificed for us to come to America.
Over the course of the years, helping out my family has ranged from a $5,000 personal loan I took out with 20% interest to pay a last minute medical bill for my uncle (before I had any real savings), monthly payments to my parents of $300 to help with their bills, $1,000 to my niece to help pay for her private school, and $750 to help my parent’s good friend because their son needed a loan. Each time, I’ve said yes and put my family first above my own needs.
One time I had casually mentioned giving money to my parents to my colleagues over lunch, and they were astounded. Why wouldn’t I take care of myself first, and pay down my student debt and save up my money? Why did my parents need my help if they were grown adults? Did people even do this nowadays? I was a bit shocked, and over the first few years out of school, I struggled a bit with my cultural and family identity. I questioned why I had to take on the burden of taking care of my family and my future self.
Today, I’ve come to terms with both my identity and with how I can make giving to my family work for me and my future self. As much as I am an American, I am my mother’s daughter who cares about my family and wants to respect my parents, our culture, and their sacrifices. For me, I auto set aside $300/month in my budget to my parents. This is absolutely not negotiable, and I will do everything it takes in my finances to work around it (including cutting back on my own expenses). I have, however, changed how I think about other payments to family members and how I choose to give the money to my parents.
I’m proud of the steps I’ve taken to build a future for me and my parent’s, and wanted to share some tips I’ve accumulated over the years:
Lesson 1: Give the right amount.
First off, I just want to state this loud and clear, it’s okay to give money back to your family if that is important to you, and don’t let anyone else tell you otherwise. It IS important to understand who you are giving the money to, what that amount is, and how that fits into your financial goals. After all, the better you are financially, the more likely you will be able to help your family in the future.
Snowball Take: How much should you give and what are financial goals? You need to set a budget to understand how much of your take home pay you can set aside to give (on average, we have seen our community give a wide range, but it roughly falls from $50-$300 or 1%-5% of their take home pay). Financial goals can include paying down debt, setting up an emergency savings, retirement, investing, etc.
Lesson 2: Learn to say no.
This is probably the hardest one for me. You need to learn to say no beyond the amount you can give. For me, I wanted to help out my parents, but it wasn’t as important to help my extended family. I always just felt guilty and didn’t know how to say no, but after I paid the money I would feel miserable and harness resentment towards the rest of my family. For example, that $5,000 personal loan cost $1,000 in interest and hurt my credit score by 100 points.
Snowball Take: How do you say no? Set boundaries, and practice language to say when you are in this situation. For example, you can say “I’m really sorry but I can’t help you financially. Is there anything else I can do to help?”
Lesson 3: Build for the future, not for the short term.
This didn’t come intuitively to me until I chatted with a Snowball financial coach. My parents are getting old, and it’s important that they have a solid financial future. If not, I know the burden will be on me to help them. I’ve learned to understand where the money I give my parents is going and how to make money work for their future. We ran through their budget, and I realized they were using most of the money to pay off excessive expenses. Instead, we cut expenses and set up a joint high yield savings account, and we are building up an emergency savings.
Snowball Take: What does “work for their future” mean? This could be anything that helps them in the long run financially including setting up an emergency savings fund, helping with the mortgage or a downpayment, health insurance, etc.
Lesson 4: Help comes in different ways.
Saying no doesn’t mean that you aren’t helping your family. Help can come in many shapes and forms, and it doesn’t have to be all monetary. For example, I recently offered to help my niece review her resume, set up her email account, and showed her where she can find job postings. This helped her tremendously when she ended up landing a nursing job that paid her $60,000 annually.
Snowball Take: This is a GREAT way to help your family! We’ve seen our community help with career (e.g., resume, job postings, etc.) and education goals (e.g., tutoring, college applications, etc.).
Lesson 5: Know your financial weaknesses.
It’s important to understand your financial situation to see if it even makes sense to give money to your family. For example, when I had that $5,000 personal loan to pay off, I was still paying my family $300 a month and additional payments. Because of this, I ended up missing payments on the loan, incurring more interest, and hurting my credit score. Now I know that I need to be on solid financial footing and have a financial plan to drive my decisions.
Snowball Take: We think this is one of the most important lessons! You can only help others if you are in a good position, so make sure you do a financial review to understand where you stand.
If you would like to figure out your own situation, feel free to schedule an intro coaching call with us here.