Sometimes it's hard enough just keeping track of your own finances. But, as many of us have learned, life gets even more complicated when your parents come to you for assistance with their money matters -- or worse, when they don't ask for help but really should.
Many people, especially those who grew up during hard times, are fiercely independent and hate to relinquish control over any aspect of their lives, especially personal financial matters. Some are downright suspicious when anyone, including their own children, tries to intercede. Others are simply in over their heads with bills but are too embarrassed to ask for help.
But don't give up. Try to become familiar with your parents' financial, medical and legal records, sooner rather than later, so you'll be able to help out if needed. If possible, begin having those conversations while their health and finances are still in good shape so you'll be able to spot any warning signals that something's amiss later on.
- Unpaid bills, late payment notices or utility shut-off warnings.
- Calls or letters from creditors or collection agencies.
- They've had to choose between filling prescriptions and buying food, utilities or other necessities.
- Unlikely magazine subscriptions or cheap prizes -- signs they may be targets of telemarketing or get-rich-quick schemes.
- Seemingly unnecessary home improvements; or conversely, signs that they can't afford needed repairs.
- Uncharacteristically lavish spending on vacations, new cars, etc.
If your parents initially are reluctant to share their financial and legal information, tell them you're working on your own financial planning (budgeting, creating a will, retirement savings, etc.) and would like their advice. That will lead naturally to discussions about their own plans. Or, bring in an impartial party, such as an attorney, financial planner, social worker or trusted friend to guide the conversation.
- Details of all major possessions and relevant paperwork (such as property deeds, car registration, jewelry, etc.).
- Outstanding and recurring debts (mortgage, car loan, medical bills, utilities, etc.).
- All income sources, including Social Security, pension, 401(k), IRA, investment accounts and savings.
- Bank accounts, credit cards, safe deposit box contents and insurance policies, including password, agent and beneficiary information.
- Will, trust, power of attorney, health care proxy, funeral plans and other documents showing how they want their affairs handled.
- Contact information for their lawyer, accountant, broker, financial planner, insurance agent and other advisors.
- Order their credit reports to be aware of all current and past loans and credit accounts, as well as to look for any suspicious account activity. Each of them can order one free credit report per year from the three major credit bureaus at AnnualCreditReport.com.
- Help your parents create a detailed budget so they always know how much money is coming in and going out. Free budgeting tools are available at MyMoney.gov, the National Foundation for Credit Counseling, Mint.com and Practical Money Skills for Life, a free personal financial management program run by my employer, Visa Inc.
- If you're helping pay or process their bills, request that duplicate account statements be sent to you as well, so you can quickly spot any errant activity.
- Set up direct deposit for income sources that allow it, such as Social Security, pensions and IRAs. Also arrange automatic bill payment for utilities and other monthly bills to avoid late payment fees. Just make sure the account they're drawn from is always sufficiently funded.
- Many retirees must file quarterly tax returns -- a daunting task for anyone. Offer to help with the paperwork; or, if they work with an accountant or tax preparer, ask to attend the next meeting.
- To reduce telemarketer calls, register your parents with the government's National Do Not Call Registry. Similarly, to reduce unsolicited direct mail (and marketing emails), register them with the Direct Mail Association's mail preference service.
- Schedule a session with a financial planner for guidance on the many tax, income and expense implications of retirement. If you don't have one, the Financial Planning Association is a good place to start your search.
- And finally, if you're already helping to support your parents financially or expect to be, see my previous blog, Financial Costs of Caring for Your Parents, for tips on coping with the expense.
Don't be afraid to ask your parents if they need help managing their finances. Chances are, in 30 years you'll thank your own kids for the offer.
This article is intended to provide general information and should not be considered legal, tax or financial advice. It's always a good idea to consult a legal, tax or financial advisor for specific information on how certain laws apply to you and about your individual financial situation.
To participate in a free, online Financial Literacy and Education Summit on April 23, 2012, go to Practical Money Skills for Life.