What are some of the first things that come to mind when you think of Thomas Jefferson? Third President of the United States, Declaration of Independence, Founding Father, Inventor, Architect… It is pretty amazing what he was able to accomplish in his time, and if you ever get a chance to visit his home in Virginia, Monticello, I highly recommend it.
Money Problems Haven’t Changed Much
Accomplishments aside, Jefferson lived most of his life buried in crushing debt! Even with all of his countless achievements, he died in 1826 with over $100,000 in debt – which is roughly $1.5 million dollars in today’s terms! So how did he end up in the hole after all the years he spent working and contributing to our budding country?
- He inherited a ton of debt from his father in law
- A lot of people he lent money to never paid him back
- Farming didn’t provide a stable income
- He spent beyond his means
- The Panic of 1819 financial crisis
Even though a LOT has changed in the last few centuries, there are still plenty of parallels in Jefferson’s financial situation that we can relate to today. Chances are one of your close relatives has bad debt problems (unfortunately there are several in my family). Friends and relatives not repaying loans is still a common problem today, and I’d wager that farming is still a difficult way to earn a living. Tons of people still continue to spend way more than they make, and we are still trying to recover from the 2007/2008 financial crisis.
How Are Your Parents Doing?
I was so shocked when I learned about the debt that Jefferson inherited and was never able to overcome that it prompted me to talk with my parents and find out how they are doing financially. Unfortunately I found out that between the two of them they have over $200,000 in debt and they’re less than a year from retirement! I started to panic. Maybe that doesn’t seem like a lot of money, but that amount of debt at their age, with less than $3000 in savings between them, is so much worse than I ever imagined it could be. I thought that all of that debt would be dumped on to me if they were to die tomorrow, but Jeff Rutherford kindly corrected me and fortunately that is not the case. That doesn’t mean that their retirement years will be easy though – if they have trouble paying bills, get really sick, and need help paying for medical care not covered by their insurance – I’ll be the one they call first. And that’s scary to think about. Not everyone’s parents may do that, but I want my parents to feel they could come to me for help if they really needed it.
It’s so easy for us to spend so much time focusing on our own bills and our own financial goals that we totally forget about checking in on our parent’s situation. If your mom and pop are already debt free and happily enjoying retirement, jump for joy and count your blessings. If your parents sound more like mine, better take the time to talk to them now and put a plan together asap. Get your siblings involved too if you can and don’t be afraid to ask for the nitty gritty details of mom and dad’s expenses, savings, loans, assets, wills, and trusts too. Make sure they aren’t forgetting to budget for big annual items like property tax, car repair, house maintenance, healthcare, rising insurance costs, and travel.
It’s Never Too Late To Take Action
I regret not taking action years ago when my mother got divorced and started living on her own. She admitted to me just recently that she’d never made a budget before. (What?!) After I sat down with her and calculated out all of her expenses, we were both horrified to realize that she’d been over spending by about $2,000 a month for years.
My dad’s financial situation isn’t any better and unfortunately he’s battling cancer and unemployment on top of all of his money problems. So how did things get this bad? They didn’t plan well, stick to a budget, manage their debt, or anticpate how much they could lose in the financial crisis. I’m doing what I can to help both of them each month but I definitely don’t have the means to pay off their $200k in debt anytime soon and it still scares me.
Check In Regularly
Now that I know the details of how bad their situation is, I’m checking in on them all the time asking for udpates and doing my best to keep them motivated to whittle away at their debt. I put together a budget for them and am helping them keep track of their expenses each month. They’re finally facing their fears and doing their best to take control of their situation, which is all I can really ask for. I try to point out ways they can cut back on spending and find ways they can be more resourceful with what they already have.
It takes a lot of patience and perseverance though because we all know that parents don’t want to be lectured by their kids. Don’t let your mom and dad use that as an excuse not to talk to you though. It gets easier and easier the more you talk to them about their finances. The way I look at it, if they haven’t been responsible enough to get themselves on track financially, it’s up to us to straighten them out! We owe it to them and to ourselves.
Untemplaters, do you talk with your parents about their financial situation regularly? How have their money circumstances impacted your life?
Financial Success for Young Adults says
It’s nice to know that debt does not get inherited anymore, but you’re right that the burden may fall on you anyway if you are responsible for assisting them in their old age. I’m scared to have this talk with my parents because I’m working on building my on nest egg.
It definitely is a scary conversation to have when we are so busy working to get ourselves in good shape. Part of me avoided talking to them because I wanted to put off the chance they’d ask me for money as long as possible. I’m so glad I finally did though because my mom especially had no clue how much she was over spending and she was addicted to buying clothes. When I first started to help her she would try to hide her shopping receipts from me. It takes a lot of patience but she is starting to make some progress!
Money Reasons says
Ironically, I read that Jefferson was one of the most intelligent Presidents too. Just goes to show that being rich and being smart don’t hang out hand in hand always.
Haha, true true. Thanks Money Reasons!
Being in debt is bad; not doing anything about it is worse!
Lucky for me my parents were better than me when it came to managing money!
Financial Samurai says
MoneyCone – What happened then? Did your parents ways not rub off on you? I’m always interested in the psychology of PF.
Yep so true. My dad definitely has tried harder than my mom to keep his debt down but my mom is getting better. That’s nice for you that your parents were good with money!
Financial Samurai says
Debt really is a killer if you don’t have the money to support it.
Regarding paying off a parent’s debt if/after they pass…… are kids required to do this? I have to imagine there is a law that protects us from other people’s problems, even if we are related.
Let’s say your dad took out a loan and put his life savings and the loan on black and it came up red. I don’t think you have to pay it off. That’s why loan sharks and their thugs exist, to try and get that money back before you die b/c they know once you’re dead, there’s nothing they can legally do.
I’d check into this…. b/c if this is true, then maybe the last 5 years of our lives, we should giveaway all our money to our children, and then get into MASSIVE debt and live like rockstars!!
I’m gonna go check in on my parents this week and ask how they are doing. Thnx for the reminder!
btw. C’ville is beautiful!
Jeff is right – we are off the hook if we haven’t co-signed. What a relief! What will typically happen is if they have debt, the assets remaining in their estate at their passing will be used to pay off the debt first (or the kids could get a loan to pay it off if they don’t want to sell), and then whatever is remaining will be distributed to the family.
Jeff Rutherford says
While I appreciate the spirit of your article, inheriting debt is almost nonexistent.
Whatever debts your parents have at their death, those debts are incurred by their estate. If their estates don’t have the funds to pay, those debts gouncollected. You’re not personally liable unless you co-signed on any of those loans or credit cards. If not, banks and credit card companies can’t pursue you for those debts.
Regardless, common sense financial advice still applies:
Never use credit cards.
Never finance a car.
Live below your means, and save money.
Plan ahead for major financial events (college education for children) so you don’t have to borrow money.
Yes you’re right about not inheriting our parents debt if you haven’t co-signed – PHEW! 🙂 Thanks for letting me know, I’ve updated the post. I hope my parents can start turning their finances around because I don’t want their retirement years to be filled with money stress. They’ve worked so hard for all these years, I want them to be able to relax for the rest.