# Dealing with family who have little financial knowledge



## callyhan (Dec 7, 2010)

My sister in-law wants to buy a house. She is early thirties, single, a teacher at a catholic high school in a small Ontario city. My in-laws (all of them, mother, father, sister, aunt/uncles) do NOT talk about money. When my partner was prodding his mother for the status of his sister's student loans she said "that's personal, I can't ask that kind of thing."

His sister has terrible spending habits from my perspective and little amount of info I have gained from conversations. She has been a full-time teacher for >5 years now, has lived in a reasonably priced apartment, and drives a used Camry. From the outsiders perspective, she seems financially responsible. But when I asked her how much she has for a down payment, she says she has 15K saved. She still has outstanding student loans and only pays the minimums, even though her income and lifestyle would have allowed to have her pay them off completely if she had some kind of plan for payback.

She says her budget for a home is 125K, and was "floored" when the bank rep told her she was approved for 277K. She has no idea what kind of mortgage she should be getting. She relies on the advice of the bank (makes me shudder). She only has about 3K in a RRSP so far, and although she has a pension, our limited conversations on the topic make me think that saving is not in her realm of thought. She spends a ton of money on what I perceive as worthless stuff, baking trinkets, crafting, miche purses, scentsy candles, etc. 

I really care for her well being, and I don't want her to get in over her head and be "house poor". I don't believe she has enough saved to deal with closing costs, CMHC insurance, moving costs, utilities deposits, etc! I don't believe she has a budget, and since she has never had to pay for utilities other than cable/internet, I don't believe she has realistically allocated for those costs. 

She is also quite immature for her age, I think it's something to do with being a high-school teacher. She spends alot of money on clothes, hair, jewelry, beauty without looking for bargains. I don't believe she is independent enough from her parents to handle the maintenance responsibility of a home on her own. She is not the type of person to shovel driveways, clean gutters, etc. I can see once she moves in, my partner will begin to get ALOT of phone calls asking for help when things go wrong. Makes it difficult for us as we are at least an hour drive from her.

How the heck can I help her, without humiliating her? I am younger than her, and I don't want to come off as smug or superior if I offer her advice. And I don't want to make her feel like the goal of home owning is unachievable! I just honestly don't want to see her struggle and be unhappy. I think she should really get some basic personal finance info first, give herself a year or two to save and build her networth before investing in real estate. The problem is their family does not talk about money, they tiptoe around all uncomfortable topics really, and only allow polite conversation at family get togethers. I don't want to upset the mother/father in-laws either and make them think I am sticking my nose where it doesn't belong. My family is the opposite and we are pretty much wide open about our financial goals and planning.

How should I help her? Has anyone else had issues like this?


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## crazyjackcsa (Aug 8, 2010)

Without reading the post, the answer is clear. Keep your mouth shut, and don't help. 
After reading the post, the answer is clear. Keep your mouth shut, and keep your nose to yourself.

You obviously don't hold your sister in law in high regard and seem to think you have everything figured out. That's your problem. Not hers.


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## callyhan (Dec 7, 2010)

crazyjackcsa said:


> Without reading the post, the answer is clear. Keep your mouth shut, and don't help.
> After reading the post, the answer is clear. Keep your mouth shut, and keep your nose to yourself.
> 
> You obviously don't hold your sister in law in high regard and seem to think you have everything figured out. That's your problem. Not hers.


Fair enough. My first post was kind of bratty. I truly care a lot for her though, she is such a positive happy person, and cares so much for her students and career. While I don't agree with a lot of her spending habits I'm sure most of it comes from not being taught the basics of household budgeting and personal finances from anyone else in her family.

How would your opinion change if I mentioned that she has been asking us questions about home buying? I've already mentioned to her that I know how overwhelming the process can be and if she wants to chat about it all I am more than willing. I'm also a professional in the construction industry, so I've offered to help with home inspection, etc. if the time comes.


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## Hobotrader (Feb 10, 2013)

I don't think you have a problem there. But people are how they are. I think in society they made money into taboo, it's probably religious in origin since most religions abhor money lol. As a result, people won't have 'that discussion'. I have a sister that is in much worse shape (dozens of thousands in debt, no assets, low income), she's a communist. There's very little I can do. Money is a psychological thing and personal valuation. Some people don't value it and never will, some people hate it (like my sister) though in total contradiction, need it and would take/want more. I gave her books initially (she's 6 years older) but to no avail. It's kind of the same with fat people, they will lose weight when they decide its a appropriate or when they value it enough. It's not just a knowledge gap, but it's also an 'do I give a **** gap?' or 'do I want it enough gap?'...Unfortunately, our society has become so rich/abundant + safety netted that people are able to just throw it all in the wind - the majority won't know the pain of true poverty or what it's like to go hungry so the incentives are towards pleasure rather than survival/protection/prudence (and this will cause society to be poor / indebted again - cyclicality for the win!). The prevailing culture is to keep up with the Jones' and to keep consuming...it takes a very smart person to see through the bullshit society and advertising companies have created =), not to mention the banks happily waiting to fleece people.


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## peterk (May 16, 2010)

I would just be happy she's a teacher. Take comfort in the fact that it's nearly impossible for her to get fired, and no matter how much she doesn't know about finances, she'll still have a nice big pension to sustain her later on.

People spend money on stupid things every day, buy too big of houses every day, and take "advice" from their self-interested bankers every day. None of it is catastrophic, and until your family member exhibits signs of DISASTEROUS financial decisions (not silly minor things like your SIL does) it's best to keep out of it.


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## none (Jan 15, 2013)

I've been thinking about this too as my family is in a similar situation.

The approach I'm thinking of taking is taking about probabilities. I think A LOT of people will agree that there is at least a 5% chance the market (depending where you are of course) will correct by 30% or more.

If you agree with this probability (which can be roughly supported by data and examples from the US) tell her that if she is willing to accept that 5% probability there is a 1:20 chance she will lost approximately $100,000 in after taxed income, or what I'm guessing is about 3 years after taxed salary.

At her stage in life, and assuming she lives in a market where rents are less than costs of owning, the only reason to buy a house is on speculation. That is generally a very bad idea.

Worse case, is that she does it anyway and five years from now you can give her the 'ol I told you so in her butter face.


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## Pennypincher (Dec 3, 2012)

I totally understand your fascination with her finances. I do the same thing in terms of observing my friends and how they spend. It's natural. I don't think though, that she is in a bad situation. She might be behind you in saving and all that, but at least she has a job that supports her. If she isn't in debt, then that is a good thing. She seems to only have to support herself and nobody else which is also a huge plus. 

I am a similar age to your sister in law. I am always obsessing about a friend of mine who was married, and together they earned half of what my spouse and I earn. Yet they lived like they made twice as much as we did. They always had two cars and we had the one cheap toyota corolla. They had a big house and we had a small, old condo. They had bikes, tools, lululemon clothes, vacations, a brand new kitchen, etc etc... Eventually I learned that they were $100,000 in consumer, home equity line of credit debt. This debt would never get paid off! I was floored. They also divorced and had two kids in the mix. When everything was settled, the one person got the house and got rid of the HELOC and had to start over with a $300,000 mortgage on a $350,000 house. I'm pretty sure they each earn an income of around $45,000 and it isn't going up anytime soon. They live paycheque to paycheque. The other person went and bought a house for $300,000 as well. Now they went from around $300,000 in total debt to $600,000 if you combine it. That is pure insanity. I really just sit back and watch. I am amazed.


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## Homerhomer (Oct 18, 2010)

Callyhan, it really is not your business how she lives here life and how she spends her money, if she came to you for help and advice that's a different story, right now there doesn't seem to be any problem from her point of view, what makes her happy currently is her own choice, and what makes you happy and is important to you may not be to her and others.

Don't worry about her finances.


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## andrewf (Mar 1, 2010)

I wonder what people might say if instead of reckless personal finance the sister in law was shooting stuff in her arms. Similar "mind your own business" attitude?


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## Homerhomer (Oct 18, 2010)

andrewf said:


> I wonder what people might say if instead of reckless personal finance the sister in law was shooting stuff in her arms. Similar "mind your own business" attitude?


No, drug addiction requires help, it's a disease, buying jeans, bling or a house is not ;-)


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## callyhan (Dec 7, 2010)

She has come to me for help, as I mentioned earlier. I just don't want to make her uncomfortable and shoot down her dreams! It's not like this is a stranger here, she is my family, I want her to be comfortable and not take on too much house and debt without realizing how she may have to sacrifice some of her lifestyle. Frack, I don't really care if she spends all her money on baking stuff, because I get to eat it . But she really doesn't have anyone but me and my partner to help her through this. Her parents, while incredibly generous and lovely people, are pretty simple folk and the complex stuff of real estate and mortgages/debt is not their forte nor are they comfortable talking about it.


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## andrewf (Mar 1, 2010)

I think the distinction is blurry.


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## none (Jan 15, 2013)

callyhan said:


> She has come to me for help, as I mentioned earlier. I just don't want to make her uncomfortable and shoot down her dreams!


Sounds like you want to keep her from her underwater nightmare.

Renting has SO many benefits to it - the whole home ownership thing has been so over romanticized it's rediculous. I'd rather spend my weekends doing things I want instead of fixing a house, I'd rather make money on equities than enter a declining market, I'd rather maintain my mobility to move at a months notice rather than be stuck in a place I no longer want to live it.

It's just a stupid house -- inanimate objects should be unworthy of ones affection (says the Audi owner -- oops).


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## donald (Apr 18, 2011)

I'd say let it go.Much worse things financially,she is not in that bad shape and is probably ahead of the curve in averages (she will likely marry and I would think that will help her)Most of us her are strong with money so we have a skewed outlook.Its not fun to be judged.
your could use the same correlation with health/fitness,I have a friend who has debt/bad money management ect and he always gets on me that I ain't eating right/exercise enough sect(I tell him to shut it because I know I don't have that part of my life sorted)
Were all at different stages(and she might eventually change her financial sistituation)......billy banks could look down on warren buffet and think less of him because he drinks cola and eats unhealthy and is tubby.


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## Sherlock (Apr 18, 2010)

Sounds like she needs a man in her life.


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## Cal (Jun 17, 2009)

I would steer her towards the convenience of her life in regards to not buying a home. It can be alot of work, she probably doesn't realize how good she has it renting an apartment. If she were to mention that she would hope her brother could help, I would remind her that you live an hour away.

If she mentions that she would like to have the forced savings a house would offer, I am sure you can help her out in that regard. At least until she gets a reasonable downpayment.


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## Charlie (May 20, 2011)

I don't think a $125K home with 10% down on a teacher's salary is reckless. 

It's good to help her clarify the costs -- the advantages of 20% re CMHC; the selling costs if she doesn't intend to live there 5+ yrs, how real estate doesn't always go up, and may go down, and the total costs of ownership including condo fees, taxes etc (but don't over embellish the costs to support your bias).

Ultimately the decision is hers, however...so be wary of imposing your opinions on her (whether it's a good or bad idea to buy) over helping her understand the finances, concepts and actual annual costs involved.


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## financialnoob (Feb 26, 2011)

callyhan said:


> I just don't want to make her uncomfortable and shoot down her dreams!


Who says you have to shoot down her dreams? Why not help her find a way to achieve them? You could talk about having savings and maybe the RRSP home buyers program would be a good way to encourage a forced savings of sorts. Or talk to her about the more she can save up for the downpayment, the more money she will save overall in interest over 25 years. Or the need to have an emergency fund if she's taking on such a huge risk or making sure she has enough to cover the emergencies that can (and WILL) come up when she buys a place.


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## callyhan (Dec 7, 2010)

Sherlock said:


> Sounds like she needs a man in her life.


Oh that is another issue entirely. Goes along with the high school mentality. You wonder why a lot of teachers end up marrying other teachers?

Right now she is looking at a place that is about 200K, and she will end up with a mortgage payment of about $1000/month. It's more than her rent. While it's not totally unrealistic, for someone with no budgeting or money management skills it may come as shock once all the other monthly expenses come in.


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## RBull (Jan 20, 2013)

^It will be a major shock after she learns all of the other things home ownership has to deal with.


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## RBull (Jan 20, 2013)

Some good points. 

Much of it comes down to different strokes for different folks. A person shouldn't look at their house as an investment; certainly not as a replacement for future savings/retirement. It's an expense. It's certainly more illiquid than equities and isn't likely to make the same kind of return as a financial investment. Declining asset may depend on where you are. In some overbought areas it is and may likely continue to decline. Renting certainly gives you more flexibility if that's what you need. 

I enjoy working on my place and the satisfaction of making it look good and walking /viewing it knowing it's mine... and there's no one looking over my shoulder. I like making money in equities too. It's not an either/or. If it were only about making money I would live in a shoebox and have everything in the markets. 

LOL, inanimate object. Audi.....I understand.... I enjoy my BMW summer toy!




none said:


> Sounds like you want to keep her from her underwater nightmare.
> 
> Renting has SO many benefits to it - the whole home ownership thing has been so over romanticized it's rediculous. I'd rather spend my weekends doing things I want instead of fixing a house, I'd rather make money on equities than enter a declining market, I'd rather maintain my mobility to move at a months notice rather than be stuck in a place I no longer want to live it.
> 
> It's just a stupid house -- inanimate objects should be unworthy of ones affection (says the Audi owner -- oops).


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## none (Jan 15, 2013)

I understand. I used to like working on my house (before selling it) but my OCD will always shine through and the light switch that I installed .25 inch too high woud always other me. The slight error in edging that I made when painting the ceiling would always jump out at me etc etc. It ended up I would always be looking at the blemished flowers from the trees all the time.

Anyway, that's my issue I guess. The house I currently live in is great but it certainly has its problems. The thing is they're not my problems so they don't bother me at all. I much more forgiving of others short comings compared to my own. Again, my issue I guess.


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## kcowan (Jul 1, 2010)

none
I also took great pride in the projects completed successfully. So much so that I have built some planters for the patio in our rented penthouse!


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## lonewolf (Jun 12, 2012)

Callyhan

You & your family do not ever want to become an enabler for your sister in law. On till debt do us part the weakest link is almost always the parents. Maybe have one of Gails shows on Tv when your mom comes over to visit that shows that helping out those that spend money foolish adds to the problem. @ some point in the future it would not surprise me if your mom bails out your brother & wife when she cant really afford to & she should be the last one to do this because she has become weak with age.


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## realist (Apr 8, 2011)

How much are you willing to talk to her about this?
How much does she want you to?

I would ask her point blank - How much of my advice do you want to hear? Even if you may not like what I have to say? 

The problem comes when you give her good advice and she ignores it.


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## MoneyGal (Apr 24, 2009)

^ This is great advice.


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## OhGreatGuru (May 24, 2009)

Instead of giving her "your" opinion, lead her to easy-to-read references to help her draw her own conclusions. She's a teacher, which requires a university education - she should be able to read and learn.

Refer her to CMHC's Consumer's Web page for advice on buying, renting, maintaining a home. http://www.cmhc-schl.gc.ca/en/co/index.cfm

Buy her a book of CDN mortgage tables (if they are still available - now that everyone has computers they are hard to find.) or refer her to a mortgage calculator site that will show her much she will have to pay in principal and interest over the life of a mortgage, so she can see what a difference interest rates and amortization periods make.

You could buy her a copy of Mortgages for Dummies, but that might be overkill, and I can't tell from the listing if it is written for the Canadian market.

It sounds to me like you think she needs to read "Personal Finance for Canadians for Dummies", but she hasn't really asked you for advice on how to control her spending.


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