My 26-year old nephew visited for financial advice yesterday. He is a year into marriage and is having trouble paying the bills. You see, before getting married he bought a big gas-guzzling truck for $38,000...and before that he owned Dodge Ram pickup (paid for) and spent $3000 for repairs, tires, and rims, before trading it in on a black Ford Mustang. I warned him against piling on debt before entering the marriage, but the salesman convinced him it was a sweet deal.
A year later he missed his old truck and traded in the 'stang for the new truck he couldn't afford. In order to get it, he convinced his fiance to trade in her paid-for Chevy Cobalt. Then he eventually bought her a new ride and enslaved them with 5-6 years of two car payments.
Shortly after his wedding, he got into an apartment for $900 plus. "Why not find a cheaper place?" I asked. He recently broke the lease and I helped him move into an apartment with lower rent.
Later, they asked me for a $45k loan for a downpayment on a new home. I said no because it was an unreasonable request, and because he has a history of non-payment...with creditors and family.
He'll be transitioning to a new job soon with lower pay initially. Despite the lower rent, he's still struggling to make ends meet and asked for advice on cashing out his 401k. We calculated what he will get back, and what he will lose at the end game when he retires in 40 years (between $150k-$200k). I offered solutions that would help him avoid cashing out, but they were unacceptable.
I hope he will begin to take money matters more seriously now that he has a truly darling wife to support, and future kids to think of. Hopefully he will steer their financial ship in a way that earns their love and respect. Until then, he will receive occasional help from me only in the form of guidance; clearly loaning him money would be a disaster.
I asked if he realized that cars have been his Achilles Heel and he said yes, but I'm not convinced that he fully understands the opportunity cost of being easy prey at dealerships. We all make money mistakes and I've made my share. He still has time to recover from his own, and I really hope he does.