Tuesday, July 22, 2008

What does financial independence mean?

Yesterday as I was driving up to get some work done on the new house* and stuck in traffic. It was Talk of the Nation** time on NPR so I decided to tune in. Melody Serafino, a New York twentysomething was discussing, was discussing her recent op-ed piece in Newsweek. The idea of 'adulthood' is something that many twentysomethings, myself included, seem to struggle with. The basic premise of the article is that financial independence is necessary to be an adult. Many of her friends seem to have parents who subsidize their rent, give monthly allowances, or still share credit cards with their children. She wonders when these twentysomethings will learn to budget, do for themselves, and what will happen if their parents suddenly can't help any more.

As I listened to Serafino's explanations and the responding callers I swung back and forth. The side of me that values responsibility agreed strongly. Parental wallets aren't something that should be tapped for every little financial need. Also, if Mom and Dad continually bail you out how will you learn to make things work on your own?

Then I thought about my friends, our situations, and the parental contributions I've gotten this year. Most of my friends and I are self supporting, but benefit from random influxes of parental cash. We don't rely on the cash but are generally happy to receive it.***

In my case my mom is there when she thinks I'm not taking good enough care of myself or something should be handled by parents. Every couple of months she sends me a check with a note like "Go get your hair done and take Gameboy out to lunch" or "It's time for sandals, go get a pedicure." Most of that money ends up going to debt repayment, but occasionally I oblige the request. Two months this year she has paid my student loans. She feels like paying for school is a parental responsibility and I had a full ride through undergrad. Without these funds the bills would still be paid in full every month, but extra debt payments may not have happened at the same pace.

Most recently we applied to the Bank of Mom for a loan to help our down payment. We got preapproval in April and decided on a loan program that required 8% down. We figured out how much we could comfortably put down and started looking in that price range. As we saw what was available we inched the asking price up, finally stopping at 20K more than our original figure. We found the house, put down money, and were informed that the loan program we wanted had moved from 8% to 10% down. We could have depleted our reserves or walked away (losing our earnest money). Without us asking my mom suggested taking a loan from her significant personal e fund to preserve fledgling e fund. Actually she offered to give us the money outright, but we weren't comfortable with that.

So my question is where is the line? And what does it mean to be financially independent? I've gotten enough money from my mom this year that I can't claim to be getting where I'm going without her assistance. But at the same time if her support stopped tomorrow I'd be fine. I may not move forward at the same rate, but my bills, and then some would all get paid. Does the fact that I get random influxes but can survive on my own mean I'm not financially independent? Or is it that I'm just straddling the fence of financial independence?

For any other twentysomethings reading along are your feet firmly planted on one side or the other?

*Meeting the garage door opener installation guy if you're dying to know.
**A show that discusses current events and controversial topics
***I'm the secondary on my mom's ING e fund. This is her preferred way of giving me money. In the past few years when I thought she wasn't in a place where she should be giving me money I've also transfered fund back.


Money Maus said...

I think being financially independent means that a person understands their financial situation and is doing all that they can to better themselves (have a budget, pay down debt, etc)... Like you, I receive the occasional gift from my parents as well - money to get a pedicure, get my hair cut, splitting the cost of any large car repairs. I know that I don't NEED the money at all, even with my entry-level salary in an expensive city, but it's nice to have it! :) A lot of my friends, even those who are in their late 20s, still get help from their parents. It's nice to be straddling the fence! (Sorry for such a long comment, lol!)

Shuchong said...

I'm 20something and I consider myself financially independent using the same measure you mentioned. My parents gave me money this year to fund my IRA. It would have been funded without their help (in fact, it was funded before their check came to me), therefore I consider the money to be a gift that I can do without, not a handout that makes me dependent upon my parents.

It is kind of a fine-line distinction to make though, sometimes. I feel independent though, and knowing that I can get by without my parents' help is an ego-booster/sobering realization. That's basically adulthood right? The elation of knowing you can depend upon yourself along with the cringe-inducing knowledge that if you truly screw up, your mommy isn't going to be able to bail you out:)