Dave Says: Your Wake-up Call

Dear Dave,

My husband and I are both 50, and we make about $50,000 a year. We have a little bit of debt, and recently my mother-in-law moved in with us due to health issues. We've always gotten by, but now we're struggling with the additional expense of having her with us. We love her, but we're unsure what to do financially. Do you have any suggestions?

Jen

Dear Jen,

Anytime things get tight and something like that happens, it's your wake-up call. It's the phone ringing, so I'm going to tell you to pick up the phone. It's telling you that you've been kind of sloppy and disorganized with your finances in the past, but you've made just enough money to get away with it.

Her moving in tightened things up, and that's understandable to a point. But it has shone a spotlight on the fact that you're going to have to start doing a written plan and behaving. Chances are you're going to have to cut back on some stuff because you've chosen to take care of her. This is an honorable choice and a wonderful thing you're doing, by the way.

With this added responsibility you've taken on — and many Americans are facing the same thing — you're going to find yourselves on one end of the Sandwich Generation. They're sandwiched between taking care of their parents and taking care of their grown kids. And the way you handle it is with a written budget.

The good news is that with a detailed plan, you can analyze whether you need the extra income if you need to cut some expenses or both. You've got to create a little margin to have a clear picture of your future. If you just wander along without a plan, you're going to make a mess out of this, and it's going to get bad fast.

—Dave