Mismanaging A Family of Eight
28 November 2006That’s what this article is all about – how a big family turned into a big financial problem. Honestly though, the number of kids wasn’t the source of the problems – it was the inability of the parents to rein in their spending. They kept buying and buying, and now the problem has reached critical mass:
But as the children grew, so did the Schenkels’ expenses. When their small 3-bedroom home became a squeeze, they built a bigger one for $325,000, raising their mortgage payments to $2,500 a month. As the four kids inherited Kelli’s passion for gymnastics, the couple began spending $1,000 a month for classes and travel to competitions. And they couldn’t resist buying extras like the 50cc Suzuki motorcycle that Nate rides around on (predictably crashing into the deck and gashing an eyebrow shortly after learning to ride).
While the Schenkels have been pretty good about keeping track of their six lively children, they haven’t been as vigilant about tracking their cash flow. The price of neglect became clear when Jay Berger, an adviser with Integrated Wealth Management in Traverse City, Mich., recently met with the Schenkels (at Money’s request) for a financial planning session.
Sitting at their kitchen table, the couple were aghast to discover that they’re spending nearly $9,000 a year more than they earn and have drained most of their $112,000 home-equity line of credit. Plus, they have almost no savings – only $23,000 in retirement funds and no college funds at all for the kids.
This struck me as willful ignorance. No one spends $9,000 more than they make every year and then suddenly realizes it after they’ve burned through $100,000. But they do refuse to admit when they’ve got a serious problem – often moreso with money than anything else. In their late thirties, this couple will barely have enough time to right the ship – and that’s assuming extreme cutbacks in their spending. I do think that although the problems here weren’t initially caused by having so many kids, the size of the family has caused the budget issues to snowball – and anyone thinking about doing that ought to think twice. It’s not an absolute no-no, but the reality is that a child is a drain on your budget. Six children are only going to magnify that – and if you can’t afford it, you shouldn’t be trying to create your dream family just because it’s something you want. Everybody wants things – for some people it’s cars or houses, for others it’s vacations, and maybe for you it’s a big, loving, Brady Bunch sized family. The only problem is that you just can’t go blowing all your money on something just because you want it – even if it is something warm and fuzzy like a big family. If you spend $100,000 on your dream wedding and you make an average income, you’re going to regret it. And if you have more kids than you can afford to take care of, you’ll regret it later on, too. Dreams are great – but you can’t decide they’re going to come true regardless of the consequences. I think this particular decision is more likely than others to get people into a bind because it often has no logical basis. No parent of six is ever going to sit down and regret having one of their children. But if they’d really thought it through beforehand, it doesn’t seem like that good an idea unless you have a pretty high income – or some of your kids are already out the door. This family tried to have it both ways – all the spending and luxuries of a smaller family, with all the expenses of a larger one. It doesn’t work that way – if you don’t make a huge income and you want more kids, you’ll have to sacrifice some of your other dreams, period. And if you try to have it all, you’re going to dig yourself a financial hole you might not be able to get out of.
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