‘This is going to make me vomit’: Texas grandma is in debt despite $130,000 income — supports 6 family members on a single salary and puts everything on credit cards. Caleb Hammer responds

Multigenerational debt

The rising cost of living, coupled with low incomes and a spike in unemployment, is putting the squeeze on many American families.

Home prices have surged in recent years and, in 2023, only 16% of listed properties could be considered “affordable” according to real estate platform Redfin.

Wages haven’t kept up with this pace either, as the year-over-year wage growth rate sits at 4.5%, according to the Economic Policy Institute.

Higher home prices and lower wages have pushed more families to consider multigenerational living. Roughly 14% of homebuyers in 2022 were multigenerational families living together, according to the National Association of Realtors (NAR). Minority homebuyers were even more likely to live in multigenerational houses, an increase of 19%.

From 1971 to 2021, the number of Americans living in multigenerational households has quadrupled, according to the Pew Research Center.

Now, Jennifer is living this statistic. She was a homeowner, but ended up selling the unit due to personal reasons. She was left owning a balance on her mortgage, which she said she paid for with credit cards.

Now she’s renting a two-bedroom condo at $2,209 a month. However, she shares the unit with her two sons, aged 25 and 28 respectively, along with their children and partners. Altogether, the unit is shared by seven people.

Her sons contribute $700 each for rent, but are both currently unemployed. Effectively, the entire family is reliant on Jennifer’s income, which results in monthly grocery bills that total as high as $2,898.

“I’ve never seen anything like that in my life,” Hammer told her.

To make matters worse, Jennifer’s spending is fueled by credit cards and buy-now-pay-later services. Sometimes, she uses a card to pay off her buy-now-pay-later balances. Altogether, she has “almost $60,000 of bad debt,” Hammer calculated.

This mountain of debt doesn’t seem to be slowing her down, though. Jennifer booked a cruise for December. “Whatever you’re spending on isn’t as important as you being able to retire,” Hammer told her.

However, Hammer said an overhaul of her spending habits and family living situation could improve her financial situation substantially.

Discover how a simple decision today could lead to an extra $1.3 million in retirement

Learn how you can set yourself up for a more prosperous future by exploring why so many people who work with financial advisors retire with more wealth.

Discover the full story and see how you could be on the path to an extra $1.3 million in retirement.

Read More

Emptying the nest

Jennifer and Hammer both agreed that it’s time for her adult sons to leave. Despite the fact that they struggle with employment and one of them is in the midst of divorce, they’re old enough to take care of themselves. “[They] could and should figure it out,” Hammer said.

According to Pew research, 53% of adult children living with their parents say the arrangement helps them financially, while only 29% of parents in these situations say the same.

Jennifer could significantly reduce her monthly expenses or debt burden if her sons seek out employment and move out as soon as they can. Meanwhile, Hammer advised her to swear off credit cards completely. “You’re not a credit card person,” he said.

These steps should allow her to start saving towards retirement — which is rapidly approaching. Given her robust income, it’s not too late for Jennifer to plan for (and enjoy) financial freedom.