Financial responsibility does not obligate you to help others

Dear Dave: I’m single, and I make about $70,000 a year. I’ve been able to set aside a nice bit of money in savings, and I’m paying off my student loans and car payment. One student loan is $4,000, the other is $30,000, and my car note is $21,000. Since I’m on the right track now, should I save up some for my dad’s retirement? He’s getting older, and he’s horrible with money. — Colby

Dear Colby:Right now, you need to be getting out of debt, saving and building wealth for you. As you do this, you can choose to use some of your money to help family, friends or your community, if you want. Just because you’re headed in the right direction and being responsible with your money is no reason to set up a "my dad’s an idiot with money" account.

In your situation, you need to be working the debt snowball. List your debts — and it’ll be easy since there are only three of them — from smallest to largest. For you, this means you’ll make minimum payments on the car and the big student loan while you attack the $4,000 loan with a vengeance. Scrape together every penny you can to throw at that thing, and once it’s paid off, take the money you were putting toward it, plus any other you can scrounge up, and knock that car out.

It may take you a couple of years of rolling up your sleeves and really attacking these things, but you can do it.

Dear Dave: I’m 58, my kids are all out on their own and I rent a great, little apartment. It’s a perfect setup for me because I travel quite a bit. However, I’ve had several people tell me I should really look into buying a house. I’ve saved about $450,000, I make $90,000 a year and my rent is $1,100 a month. So, I guess I’m looking for validation. Is it OK for me to continue being a renter?  — Alan


Dear Alan:I think it depends a lot on the ratio of rent to wealth. By this, I mean if the rent isn’t much compared to the size of your income and nest egg, then I’d say keep the apartment. It’s not doing you any real financial damage, plus you still have the ability to invest in things other than a personal residence.

Now, if you’re not doing any other investing because your income is being eaten up by rent, then apartment living starts to become a bad idea pretty fast. The only real downside, long term, is that market rents will go up eventually. If they rise faster than your income, then you could lose control of that part of your life. Or what if the current owners sell the building, and the new management jacks up the rent? Then, you’d need to look into buying something so you could regain control of all that.

Still, if I’m in your situation, with your lifestyle and having piles of cash saved up, I’d stay put. It sounds to me like you’ve got a pretty sweet situation, Alan. If things get sassy instead of sweet, you’ll be forced to revisit this issue.

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