When Pocket Is Tight

My friend is facing financial difficulty since 2 years ago. Listening to him, I guess it is due to inappropriate money handling in the family.

Our children grow up observing how we handle money. If we give them whatever they ask for as long as we can afford, they learn our way of spending money. My friend has no wise habit of saving. He buys many insurance policies. He has the impression that buying insurance is saving money. When he was in his prime years, he could afford many policies. His earning power is not as good as a few years back. He is now lagging in premium payment. I suppose the policies will lapse one after another.

My friend also brought along the whole family for holiday in Malaysia, Singapore, Taiwan and China. Holiday is costly for his income. His children must have thought that their father is wealthier than their other friends' fathers.

My friend starts to feel the pinch of his pocket when his children ask for new handphone, smartphone, notebook, iPad. When one child asks for it, he has to buy for other children. He has not learned to say no to his children.

Eventually, he starts drawing from his overdraft. When monthly family expenditure is more than income, he feels the chill seeing the monthly overdraft statement. I can see that he is afraid of losing his house which he is drawing the overdraft from. He is worried about his children's spending pattern as they don't understand why their father are moody over their requests now. I really feel sorry for him as the whole family is under a great deal of tension.

My advise to him is to stop satisfying his children's requests. They are all working now and they should live on their own income. The insurance policies need to be revised. My friend has stopped premium payment.  Instead of lapsing the whole life policies, my advise to him is to convert the policies to either paid-up policy or extended term assurance. Drawing from overdraft to pay for whole life policies when your children have all grown up don't serve much purpose. And there is no point paying premium for your children's whole life policies.

I believe family should value their relationship. The whole family should understand their situation now, and agree to settle the overdraft by cutting down unnecessary expenses. It is still not too late. In fact, there is nothing shameful to explain to the children of his situation now. Isn't it better to face the problem together, than to to face the situation yourself?