Family Money Mangement – Helping Friends And Family In Financial Trouble
By glblguy
When it comes to family money management and assisting friends and family who fall victim to the current economic crisis, most people want to help, but often have absolutely no idea what to do. 90 percent of us understand that the equation of “family + money” = “a particularly nasty” outcome. Hence, the dilemma resulting from being put in this awkward position, not knowing what to do, nor where to turn, can be a bit daunting.
Family Money Management, The First Step
Not to worry – I’ll talk you through it. Firstly, you need to confront the situation in a very sensitive way. Let’s say that your best friend is currently between jobs, and they have no income being generated whatsoever. Unfortunately, this person still has a mortgage, with a repayment due in the short term. If you knew this, and decided that you should indeed take action to assist – you need to think long and hard about what you are about to do. You must realize that whenever you lend money, there is the risk that it may not come back to you. Even though the person is your friend or family member – this very fact alone doesn’t mean they are immune from things like bankruptcy.
Discussion Time
Having made the decision that you are willing to risk your own money, you need to discuss your choice with the relevant person. In the above example – take your friend out for a coffee, and get straight down to business. Bring up their situation (in a sensitive way), and ask if you can go in to as much detail as possible. Assuming that you have enough money to support this short term financing act – you should be feeling quite comfortable at this stage.
If you are financially literate (and most people lending money are), take the opportunity to give your friend some good advice on how to generate more income, hopefully to get their feet back on the ground. Friends and family appreciate this, and it can go a long way to helping things.
More times than not, the friend or relative will try to refuse the money. Yes, this is a natural reaction to being offered this type of support. If you truly believe that the money is needed, and can be repaid in time, push ahead with your decision. You should have considered that in the first step above.
Following Up
Once you have transferred the money to the persons account, ensure that you follow up on a regular basis. Avoid calling to see when you will be repaid – because this puts everyone in a sticky situation. Instead, ask indirect questions such as: “how’s everything coming along?”. “how are the finances going?”, “are you keeping up with those mortgage payments?”, “did you action any of that advice I gave you previously?”. This should stimulate the topic, and will probably get you the answer you were looking for.
One thing is for certain, regardless of what you choose to do. You need to tread with caution. The very fact that they are one of your closest companions should never be compromised by something as material as money. Think about this, and then decide whether lending a financial hand is indeed the right thing to do.
This was a guest post by Andrew Wang who lives in Seattle area. He writes about Travel Reward Credit Card & Student Loans. If you enjoyed this article, make sure you head over and subscribe to his blogs!
February 18th, 2009 at 7:52 am
I think you have to go into this sort of situation with the idea the lent money may end up being a gift.
Next, you may have to view it from the opposite perspective– what if it were the other way around? Would they help me?
Finally, do I have an excess I can part with at all?
There are no simple answers, but thought, consideration, and communication are musts.
February 18th, 2009 at 9:17 am
I agree with DDFD that it’s probably best to view this money as a gift – unless you are willing to go through what is necessary to make it a true loan with paperwork and an interest rate (and follow-up with a credit bureau). There are also microlending sites meant to help friends and family now, which make the loan more official, and can get more people involved.
I know that my husband and I were helped a lot when we first started out, and we have no qualms about providing gifts to our siblings and others who are in the situation we were in.
February 18th, 2009 at 9:22 am
Ditto on the gift idea. I also think it would be a good idea to talk to the person about a repayment schedule if possible. Finally, why not reduce the agreement to writing? You can always rip up the agreement if you do end up gifting the money and it helps the person receiving the money because they’ll be less likely to consider this charity.
February 18th, 2009 at 1:55 pm
We have offered to help friends in non monetary ways including watching kids and offering a date night so they could talk finances. It can be frustrating to watch friends go through a crisis and sometimes non cash help can be beneficial to the couple.
If we did “lend” money it would be a gift and we wouldn’t expect to be paid back. I think it would strain the friendship if they never paid back the loan or if we saw them purchase non essentials with the money.
February 19th, 2009 at 6:37 am
I am surprised there aren’t more comments on this topic– must be a taboo topic . . .
February 19th, 2009 at 8:58 am
I like the type of comments you suggest to keep such a conversation from being too personal. I also must say not to loan out anything more than you could call a gift. I’m helping my brother out right now and it’s tough…especially on my marriage…my wife is “done with him” and I can’t blame her. It’s tough setting and enforcing boundaries with family. I’m like DFDD…this post should get lots of views considering the times we are in right now.
February 19th, 2009 at 11:17 pm
not an easy topic from either side. been on both.
no one wants to need help, or admit to needing help, or feel obligated, or shafted, or guilty.
took me forever to admit needed help then longer to ask but lucky i have family who could help & didn’t use the help as a choke chain. when i can, i help back. sometimes we trade “services” or “goods”; sometimes we gift cash.
February 22nd, 2009 at 10:51 am
I have to agree with it being a gift. This should be settled firm in your mind beforehand. “Was it a gift, a loan, when this expected to be paid back?” Those are the internal questions that both parties go through, and usually that’s where there’s a “nasty outcome”. I believe it should also be taken into consideration, the person’s financial literacy you are lending to. Is this relative someone who has the knowledge to use the money in a way that will actually help their situation? Many people are in financial difficulty right now, but some were in it before this crunch because of a lack of knowledge and willingness. If this is the case usually help for them should be offered in a more beneficial way…my 3 cents anyway.
Alan
July 18th, 2012 at 1:17 pm
I’m so worried about asking familly for money, I can’t make the payments anymore, haing another surgery in 13 days…….so depressed I think it’s easier to give up I’ve been sick so long I wish life could pay you back for all the good deeds I’ve done …I”d be rich. Scared to death