business advice: should i help my younger relative start a business

[Mr Mark]

I have a younger relative who is young (early 20s) and about to get married. He has the luxury of a close to zero net worth, because he avoided student loans by not going to university. But totally non mustashian, blows every buck paycheck to paycheck, lives a well as he can. Cruises, tattoos, going out drinking, ....

He currently has a reasonably paid lower level job as a mall security guard, which is a job he sort of makes himself enjoy, by being good at it. No house (just moved into a rental perhaps? No idea of details).

I'm thinking about trying to incentivise him into a path of mustachian FI, and my stash perhaps earning a solid financial return in the success case,  by somehow helping him and his fiancee start a low capital business  venture they would be passionate about, like a tattoo parlor! Go with the grain, right? Couple it with some education, a business advisor, etc, it could be a win/ win.

We'd only be talking a <<5%  clip of the stash, btw, and very tax efficient. And I really want him to turn it around and succeed. It may be a case of a stitch in time, in that respect.

Thoughts please. Cos I'm pretty sure there's a lot I haven't thought of!

[gooki]

No.

[mox]

I started my part time business with the goal to make 10 € (after tax) extra every day.
First invest was 200 €.

Maybe you should give him some money to start 200 and give him the challenge to make 5k$ out ouf it within 1 year.
After he reached the goal you can invest, with a low risk.



 

[limeandpepper]

blows every buck paycheck to paycheck, lives a well as he can. Cruises, tattoos, going out drinking, ....

It is very kind and generous of you, but I wouldn't trust someone like that with my money.

[GlobalStache]

Sorry, but I must also say: NO. 

Back before we wised up, my husband and I helped two family members...and never saw the money again.  We saw them continue their spendthrift ways without any serious effort to change their ways and ultimately repay us (okay, amounts were not huge, but still...).  Watching that ate me alive!!  Didn't seem to bother them.  First time, shame on them; second time, shame on me.

Perhaps start by encouraging a Mustachian life and see if he changes his ways.  After proven change, then reconsider helping.  Some people change, most won't.  Hate to be a downer!

[Adventine]

I have a younger relative who is young (early 20s) and about to get married. He has the luxury of a close to zero net worth, because he avoided student loans by not going to university. But totally non mustashian, blows every buck paycheck to paycheck, lives a well as he can. Cruises, tattoos, going out drinking, ....

He currently has a reasonably paid lower level job as a mall security guard, which is a job he sort of makes himself enjoy, by being good at it. No house (just moved into a rental perhaps? No idea of details).

I'm thinking about trying to incentivise him into a path of mustachian FI, and my stash perhaps earning a solid financial return in the success case,  by somehow helping him and his fiancee start a low capital business  venture they would be passionate about, like a tattoo parlor! Go with the grain, right? Couple it with some education, a business advisor, etc, it could be a win/ win.

We'd only be talking a <<5%  clip of the stash, btw, and very tax efficient. And I really want him to turn it around and succeed. It may be a case of a stitch in time, in that respect.

Thoughts please. Cos I'm pretty sure there's a lot I haven't thought of!

May I ask, who is this relative to you, exactly? From your post, I get a sense that you feel responsible for him somehow. Care to share more details about your relationship and what other qualities he has that make you believe he can start a good business?

[plainjane]

If they came to you with a business idea and asked for the money to invest, then maybe.  But right now you're trying to cargo-cult it. 

Start off by talking about opportunities of doing a small, low capital business.  Are they excited?  Are they willing to do the work?  Try to support them putting together a business plan (don't do it for them!).  Don't just give them money without them having taking a few steps themselves, and doing the ground work.

And then approach it as a business transaction, or as family "gift".  Decide which way you're going, and keep to that approach.

[citrine]

Sure...if you want to lose the relationship, then please invest away!
In my experience, money and relatives/friends never mix.

[Mr Mark]

Thanks guys. I like the idea of starting really slow, and making sure it comes from him, not the otherway around. A nd start v small, goal driven.

And yes, it's a dangerous and risky path. So right now, no is a good answer. I'll pursue other options for now.  And do more work on this option later.

[AboutTime]

I agree with some of the other posts....take it slow or don't take it at all.  Consider yourself lucky if you see any return of capital and/or earnings. 

[bigchrisb]

I've been pretty mustachian all my life.  However, I got a significant helping hand from my parents in terms of buying into a business.  They didn't provide funding directly, but did provide a guarantee for a commercial loan I took out.  It was a large sum of money for me ($200k), and non trivial for them (maybe 10% of their net worth).

Three years on, I've paid off $140k of the loan, and that investment in my company is probably responsible for about $750k of my net worth, one way or another. 

I'd certainly think of doing the same if I have kids.  However, I wouldn't just gift it, and I'd want to see a reasonable probability of success first. Blowing every buck paycheck to paycheck would not fit my criteria for responsible lending!

[Mr Mark]

Yeah, I was hoping to suspend the laws of casualty. But the natural order of things must be accepted, even in a very close relative. Or it'll all end up worse than it is now.

Thanks for the facepunch. I needed that.