Author Topic: consulting with a friend  (Read 4751 times)

deciduous

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consulting with a friend
« on: July 24, 2013, 11:41:36 AM »
I'm sure this question has been asked and answered numerous times before, so my apologies in advance; I have used the search and came up dry.

A few years ago I started a company with some friends. We have had some success, but it's extremely uneven, and last year, we decided we had to walk away from it. The company is not bankrupt, but only remains open to honor our responsibilities towards existing clients.

I am technical and just accepted a new full time position. My non-technical friend has been unable to find a job for a year despite diligent efforts. His debt emergency has gone from bad to extreme. I am looking for ways to help.

1. What non-profit resources exist to advise people who are in dire financial straits? I think we need a financial expert to carefully review his household's cash flow and help him focus all available resources against the worst parts of the debt.

2. I am considering extending him an ongoing 0% loan while we find his next job. My understanding is that unemployment insurance comes from your previous employer (our little company) and that does not exist in this case. I don't actually know what federal support exists, or what he might already be getting.

I am well aware of the risks inherent in being his financial backstop, so please don't bother warning me against it in principle. It's not something I'm considering lightly. I'll be careful not to ruin myself. At the end of the day, I value my friend's well-being above a certain degree of my own wealth. I will run some numbers on my end before I actually propose anything to him.

3. For those of you who have given "the talk" on mustachianism, how did it go? How does one avoid coming across as patronizing? I've already pointed him in the direction of this blog and another resource or two, but I don't know whether he dug into them any further.

Thanks to everyone! This is not easy.

worms

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Re: consulting with a friend
« Reply #1 on: July 24, 2013, 12:12:29 PM »
Its not clear if there were others involved in the old company, but would it be possible to use the old company as a vehicle to channel some work to him, or at least some form of activity that would enable you to 'pay' him rather than lend the money?  Perhaps you could devise some new business line that would use his time and the existing company structure.  If he then got fed up doing all the work and sharing the company success and walked away to continue on his own, then you have achieved your real aim. If he stays and you keep the business going, then you have additional passive income!

deciduous

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Re: consulting with a friend
« Reply #2 on: July 24, 2013, 12:18:32 PM »
Its not clear if there were others involved in the old company, but would it be possible to use the old company as a vehicle to channel some work to him, or at least some form of activity that would enable you to 'pay' him rather than lend the money?

Thank you, but I'm afraid the company is not the solution here. I don't mean to be so dismissive, but I'm not really comfortable posting the details of it on the internet. Suffice it to say there's no reliable income or leads there.

willn

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Re: consulting with a friend
« Reply #3 on: July 24, 2013, 12:20:13 PM »
I'm sure this question has been asked and answered numerous times before, so my apologies in advance; I have used the search and came up dry.

A few years ago I started a company with some friends. We have had some success, but it's extremely uneven, and last year, we decided we had to walk away from it. The company is not bankrupt, but only remains open to honor our responsibilities towards existing clients.

I am technical and just accepted a new full time position. My non-technical friend has been unable to find a job for a year despite diligent efforts. His debt emergency has gone from bad to extreme. I am looking for ways to help.

1. What non-profit resources exist to advise people who are in dire financial straits? I think we need a financial expert to carefully review his household's cash flow and help him focus all available resources against the worst parts of the debt.

2. I am considering extending him an ongoing 0% loan while we find his next job. My understanding is that unemployment insurance comes from your previous employer (our little company) and that does not exist in this case. I don't actually know what federal support exists, or what he might already be getting.

I am well aware of the risks inherent in being his financial backstop, so please don't bother warning me against it in principle. It's not something I'm considering lightly. I'll be careful not to ruin myself. At the end of the day, I value my friend's well-being above a certain degree of my own wealth. I will run some numbers on my end before I actually propose anything to him.

3. For those of you who have given "the talk" on mustachianism, how did it go? How does one avoid coming across as patronizing? I've already pointed him in the direction of this blog and another resource or two, but I don't know whether he dug into them any further.

Thanks to everyone! This is not easy.

1.  This site.  Dave Ramsey podcast or radio show.  These cover the basics of budgeting, prioritizing, and frugality tips. His debt isn't an emergency, but paying for his four walls and food might be.   Is he prioritizing those?  Sometimes people in dire straights make bad decisions and pay credit card bills before paying rent etc, not because they are stupid but because they grip up, get anxious, worry about the credit score.  Guy needs a job, sounds like what he's doing isn't working so its time to change.  I met a guy last week whose kid earned $800/month dogsitting.  Point is, he needs SOMETHING to exercise the "i have a job" muscle, sort of like having a girlfriend makes you more attractive to other girls, having a job makes you more attractive to other companies.

2.  Don't loan.  Just gift it to him. Then you are both relieved of the burden, guilt, worry, and shame that debt brings.  Not worried about you ruining yourself, but don't ruin the friendship either.  Tell him the condition is he pass it on to someone else worthy someday.

3.  Key in my experience is to get someone dreaming about what they want.  Everyone needs a reason, a goal.  The "why" has to happen before the "what".  Once he has a goal, you can get him info on the technical details.

etselec

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Re: consulting with a friend
« Reply #4 on: July 24, 2013, 12:43:17 PM »
1. There are nonprofit consumer credit counseling agencies. http://www.nfcc.org/ can help you find your local one.

worms

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Re: consulting with a friend
« Reply #5 on: July 24, 2013, 02:45:55 PM »

Thank you, but I'm afraid the company is not the solution here. I don't mean to be so dismissive, but I'm not really comfortable posting the details of it on the internet. Suffice it to say there's no reliable income or leads there.

Certainly don't want you to divulge anything and you know the situation on the ground best.  I just feel that the toughest part is starting your first company. When you have done it once, then you can easily reinvent it or start another one.  While your friend will benefit in the short term from your money, he might get greater benefit longer term from you as a business partner or mentor.  Even if the new venture was something simple like trading on eBay, you might be doing him a great service by helping him get up and running.

Spork

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Re: consulting with a friend
« Reply #6 on: July 24, 2013, 02:57:36 PM »
2. I am considering extending him an ongoing 0% loan while we find his next job. My understanding is that unemployment insurance comes from your previous employer (our little company) and that does not exist in this case. I don't actually know what federal support exists, or what he might already be getting.


I am not a lawyer, accountant or anything remotely similar.  However, I have a vague recollection that you can't legally offer a 0% loan.  Or, to be more correct: if your loan is more than the yearly maximum IRS guidelines for gift exclusions ($14,000 in 2013) then you must either pay the gift tax or charge a minimum rate of whatever the current IRS applicable federal rate.  Hopefully someone will correct me if I am wrong or clarify this if I am vaguely right.

unpolloloco

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Re: consulting with a friend
« Reply #7 on: July 24, 2013, 03:20:26 PM »
Sounds like the friend does not have a debt emergency - He has an income emergency.  Any resources/cost cutting consulting you throw at him are only going to delay the inevitable bankruptcy unless the income piece can be fixed first.  So focus there!

deciduous

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Re: consulting with a friend
« Reply #8 on: July 25, 2013, 07:46:07 AM »
Thanks to everyone for the help, especially etselec for nfcc.org, that's exactly the sort of thing I was looking for.

willn

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Re: consulting with a friend
« Reply #9 on: July 26, 2013, 10:34:55 AM »
Thanks to everyone for the help, especially etselec for nfcc.org, that's exactly the sort of thing I was looking for.

Good luck--and a final tip, be cautious with these organizations, "credit counseling" companies have one of the highest rates of complaints to the FTC of any type of company. Typically they "consolidate" your debt by taking payments from you, not paying the creditors, then trying to settle the debt when it goes bad.  All things an adult could do on their own, even if it isn't an outright scam, they are often incompetent.

Personal finance just isn't that complicated, it isn't about numbers most of the time, right? It's about behavior, motivation, organization, and personal accountability.  If your finances are that complicated you need someone to help you unwind stuff, a lawyer is probably better than some random "counselor".

MissStache

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Re: consulting with a friend
« Reply #10 on: July 26, 2013, 10:47:36 AM »
3. For those of you who have given "the talk" on mustachianism, how did it go? How does one avoid coming across as patronizing? I've already pointed him in the direction of this blog and another resource or two, but I don't know whether he dug into them any further.


Has he actually asked you for help?  If not, I'd tread lightly when it comes to giving too much advice.  If he hasn't faced his financial issues head on, he may not be willing to listen.  You obviously value and care about your friend very much so you sound like you are a wonderful resource for him, but I'd hate for him to take it the wrong way/overreact/get angry and it damage your friendship.

If you have talked to him about it, have him come to the MMM community and post a case study!  That way we can dole out the face punches and you don't have to :)