Author Topic: Loaning money to family?  (Read 11039 times)

Fortuna

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Loaning money to family?
« on: July 11, 2014, 12:31:21 PM »
Tough question and I would like some opinions as I am personally conflicted.  I have a sister-in-law who is asking if we can loan her $1500.  Now there is some history here.  I have known my wife for 15 years and in that time this SIL has never had a real job.  For a large part of that time she lived with her partner who was well off and she did pay some form of rent but the partner covered most expenses and provided a lifestyle.

They split up.  Also part of the history is since her college days my wife has helped her with money off and on.  Basically supporting her some times (and my wife never made big $$).  She had paid back some or maybe all of that money.  Recent history since they split up SIL has bought a house to renovate and lives on one floor renting another.  She went back to school to become a wellness consultant and gets a little income from that and she rents rooms in her house to other "practitioners" for income.

So long story short she has done a couple degrees (Arts/Wellness thing) and never really gotten a real job.  I don't think she wants the 9-5 life and that is fine - she has always seen herself as a business person - problem is none of her businesses support her.  Over the last 2 years she has gotten by barely doing her wellness/office room rental.  KEY POINT:  About 2 years ago when she needed a new mattress we bought if for her.  At the time it was a loan but I told my wife I did not expect to be paid back.  But this is it.  I do not want to support her all her adult life.

So now she lost a couple of her rental clients and at the same time need some car repairs and had to buy an AC unit to cool the rooms she rents.  So she has to pay off her credit card and does not have money for food right this minute hence the request for a loan.  She is promising to pay it back.  You can see the picture and slippery slope.

My wife is in the tough spot because it is her sister.  My issue is this woman is 45 years old and not on a path to being able to support herself - so we said yes once and now she needs help again.   I look at it like this if we make the loan we should be prepared to wait a long time to be repaid or possibly never.  We are financially stable, no mortgage, no debts and I am working hard towards FIRE in 4-7 years.  So this money will come out of money we would otherwise invest.  The loan will cost me more than $1500.

Would you say no? Have you ever been in this situation?  Would you let a family member sink and go hungry?

neo von retorch

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Re: Loaning money to family?
« Reply #1 on: July 11, 2014, 12:36:13 PM »
I have loaned money to family and friends. Most of them were very up front about how and when they would pay it back, and they did exactly that. One person in particular made vague promises, but was unreliable, and some debts were never repaid. This same person has done this to multiple people in and out of the family. They do not accept the consequences of their actions - they push them to someone else. They do not take better paying jobs - only jobs they like. They deny bad habits and wrongdoing. After a few bad experiences, I removed myself from the pool of available lenders, but the behavior continues with others. Someone else always ends up with the consequences. This person never starved or went homeless or hungry.

Fortuna

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Re: Loaning money to family?
« Reply #2 on: July 11, 2014, 12:42:33 PM »
In her case she is not really horribly irresponsible with money.  As far as I know she does not run up debts.  But then again I do not manage her money. But she does always rely and somewhat expect others to help her instead of getting paying job.

Problem here is in this family we are the only ones who could afford to help.  There is another sister in the family and she has limited income.  We loaned her money once and it was promptly paid back.  Their father is 80+ years old and lives on just his OAS, CPP and some small annuity payments.

If we say no that is where she will turn to next.

PloddingInsight

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Re: Loaning money to family?
« Reply #3 on: July 11, 2014, 12:48:13 PM »
I'd either give her the money as a gift or just say no.

Zamboni

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Re: Loaning money to family?
« Reply #4 on: July 11, 2014, 12:56:00 PM »
^Same here.  Gift or nothing.  I won't loan money to family or friends.  I have given (sometimes sizable) one time gifts when someone needed it.

trailrated

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Re: Loaning money to family?
« Reply #5 on: July 11, 2014, 12:59:21 PM »
DON'T DO IT

GuitarStv

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Re: Loaning money to family?
« Reply #6 on: July 11, 2014, 12:59:55 PM »
Don't ever loan someone money if you would feel uncomfortable about breaking their thumbs.

  - Dad, words to live by

RiskDown

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Re: Loaning money to family?
« Reply #7 on: July 11, 2014, 01:20:26 PM »
I wouldn't do it just because there may be valuable learning opportunities in the struggles which arise with her finding an alternative path.

It's a long shot, but you may be "teaching a man to fish"... I've done the very same thing to my sister... and she's always paid me back for the most part. The last time I loaned to her, I told her it was over, and I was done enabling her stupidity. I've stuck to it. It didn't help her, she just latched on to another sucker, but I sleep like a baby at nights.

Prairie Stash

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Re: Loaning money to family?
« Reply #8 on: July 11, 2014, 01:23:01 PM »
The loan is for her business, AC and to compensate for rental income loss. Write out an agreement with 5% interest and a payment schedule. If she's sincere about the loan then there's no problem.  If you want to be nice make the first 6 months (or year) interest free.

Then expect to never see the money. Really it's better to say no but for marital harmony I'd probably do it.

Possibly you might see it out of the FIL estate, that's a long ways off but at 80 it's on the table.  I have a friend who's Dad does a running tally for each of his children.  Every time they get money from him he deducts it from their portion of their inheritance.  At his death each will receive money and the amount will depend on how much they already received.  It's the fairest system I've ever seen.

ginklord

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Re: Loaning money to family?
« Reply #9 on: July 11, 2014, 01:30:48 PM »
Do you and your wife expect anything to change with her financial management? If not, you're probably just enabling her to continue making poor decisions by making the loan.

If yes, use those changes as Terms for the loan. For example, build a payment schedule with her in such a way that 1/2 the payment goes to you and the other 1/2 goes to an emergency fund.

I'm assuming you don't want her to go hungry, so offer to have her eat with you and your family every night. This may also provide an opportunity to begin a real discussion about how your financial choices have benefited you and your family.

frugaliknowit

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Re: Loaning money to family?
« Reply #10 on: July 11, 2014, 01:51:37 PM »
Don't do it.  If you do, you are enabling her bad judgement and contributing to her immaturity.  Tough love, the real kind.

If she were to present a specific plan on how she were to pay it back, create an emergency fund, and become independent, sure, I would do it.


trailrated

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Re: Loaning money to family?
« Reply #11 on: July 11, 2014, 01:54:41 PM »
If you have any projects or work that needs to be done you might want to use her as a "contractor". She gets the dignity of work for money, you feel good about helping her out. It could be a win-win. If she is not willing to work for it, you shouldn't feel bad for refusing. Just an idea, best of luck in an awkward situation.

Fortuna

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Re: Loaning money to family?
« Reply #12 on: July 11, 2014, 01:56:17 PM »
@ginklord: Good question.  I do not expect anything to change.  I have said to my wife that I am willing to help someone who will change and is trying to grow.  But enabling the same problems is probably what we are doing.  They are a family who does not talk about things.  So open dialogue is not going one but your right maybe that should be pushed.

@Prairie Practicality:  The idea of the FIL estate is a good one.  However he is 82 in good health and has longevity in the family.  So he may need the value in his home to live for another 8-10 years or more.  Who knows there may not be much of an estate.

Part of my problem giving the money besides all the obvious issues described below is this is taking money away from our drive to FIRE.  So a part of me is selfish and resents my goals being impacted.  I don't know does that make me a selfish person?  Am I too focused on my own goals?  If it were my sisters (I have 2) I would want to help but I can't compare because they are responsible with their money and only ask if they came to a place of misfortune not of their own doing.  Can't say that here.

Pex

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Re: Loaning money to family?
« Reply #13 on: July 11, 2014, 02:00:35 PM »
Do not make this mistake.

The first time, it's hard for the in-law to ask for money.  The secon time, it's much easier.
The 3rd time, it's an expectation that you will give them the cash.  I am not kidding here.  I've made your mistake.
I became the emergency fund for them.  Why plan for yourself when you can always just take it from your brother-in-law?

Once you finally say no, you are a jerk, a tightwad and a money-nazi.   Don't make the mistake I did.
The family that refused to loan her money when I said yes are still the most wonderful people in the world to her.

The fact that I gave and then said no later has made me public enemy number 1.

Leech-logic.  There is nothing like it.  To add to the fun, I have this going on on both my side of the family and my wives'.  It is unreal. 

Do not make this mistake.

BFGirl

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Re: Loaning money to family?
« Reply #14 on: July 11, 2014, 02:02:50 PM »
What does your wife want to do?

If she has paid you back in the past, I would loan it to her.  If she doesn't pay you back, then I wouldn't loan to her again.

RiskDown

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Re: Loaning money to family?
« Reply #15 on: July 11, 2014, 02:06:47 PM »
Do not make this mistake.

The first time, it's hard for the in-law to ask for money.  The secon time, it's much easier.
The 3rd time, it's an expectation that you will give them the cash.  I am not kidding here.  I've made your mistake.
I became the emergency fund for them.  Why plan for yourself when you can always just take it from your brother-in-law?

Once you finally say no, you are a jerk, a tightwad and a money-nazi.   Don't make the mistake I did.
The family that refused to loan her money when I said yes are still the most wonderful people in the world to her.

The fact that I gave and then said no later has made me public enemy number 1.

Leech-logic.  There is nothing like it.  To add to the fun, I have this going on on both my side of the family and my wives'.  It is unreal. 

Do not make this mistake.

^ End the thread, and shut out the lights on this post. >>100% PRECISE<<

Doomspark

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Re: Loaning money to family?
« Reply #16 on: July 11, 2014, 02:36:31 PM »
Have you discussed this with your wife?  What does she want to do?

My gut reaction is: once a leech, always a leech.  If you lend your SIL the money now, you'll be doing it again. And the amounts will start creeping up.

If your wife really wants to help her out, *give* the SIL a small amount (maybe $200.00) so she can eat for a couple of weeks. 

ginklord

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Re: Loaning money to family?
« Reply #17 on: July 11, 2014, 02:37:21 PM »
You ask if you're being selfish. Well, if your focus is financial independence and you need every possible dollar to help you get there, then yes - you are being selfish by refusing. But so is working, paying your mortgage, buying stuff, etc - it's all relative.

I think the real question is how do you help her. My guess is that loaning her money will NOT help, at all. It will simply encourage her to continue making poor decision, while simultaneously straining several relationships. Ultimately, you really need to work with your wife on this. Don't let this become a strain on your marriage.

ltt

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Re: Loaning money to family?
« Reply #18 on: July 11, 2014, 03:37:37 PM »
If you give it to her, do it as a gift, not a loan.  But since this seems to be happening on a regular basis, I think you probably need to let her know this will be the last time. 

NoraLenderbee

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Re: Loaning money to family?
« Reply #19 on: July 11, 2014, 04:22:07 PM »
How would you (and your wife) feel if you didn't give her money, but gave her a couple of bags of groceries?

ShortInSeattle

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Re: Loaning money to family?
« Reply #20 on: July 11, 2014, 04:33:24 PM »
We have loaned money to relatives before. It was paid back, but even then created some friction in the relationship. We decided to avoid family loans in the future.

When we had another relative going without food in the house, we gave them a small monetary gift to help them buy groceries for the kids. They were grateful, and we felt very happy to help.  We donate to various charities, why not to a relative going though a rough patch? 

When that same relative came looking for money later for a mortgage down payment, we said no.

I guess my point is that you don't want someone to be dependent on you, but it's not like you need to have a hard and fast rule for all circumstances.

In your particular situation I might offer to give your sister-in-law a small amount to cover her groceries for a couple weeks.  I'd make it a gift, not a loan.  Most people who come to family for money can't afford to pay the loan back anyway.

Helping a relative out isn't *always* a slippery slope. You can say yes or no as you like, you are not obligated to any future request.

I probably would not have paid for her mattress. Sleeping on the floor never killed anyone.


zolotiyeruki

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Re: Loaning money to family?
« Reply #21 on: July 12, 2014, 09:15:42 AM »
I'd either give her the money as a gift or just say no.
Repeated for emphasis.  This is the best advice here.

Cwadda

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Re: Loaning money to family?
« Reply #22 on: July 12, 2014, 09:34:17 AM »
I will loan money to family/friends that I know will pay it back. I define that as being someone who will pay it back on their own without me ever having to ask or confront them about it. They confront me, give me the money, end of story.

If I had a family member or friend who was hurting financially and I didn't think they would pay me back, I would probably do something on a larger scale - help them build a resume/find a job, help them with budgeting, help them make some repairs with things, etc. Just giving money won't solve a problem; it'll just sweep it under the rug. I would really want to teach a loved one to grab the bull by the horns. That's exactly how I would want someone to help me with if I were in such a situation.

Exflyboy

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Re: Loaning money to family?
« Reply #23 on: July 12, 2014, 10:49:34 AM »
Has she ALWAYS paid back the money in the past?.. If "No" the answer is simple.. sorry, you didn't pay me back the last time and until you do I cannot lend you money.

If yes, then maybe a partial loan of say 200 to 300 ($1500 is a lot of money).

Remember his is YOUR money. YOU have saved it. Never feel guilty for saying no.

Frank

JustTrying

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Re: Loaning money to family?
« Reply #24 on: July 12, 2014, 02:22:33 PM »
I think this is a tough one. I agree that if you give her the money, you've got to do so with feeling like you could still love her and respect her if she never paid you back. If you can't do it, then don't lend it.

Hubs' family is really irresponsible with money, so before we got married I asked him to promise me that we would never lend them money. (He made that promise). However, they have a family business and they often need him to help with that, and then don't pay him for his work until they need him for a new project (because he refuses to work for them until they pay up). It's an endless cycle of them almost always owing him at least $5,000....which is pretty much equivalent to us loaning them money. It's really frustrating to me because, like you, I see how that money could be working for us, and want the money to get invested. If I had my choice, hubs would not work for them anymore, but he chooses to continue to do so, and there's not much that I can do about it. In other words, I am not able to lend to my inlaws while still loving them and respecting them, so I wouldn't do it if it were up to me! (Unfortunately, it's not!)

On the other hand, my family is responsible and would only ask for money in a desperate situation, so I'd lend to them in a heartbeat. (But it would definitely be a one-time deal - the fact that your sister-in-law never paid you back for the mattress would mean that she lost all lending privileges to me).

But...I'm a hard ass. You've got to figure out what works for you and your family!

Fortuna

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Re: Loaning money to family?
« Reply #25 on: July 12, 2014, 02:38:54 PM »
Lots of good advise and experiences here which is what I was hoping for when we I started the thread.  After talking with my wife we are probably going to help her this time.  We both agree that buying her the mattress was dumb.  Our mistake - but she did have the nerve to ask.

I can hear the collective groans as many of you have warned me this is a bad idea.  In general you are right and you may be proven to be right in this case as well.  Couple other things in play here now that my wife and I have talked.  Fact is SIL has been borrowing from my wife off and on for a long time.  Going back 20 years.  She ran up a tab as my wife supported her while she went BACK to school.  That is the bad part.  The good is she did pay the money back over time.  A fact my wife reminded me of.

Ignoring the mattress debacle we should have not loaned her that - this time she lost a couple of her rental clients and she had just paid for some repairs to the car and the AC.  So she did not spent without having the expected income - she just lost some income.  Problem of course is that she did not have any buffer in her finances and if you are going to run your own business you better have that.

So in the end we are going to help with the expectation that she pay this and the mattress money back.  And with the message that this is it.  You need to figure out how to support yourself with stable income.  We are done.  We accept that we may lose all the money.  If that happens I can live with it - she is flesh and blood family.  We donate a fair amount of our income to charities as that is the right thing to do in our minds.  So if SIL cannot or does not pay I can scale back those donations for a time to recover what we have spent.  If I am willing to give money to charities to help people I have never met I think I can allocate this money to family in the same spirit.

But the bottom line is the message has to be delivered that she needs to become self sufficient and stop using others as a safety net.

Josiecat

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Re: Loaning money to family?
« Reply #26 on: July 12, 2014, 08:09:18 PM »
Fortuna, I would make it 100% clear to her that this is the very last time you will EVER give her money.  You give her $1500 and it ends right here, right now.  Otherwise, you know how this will turn out. 

darkadams00

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Re: Loaning money to family?
« Reply #27 on: July 12, 2014, 08:41:19 PM »
Honestly, if you've given/loaned money several times in the past, you've already established and reinforced your SIL's expectation of you--an available source. If she's paid you back, even if a bit late at times, then in her mind, she's good for the money, and you have no reason to distrust her. Also, you indicate that her behaviors haven't changed over the past several years. If she hasn't changed, and you haven't changed, and your relationship hasn't changed, and she's always paid you back, then she has absolutely no reason to expect you to withhold the cash this time. Upsetting this apple cart unexpectedly will most likely end poorly for your relationship, and she's not entirely to blame. People on this forum complain about professors, bosses, spouses, parents, children, banks, politicians, etc all the time--typically when something was withheld that the complainer thinks he's entitled to. It's all about perceptions.

Decide now if this is the last time. Then give her the money with a thorough explanation that this is the last time, why it's the last time, and offer to help her make this the last time she even needs to ask. Then you've given fair warning for the future. Although a "leech" (terrible word for even a bad SIL) might ask again anyway and still get mad if you refuse at that future point in time, you have given reasonable notice, you've completely exonerated yourself from accusations of unfairness and unexpected behavior, and you've set a precedent of level-headed thought and process that should appeal to your wife more loudly than the hissy fit your SIL throws. Be kind to your SIL. Win with your wife.

Icecreamarsenal

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Re: Loaning money to family?
« Reply #28 on: July 13, 2014, 01:31:05 PM »

DON'T DO IT

I've done this too many times. I wouldn't do it because not only will you not see the $ again, your relationship will likely suffer as well from resentment on both sides.

Nords

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Re: Loaning money to family?
« Reply #29 on: July 13, 2014, 02:47:10 PM »
So in the end we are going to help with the expectation that she pay this and the mattress money back.  And with the message that this is it.  You need to figure out how to support yourself with stable income.  We are done.  We accept that we may lose all the money.  If that happens I can live with it - she is flesh and blood family. 
I believe this is a classic example of enablement and co-dependence.

You've supported this sister for over 20 years, you're now responsible for her financial well-being, and she will not understand why that needs to change.  Your change of the rules is going to drive a wedge between the two sisters that will make them both unhappy, and you're going to end up being the authority figure who's causing the unhappiness.  In addition, every bad thing which happens to that sister from now on will be completely your fault for your selfish lack of consideration.

For real behavioral change to occur, you and your spouse will need to talk yourselves through the consequences of inciting this family dispute (and the side issues of the rest of the relatives & friends getting involved).  You should also practice extensive role-playing of the inevitable confrontation.   

Perhaps a compromise would be for you and your spouse to set aside a "Sister Assistance Fund" of some amount that your spouse is in charge of.  After you two fence off the money then your spouse is in charge of it.  She can loan as much as she wants of that fund to her sister without discussing it with you and under any arrangements she deems necessary.  You no longer get involved in the sibling dynamic, and you don't want to know anything about the blow-by-blow. 

She'd do the same thing for you if you wanted to buy an expensive item that matched your values, and you'd do the same for her if she wanted to buy something expensive that matched her values.
« Last Edit: July 13, 2014, 02:53:10 PM by Nords »

Zikoris

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Re: Loaning money to family?
« Reply #30 on: July 13, 2014, 02:59:06 PM »
I'd offer to help her make a budget, set up and use a Mint account, apply for any sort of government assistance programs she may be eligible for, and brush up her resume and/or cover letters. Also a standing invitation to drop by for dinner anytime, since we cook a big dinner every night.

Loaning money? Not a chance. That introduces a dynamic into a relationship that I would not want, whether it gets repaid or not.

Paul der Krake

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Re: Loaning money to family?
« Reply #31 on: July 13, 2014, 03:14:04 PM »
Regarding the previous loan: who the hell asks for money for a mattress? I can understand something like a roof leak, or any sudden costly repair, but a mattress? It's not like they stop working overnight, you have months, if not years, to see that expense coming. If this were one of my siblings they would be a getting a yoga mat, not a check.

Another "no" vote.

rmendpara

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Re: Loaning money to family?
« Reply #32 on: July 13, 2014, 05:24:33 PM »
SIL sees you/wife as a credit line. She will probably pay you back... eventually, but the question that you need to discuss with wife is whether or not you are enabling her to continue to be a loser.

Sorry, but it's the truth. She's 45 and never has supported herself, and still cannot.

Wife probably feels like she is helping SIL, but in reality she is just enabling her and not allowing her to grow up.

It's up to you whether or not you give her the money. If you are okay with losing the money, then fine, go ahead and loan it to SIL, but realize that money is not her problem. She has no budget, no plan, no security, and a loan from wife/you is not helping her with the key problem.

stashing_it

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Re: Loaning money to family?
« Reply #33 on: July 14, 2014, 09:26:33 PM »
I might have missed this, but has she already spent the money for the AC unit and for the car repairs ?

If not, then perhaps instead of loaning the money, you can help fix her car or find an AC unit on craigslist instead of new for cheaper than 1500             ( on my local craigslist, I see a slew of air conditioners for less than $100, and we are in the middle of a local heat wave)

sleepyguy

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Re: Loaning money to family?
« Reply #34 on: July 14, 2014, 09:54:11 PM »
If you're gonna do it , be upfront.  I personally WOULD loan the money but not expect it to be paid back.  Before I give the money I would say "This is the LAST time, we're not going to bankroll your lifestyle... you need stand on your own".

But my advice would be to say NO.

I 'loaned' my brother $3500 many years ago... unsure if I would get paid back (even though he promised he would).  I've never gotten a cent back and have ever brought it up only once.  He knows he'll never get a cent from me again... that's my code.

mooreprop

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Re: Loaning money to family?
« Reply #35 on: July 15, 2014, 02:51:09 PM »
I would loan the money.  I think you and your wife made the right decision.  However, I think that to avoid becoming the "emergency fund" for her, that you should attach some strings.  Explain to her that you are loaning her the money because of her past history of repaying you, but that you think the bigger problem is that you are planning to retire soon and will not be able to help her anymore.  Then insist on going through a financial planning course with her.  Dave Ramsey's books or other library books on personal finance could help you cover the basics and help her learn how to set up an emergency fund.  I think that she might benefit from you teaching her how to plan better, rather than just bailing her out all the time.

If she balks at this, then she is making the decision not to accept your loan.

BlueHouse

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Re: Loaning money to family?
« Reply #36 on: July 15, 2014, 08:38:39 PM »
Do not make this mistake.

The first time, it's hard for the in-law to ask for money.  The secon time, it's much easier.
The 3rd time, it's an expectation that you will give them the cash.  I am not kidding here.  I've made your mistake.
I became the emergency fund for them.  Why plan for yourself when you can always just take it from your brother-in-law?

Once you finally say no, you are a jerk, a tightwad and a money-nazi.   Don't make the mistake I did.
The family that refused to loan her money when I said yes are still the most wonderful people in the world to her.

The fact that I gave and then said no later has made me public enemy number 1.

Leech-logic.  There is nothing like it.  To add to the fun, I have this going on on both my side of the family and my wives'.  It is unreal. 

Do not make this mistake.
Yep, I agree with this. I didn't realize this was happening until I read this post. Completely true

Goldielocks

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Re: Loaning money to family?
« Reply #37 on: July 15, 2014, 11:07:59 PM »
Here's a couple options for the future:

1. You implement a specific monetary loan/gift amount per year, and explain you can't exceed this

This is what I was thinking too...without telling anyone you are doing it...I wondered why no one mentioned it yet.    It is your SIL... Some families just always help, even if it is not fair..   So if you don't want to say no, I would put aside 2k each year for family gifting.    Whichever persons you want to give it to.  Any paybacks or excess can go to FI, or gift to the other sister(s).   I am sure they have noticed.

 If (when) you get asked for more, you can say that you can't afford more...

boarder42

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Re: Loaning money to family?
« Reply #38 on: July 16, 2014, 02:11:45 PM »
this topic just popped up in my family again.  i'll echo the sentiments people have said here.  I feel that if they are willing to change their lifestyle and let me help them get their finances on track.  IF after we do all that they need some dough i'll be willing to help them out.  But if they arent willing to open the books and make changes we're just giving a man a fish rather than teaching him how. 

Thats the best analogy with loaning money to anyone family or not. 

sobezen

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Re: Loaning money to family?
« Reply #39 on: July 16, 2014, 02:19:06 PM »
I had this situation and I offered food and clothing.  Beyond that I did not offer anymore assistance because I find when people are picky, they are not appreciative or desperate enough to make changes in their own lives.  I rather not deal with their drama and have the accompanying emotional stress.  If you feel absolutely obligated it might help to pre-determine a set amount of money you are willing to never get back.  This sister sounds like she lacks accountability and the will to take charge of her life.  The longer you help her, she may come to depend on your generosity and become less willing to stand on her own.  Good luck!