Jun 26 2008
How to respond when your family asks for money
Note:This is one of the hardest things I’ve written about. I’ve personally gone through it and know how it can tear apart a family. In my case it was because I decided to help.
“Joe, you look awful.”
“Wow, is that a good way to greet a friend?” Joe asked me. “But now that you mentioned it, I haven’t been sleeping well.”
Joe then proceeded to tell me about his family situation and the stress it was causing. His brother wasn’t able to pay the rent-again-and came Joe for a loan.
“I’m getting tired of always having to bail him out. I love him, but loaning him another grand won’t solve his problem. And I’m getting tired of everyone assuming that because I run my own business I have money to loan them.” After a bitter chuckle, Joe added “I don’t know why I call it a loan. They never pay me back.”
It wasn’t the first time
Joe and I have been friends for years-heck, he gave me my start in sales! I was familiar with this drama in his family and saw it repeat several times a year. If it wasn’t his brother it was his cousin or uncle. One time their car was in the shop. Another time they were a bit short until payday.
It was like his family thought that because he was an entrepreneur he was their personal bank machine.
The straw that broke the camel’s back
This time things were different. The economic downturn was hitting Joe’s industry hard. He was struggling to keep the doors open, and the last thing he needed was this. In fact, the reason Joe and I were meeting was that I was advising him on his company’s sales and marketing.
Bottom line: he had nothing more to give.
Loaning money to your family is a lose-lose situation
When it comes to family, money, and loans you can’t win. You are a bad mother/son/brother (fill in the appropriate relationship) if you say no. It will poison your relationship even if you say yes. No matter what you do it can tear a family apart.
For entrepreneurs it can be even worse. People assume that just because you own the company that you are rich and that they are entitled. You can easily become their personal bank…or their welfare system.
With this in mind I’ve developed the following guidelines to help deal with the situation. Some sound cold and heartless, but that couldn’t be further from the truth. This is a decision that can have serious consequences. The decision must be based on facts and on what is best for everyone involved. Remember, the best answer is sometimes the one that hurts the most. People often tell me that the best thing that happened to them was that someone told them no. It forced them to grow up and solve the problem themselves.
7 Guidelines when family asks for money
1. Your not the bad guy…
You know the drill. The guilt is being applied. “Just this once…” “Don’t you love me?” You can afford it.” “Blood is thicker than water.” To make it worse other family members are calling you and asking why you won’t help.
You have done nothing wrong. They put you in a bad position, one that you often can’t win.
2. Step back and take a deep breath
The only thing that makes this so hard is that you are dealing with family. With anyone else it would be much easier. When family members ask you for money they don’t use logic. They push your buttons. This sets the stage for a major family crisis.
Now is not the time to make a decision based on feelings. You need to step away and get some space. If they push tell them you need time to think about it. If they keep pushing start asking them questions. This will put the responsibility back on their shoulders. Remember this is their problem. They are coming to you for a favor.
3. Separate emotion from fact
Now I know I’m going to get an earful about this. “It’s your mother. You owe her.” “How can you be so heartless?” “Don’t you love your family?” “Why do you hate your sister?”
Let me put that to rest right now. Decisions based on guilt rarely work out. Don’t be afraid to use decision making tools (I personally love a weighted pro/con list). Feelings and relationships are a factor, but the decision needs to stand on it’s own without the emotions to prop it up.
4. Am I helping or enabling?
This is tough because of the guilt involved. One thing to keep in mind is that often you are only making things worse by handing out money. People need to take responsibility for their own problems. In extreme cases they need to hit bottom before they can start to get better. In these cases the only way to help them is to stand firm.
Now I’m not saying you should always say no. You just need to make a clear headed logical decision that is in everyone’s best interests.
5. What are they doing to solve the problem?
Just bailing someone out won’t solve the problem. Are their expenses exceeding their income? Then they need to take steps to fix the problem. Do they have a gambling problem? Then they need to get help for the underlying addiction.
They need to take responsibility and be willing to fix their own problem. Otherwise this will come up again and again. Each time it will be a little worse.
6. You have the right to say no
Just because it is family doesn’t mean you are obligated to give them money. I hear the argument all the time that you should “honor you parents.” That doesn’t mean you are indebted to them for eternity. Yes you should respect and thank them for bringing you into this world. Just remember that this is a two way street. You deserve the same respect and appreciation as well.
Now most people have parents that gave them love and nurtured them. That is a different story. Then again, most people with loving parents aren’t put in this position.
You have to make the right decision for everyone involved. This needs to be based on facts, not some emotional tug at the heartstrings. If the right answer is no say no.
7. Always a gift never a loan
If you decide giving is the right decision make it a gift. You should never loan money to family. I don’t care if you get the terms in writing, you will never be able to enforce the contract. What are you going to do? Take them to court? I don’t care if they tell you they won’t take charity.
A loan will only poison the relationship. Each time you have to call to collect on the missed payment it will damage both of you. Even if you don’t have to make the call (unlikely) it will always get in the way of your family.
Note: a gift means no future expectations. You don’t have the right to ask for it back. They don’t owe you. You can’t use it for emotional leverage. It must be given freely.
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Wow.
When I first read about making the money a gift instead of a loan my mind did not want to accept that. I was really going to argue with you until I thought about your post. I think most people read that if you are going to loan money to family members to make sure you have everything in writing. That does create hard feelings.
But to the money as a gift. What a great idea. If you live in abundance and believe in giving why wouldn’t you give money to your family.
You made my day a better day.
@Mark-I’m glad that my post was useful and made you think. I knew it would stir up some controversy which is often good. As long as the discussion stays civil it is a productive way to explore the concept.
I have to admit this was a hard topic to write about. I’ve been seeing it pop up on several blog I follow and there never seemed to be a good answer. Everyone had a strong opinion, but they all seemed to be based on emotion.
Great article. I agree, if you are going to give money, make sure that it’s a gift. The only thing I didn’t see addressed is what to do when your spouse and you can’t agree. In this case, I think you have to turn on your family and stick with your spouse - even at the expence of your extended family relationship. And you can’t blame your spouse, because that will only damage your marriage. You have to keep your discussion with your spouse private and make a decision together.
@Curt-You sure do love to stir things up!
That does makes the decision more interesting. I think the same concepts apply, and that making a logical decision will eliminate that problem. If you step away from the emotions and base the decision on facts it eliminates many of the problems.
But at the end of the day I would always side with my wife. The day I walked down the aisle she became the most important (and influential) person in my life.
I have personally seen this happening. Basically, the person who keeps asking for bailouts has never had to accept the natural consequences of their actions. In order for them to do so, NO must be an answer. I am not advocating never helping out a family member. I would love to do so if they were in genuine need and it was a one time thing. Also, everyone has boundaries and it IS within the person boundaries (the one that is being hit up for cash) to say no. I totally agree. When the someone keeps asking for money, then they are not respecting the boundaries of the other person.
I also agree that the emotion has to be taken out of it. I have seen the guilt trip work first hand and know that it destroys relationships. Plus if family members really love you, they will understand that you can’t keep giving them money. If the get mad, it’s just because they couldn’t manipulate you into giving money. They are mad that their handout didn’t come through. People who constantly seek handouts are completely selfish and don’t care about the strain they are putting on another person.
Personally, I pride myself on being financially independent. Upon entering college, I ceased asking my parents for money. Years down the road, I still haven’t and I won’t ever. If something bad happens, I will take out a loan (which I have done for unexpected things).
@Brian-This topic tends to generate strong opinions. People tend to filter their reactions through their experiences.
That’s why separating the emotion and the facts is so important. The relationship and the emotion become data points. They are part of the decision without taking over the process.
[...] by Example How to respond when your family asks for money Lessons in Manliness- Knute [...]
Gift-not-loan is much more realistic. I also think that giving to elderly parents (or even financially supporting them) can be the right thing, while giving to or supporting adult children is generally not (assuming they’re able-bodied).
@Alison-Thanks for your comment!
I agree that elderly parents are a different story, but this again is a decision that needs to be made using logic. I know of a lot of parents that were loving and supportive. In that case the children have a larger obligation. This is also an easy decision.
It is not the same in dysfunctional families. In some cases the parents regularly put their families in harms way. They did not contribute to the health and well being. They have not earned this privilege.
Bringing dysfunctional parents into your house also adds several things to be considered. What will be the impact on your family? Will you have to worry about your identity (family steals more identities than anyone else)?
Many of the points in my post still apply. You need to look at your specific situation. This is what drives your decision.
Hi B Smith (Brandt?),
The point that hits home for me is #5. That is what I would look at very carefully. If the family member is not doing anything to help him/herself, than you might as well burn the money.
It puts a whole different take on things, though, if they are doing their best and simply getting kicked in the shins by life and need a temporary helping hand. Then I’d help in a heart beat.
Excellent post.
Anita
@Anita-you figured out my super secret identity!
Their level of personal accountability is a good indication of whether your assistance will help or hurt them. If they have taken ownership of the problem and are taking steps to improve then your efforts are for the best. If they are looking to you to bail them out, nothing changes and you enable them. This helps no one, especially them.
It’s hard when you see the tears falling. This is where getting some breathing room helps.
[...] B. Smith of Wealth and Wisdom, recently put a lot of thought into a touchy topic: what to do if your family asks for money. [...]
Really good article. #1 is the hardest to deal with. I have extended family members who make you feel bad just because you have your finances in order. They look at you like you have money falling out of your pockets. Needless to say we avoid contact with those family members just because of how negatively they interact with my husband and I.
@Paula-Thanks for the great comment. It’s funny how people think we’re rich just because we’re self employed.
It also happens when there is a difference in your level of financial responsibility. I have friends and family who act like we are loaded because we can generally afford whatever we want. What they don’t see is how often we don’t spend money and that we are in this position because we have lived within our means for almost two decades.
[...] Hiring Family B. Smith of Wealth and Wisdom, recently put a lot of thought into a touchy topic: what to do if your family asks for money. His article leads with a common misconception about entrepreneurs: family members think that just [...]
[...] How to respond when your family asks for money [...]
My mother is not a senior citizen. As a matter of fact, she is only 15 years my senior. I wish I would have read this 10 minutes ago - before I wired my mother yet another $100.00. Maybe I would have had more of a backbone. I did send her a copy of all of the wire transactions for the past year. I guess I was being passive aggressive, which I know won’t help anything. I was just really annoyed. My husband and I are so far in debt! My husband left his job to start a business. We have invested all of our savings in it. It has been about 2 years since out business has been up and running and with the economy gong the way that it is, we are struggling like never before. My mother, who only has herself to worry about, acts like we’re her ATM. I think she thinks that we are some how living high of the hog. Her house (which she inherited) has no mortgage. She lost the one house that she did purchase - after I sent in over $1600 in back mortgage to bide for time. Instead of going ahead and selling the house, she let it go into foreclosure! She has no children living at home. She never incurred any debt from me for college. Even then I sent her some of my college loan money, and had to pay it back myself. She called me crying (probably crocodile tears) because she doesn’t have any money. She won’t hold on to a job. Somebody is always treating her “mean and nasty.” I have sent her money for numerous tests that she’s needed to take for employment purposes. Either she fails the test or quits the job. I feel like an idiot for sending her the money. We really can’t afford it. My husband hasn’t complained - yet, but I am afraid he may one day truly resent it. Anyway, thank you for the wisdom and insight. In the mean time, I suppose I’ll just chalk this “gift” up to the ash heap. Hello, my name is Missy and I am an enabler.
@Missy-Wow. I thought I was the only one with family issues.
I’m glad my article made such a difference. This one took a lot to write. One thing I’ve found over the years is that there are a lot of people with dysfunctional families. I no longer feel quite so weird!
You mentioned your husband started his own business and that the economy is hurting. You may want to look at Recessionproof Your Sales for advice on surviving our economic slowdown. One interesting thing I’ve found in similar times is that you can actually make gains but you need to focus on the right things (usually the basics). Your time and resources are strained so you have to apply them intelligently.
I had wonderful parents who provided me with terrific financial advice. They lived well below their ample means, taught me to do the same. I have been saving since I was in gradeschool and saving for retirement since I began my professional career at 22. My parents (sadly) have both passed away and I have inheirited their remaining wealth. My husband and I took care of them until their last breaths.
My husband’s parents never wanted him, never showed him any love and respect, favored their other children including financial support, and now are looking to us for support. This is because we have achieved certain goals and basically have a nice life living well within our means. In addition, they always made poor financial decisions and when my husband was young and needed $ 3000 to complete the purchase of his own business, they “were not interested.” Within the last six months my husband’s job was eliminated even though he has worked like a dog for his company and I have become disabled during a knee operation. I have begun training for a more suitable job(part-time) and he is looking for a new job. At 58 and 59, we will be financially fine, our homes are paid for, etc. because of our ability to save and control our spending, but I do not feel we have to bail them out. To be fair, they are now very elderly and have limited means, but when we advised them to seek a less expensive care center, they refused. When we offered them our beautiful fully paid for retirement condo in a neighboring city at a small rent to just cover their expenses($500) and when we advised them to put what money they had in safe investments(not the stock market or an annuity) they ignored our offers and advice. The entire relationship has been poisonous.
My husband has no love for them but now feels guilty because they are his parents and they did one thing: sent him to college($12000) while basically kicking him out of their home. I feel no love or respect for them at all. My husband and I have helped friends who have been in dire straits(one with a liver transplant, another with a terrible accident). We gave money freely as gifts. But giving his parents money would be like endlessly throwing it into a cesspool. The cost of their care is $4500 a month and that would soon eat through our emergency fund, retirement savings and eventually through the money I inheirited. His guilt is overiding his common sense and I think he wants to prove to them that he is worthy of their respect. How do I expalin this all to him without getting into arguments about the facts of the situation?
Sorry to go on an on, but this has been an ongoing issue for 32 years.
@Susan-You have a unique perspective. Your parents were sportive while your husband’s parents were corrosive. You basically see both sides of the equation!
At times like this I find it helpful to be logical. Put it in a pro/con list including the emotional aspects as data points. In this case there are strong emotional issues on both the pro and con side of the list. One other thing I find helpful is to weigh each factor as some items are minor irritants while others have a significant impact.
Another thing to consider is that you have to take care of yourself first. That doesn’t mean you need to be self-centered. It just means you need to make sure you and your husband don’t put yourself in a situation. It helps no one if a decade from now you are in financial straits because you keep bailing them out.
A final thought: do some soul searching with your husband. Look at the emotions driving these bad decisions. Why is he driven to keep the relationship corrosive? Why has he not switched roles? What will happen if you refuse to pay $4500? If you do that it may force them to make a responsible decision.
An article that may be applicable is Honor thy parents.