How To Lend Money To Family (and Not Be a Chump)

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While we’ve discussed tricky situations when it comes to marriage and money, I think today’s topic is one of the toughest – bailing out family.

I think most people would do anything to help out a relative who’s hit a bump in the road. Part of it is because we love them and also because we’ve all been there.

However there are times where certain family members seem to constantly struggle and it’s not always because of external circumstances.

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In this episode we talk about:

  • How to figure out if bailing your family out is helping them or enabling them
  • Defining your line as a couple with financial coach and author of the upcoming Money Chat book Dorethia Kelly
  • How you can support your family without harming your marriage or finances

I want to make sure you have the tools and perspectives to help you find a system that works for both of you.

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Loaning Money to Family Before you loan any money to your family or friends, check out these tips from MoneyChat founder Dorethia Kelly on how to help others while protecting your own finances.

I know it can be hard to not help your relatives, especially if its parents or siblings, but as a married couple the two of you both have a say in how your immediate family’s money is spent.

When you’re approached by family to lend money, be upfront and tell them that you need to run it by your husband or wife first.
Don’t let them pressure you, even if they say it’s an emergency. Let them know you will get back to them as soon as you can, but you need some time to run the numbers.

Any reasonable person will understand and those who love you will not want to stress out your family.

If they balk and try to make you feel guilty, then you’ll know what they are really interested in.

Now let’s say that you want to help, but you don’t think a loan is the way to go. Perhaps you think the amount is too much or you think that bailing them out with money is going to make it worse.

What do you do then?

Here are some suggestions that may work for you:

  • Give a smaller gift instead of a loan. After you sit and come up with an amount that you’re both happy with, go to your relative and tell them you can offer a gift. Make sure the amount doesn’t damaged your family budget and don’t have any expectation of seeing that money again.
  • Address the problem directly. Perhaps just giving them cash will only mask the problem, so you may want to give a gift card for their specific need.
  • Offer to help them with budgeting. You don’t have to look at their numbers, perhaps you can share your budget spreadsheet.
  • Encourage them. Congratulate them when they take positive steps towards their goal.
  • Just say no. It can be hard to do, but sometimes it’s the best way to wake them up to their financial problem.

Most of the time,with the exception of option #4, the recipient will at least be cordial. even if they are upset you’re not giving them exactly what they want, you are offering to assist.
I’ve had family complain more when I said no, but only one gave me the silent treatment and it was for a limited time.

The important thing is that you and your spouse are on the same page and comfortable with the plan.

Get Money Chat The Book!

I had a great time talking with Dorethia about dealing with family and finances. If you like to hear more from her, please check her out at The Money Chat.

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