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{"id":753,"date":"2020-08-31T04:15:01","date_gmt":"2020-08-31T04:15:01","guid":{"rendered":"http:\/\/financialpsychologycenter.com\/?p=753"},"modified":"2021-02-07T00:56:31","modified_gmt":"2021-02-07T00:56:31","slug":"lending-money-to-family-is-complicated-heres-how-to-do-it-right","status":"publish","type":"post","link":"https:\/\/financialpsychologycenter.com\/lending-money-to-family-is-complicated-heres-how-to-do-it-right\/","title":{"rendered":"Lending Money to Family Is Complicated. Here\u2019s How to Do it Right"},"content":{"rendered":"

(Fatherly.com) – When a family member falls on hard times and needs a hand, stepping up is the sensible thing to do. The immediate reaction should be: What do you need and how can I help?<\/em>\u00a0But when the ensuing request is for\u00a0financial help<\/a>, the decision becomes a bit more difficult. Dealing with family is rarely drama-free. But lending\u00a0money<\/a>\u00a0to family is riddled with conflict. It immediately creates a situation that dredges up resentment, anger, and worry. How, then, do you go through with a family loan without it being such a nightmare?<\/p>\n

Even in the most straightforward agreement, money creates an imbalance. It involves power and control. You have it. They don\u2019t, and, if the deal goes bad, the nature of your relationship, and the family dynamic, can be changed for good. It can be, in a word, \u201cmessy\u201d, says\u00a0Jennifer Calder<\/a>, financial therapist in Montpelier, Vermont.<\/p>\n

Still, you\u2019re not turning away from a relative, and a family loan does not automatically mean disaster. But, to make lending money work, you need to balance your head and heart. It takes self-examination about what you\u2019re getting into and it involves having open conversations. This isn\u2019t a fun exercise. But the process can head off the anxiety, reduce surprises, and end up making a deal that works for both sides.<\/p>\n

Responding to a Family Loan Request: What to Think About<\/h2>\n

Your brother asks you for money. You want to respond, \u201cOf course,\u201d but the answer can\u2019t be impulsive. You need time. There are complications, both obvious and unforeseen, to explore. So how do you begin?<\/p>\n

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Calder says to start with two essential, fair questions: \u201cHow much?\u201d and \u201cWhat\u2019s it for?\u201d Once you have the basics, it\u2019s perfectly reasonable to then say, \u201cLet me think about this for a couple of says,\u201d because there is even more to take into account.<\/p>\n

On the practical level, the main concern is\u00a0Can I afford to give him this money?<\/em>\u00a0Over-extending yourself merely causes stress that can bubble up into resentment. If the amount of money he\u2019s requesting is doable, then you have to talk it over with your spouse, particularly if its a joint account. Not mentioning it, Calder notes, is breeding ground for\u00a0financial infidelity<\/a>. Lying to your spouse about money is never a good move.<\/p>\n

But the considerations you need to make before lending money to family are not all practical. The most essential is a basic rule of lending: You may never see the money again. But you will see this person again. You have to ask yourself:\u00a0How will I feel if it\u2019s not repaid?,<\/em>\u00a0notes Alex Melkumian, financial therapist and founder of\u00a0Financial Psychology Center<\/a>\u00a0in Los Angeles.<\/p>\n<\/div>\n

This is an important question. And if you\u2019re comfortable with the prospect, it becomes a smoother process. Calder and Melkumian both say that making it a gift \u2014 tax implications, aside \u2013 makes it even smoother. (More on that in a bit.) But before you go ahead, it\u2019s necessary to think:\u00a0Is this request part of a troubling pattern or a sign of atypical hard times?<\/em><\/p>\n

With all these considerations laid out, you come to three options:<\/p>\n

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  1. Yes.<\/li>\n
  2. No, I can\u2019t.<\/li>\n
  3. No, I don\u2019t want to.<\/li>\n<\/ol>\n

    Regardless of your answer, the conversation continues, and ways to help are still possible.<\/p>\n

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    Lending Money to Family: If Your Answer Is No.<\/h2>\n

    If a family member asks you to lend them money and your answer is \u201cNo,\u201d the way in which you deliver your answer is crucial. Is the reason because of your financial situation? Say \u201cI love you, but I can\u2019t afford it right now.\u201d Is the reason because you don\u2019t feel comfortable giving the money, say something like, \u201cI love you too much and I\u2019m worried that this will damage our relationship.\u201d It\u2019s not a desired answer, obviously. But you can follow either with, \u201cI still want to help,\u201d and then you two can brainstorm.<\/p>\n

    Depending on the underlying issue \u2013 bad job, outdated skills, poor money management \u2013 you could offer to pay for a counselor or adviser. You could look for ways to free up your brother\u2019s time in order to job hunt or take a class. The point is, as Melkumian notes, \u201cmoney is not the only resource.\u201d<\/p>\n<\/div>\n

    Lending Money to Family: If Your Answer Is Yes<\/h2>\n

    If your answer is yes, then you need to talk with the requestor frankly. Again, it\u2019s simpler to gift it, and you can put it on yourself with, \u201cDo this for me. I don\u2019t want to jeopardize us. Pay me back if you can, but you don\u2019t have to.\u201d It doesn\u2019t take away all the guilt, but some weight is lifted, notes Melkumian. Plus, the option still exists to repay, which doesn\u2019t conflict with the asker\u2019s pride.<\/p>\n

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    But if you are going to make it a family loan, you have to figure out the details of interest and repayment, and go through as many scenarios as possible. Calder calls these the \u201cWhat-ifs?\u201d, the most important being if repayment can\u2019t happen.<\/div>\n<\/div>\n<\/div>\n

    One thing that helps is to set a re-payment schedule that includes regular check-ins where you talk about the practical as well as the emotional issues. It could be asking along the way, \u201cHow are you doing?\u201d Remember, it\u2019s family, and, \u201cFamily relationships are more important than money,\u201d Melkumian says.<\/p>\n

    With the schedule, you\u2019ve built in a release valve. You, as the lender, don\u2019t have to stew or wonder about what\u2019s happening, because you know you two will be talking. \u201cThe more we leave to the imagination, the more opportunity there is for stress, anxiety and resentment,\u201d he says.<\/p>\n

    And talking serves two more purposes. It\u2019s a barometer, for one. If your relative isn\u2019t willing to engage, it\u2019s a strong sign that lending isn\u2019t wise. But by getting everything out, fewer things will come as a shock. \u201cThe more you talk about the transaction, it will become easier to talk about it,\u201d Calder says.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

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    Gaining a Release<\/h2>\n

    Here\u2019s one more thing to accept: Once you give the money, it\u2019s gone, and you need to let it go, Calder says. You can\u2019t constantly check up on or micro-manage the person. At family gatherings or even on text threads, no one wants to feel judged or that every comment is interpreted through the outstanding loan.<\/p>\n

    Here\u2019s a way to reframe perspective. Instead of focusing on the money, Melkumian says, think of this: Your brother or sister is struggling. You want to see him or her rebound and you want your relationship to remain strong. Act like you would with watching your stocks or even your hair grow. Progress isn\u2019t seen by the hour, day, or week. You\u2019re making an investment into someone you care about. That takes time. \u201cTrust the process,\u201d he says.<\/p>\n

    ***<\/p>\n

    Written by Steve Calechman<\/p>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

    (Fatherly.com) – When a family member falls on hard times and needs a hand, stepping up is the sensible thing to do. The immediate reaction should be: What do you need and how can I help?\u00a0But when the ensuing request is for\u00a0financial help, the decision becomes a bit more difficult. Dealing with family is rarely […]<\/p>\n","protected":false},"author":5,"featured_media":779,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","wds_primary_category":0,"footnotes":""},"categories":[8,5],"tags":[54,57,58,56,32,55],"class_list":{"0":"post-753","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-financial-stress","8":"category-media","9":"tag-financial-management","10":"tag-financial-psychology","11":"tag-financial-psychotherapy","12":"tag-financial-wellness","13":"tag-money","14":"tag-money-relationship","15":"entry"},"jetpack_featured_media_url":"https:\/\/financialpsychologycenter.com\/wp-content\/uploads\/2020\/09\/111.png","_links":{"self":[{"href":"https:\/\/financialpsychologycenter.com\/wp-json\/wp\/v2\/posts\/753","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/financialpsychologycenter.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/financialpsychologycenter.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/financialpsychologycenter.com\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/financialpsychologycenter.com\/wp-json\/wp\/v2\/comments?post=753"}],"version-history":[{"count":5,"href":"https:\/\/financialpsychologycenter.com\/wp-json\/wp\/v2\/posts\/753\/revisions"}],"predecessor-version":[{"id":1106,"href":"https:\/\/financialpsychologycenter.com\/wp-json\/wp\/v2\/posts\/753\/revisions\/1106"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/financialpsychologycenter.com\/wp-json\/wp\/v2\/media\/779"}],"wp:attachment":[{"href":"https:\/\/financialpsychologycenter.com\/wp-json\/wp\/v2\/media?parent=753"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/financialpsychologycenter.com\/wp-json\/wp\/v2\/categories?post=753"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/financialpsychologycenter.com\/wp-json\/wp\/v2\/tags?post=753"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}