Tender, Loving Credit
Protect yourself from the stress of lending money to loved ones.
When it comes to offering tender loving credit, financial advisors and gurus love to quote Shakespeare. Don’t Do It is their basic point. “It’s a disaster waiting to happen,” says Sheryl Garrett, a certified financial planner and author of Just Give Me the Answer$. “My father warned me to never ever lend money under any circumstance. His wisdom was excellent.
Advisors such as Garrett have seen irreparable disappointments woven into otherwise happy relationships. “I have a client who lent a significant amount of money to his son,” recounts another planner, Lauren S. Klein, in Newport Beach, California. “The son has remarried very well and has no intention of paying back the dad. My client’s relationship with his son is very strained, because the kid won’t even acknowledge the debt.” Experts can see what ordinary mortals miss; namely, the future. While our fond impulses tell us to trust, and while loved ones’ plights often seem straightforward (“Something went wrong with the car,” Garrett offers as an example, “or, I broke my front tooth”), none of this has much emotional bearing on what’s to come.
Those simple, generous feelings can suddenly disintegrate when, for instance, the beloved debtor buys something indulgent for himself. “If you watch them spend money in a way you don’t condone, the resentment starts,” says Garrett. Add the need for a bit of belt-tightening on your own part, and it gets worse. Ask Hank: “The more I’ve become broke, the more I’ve wanted that money.” How do you maintain closeness with someone when her every bullish moment, her every purchase, fills you with ill will?
So we don’t need no haters, right? Right, but closing down the teller window on our nearest and dearest isn’t a very happy alternative. What’s life if it doesn’t include a little risk in the name of devotion? The experts all seem to have an answer to this conundrum as well. If just-say-no doesn’t satisfy as a rule of thumb, they agree, you can go ahead and play banker, as long as you follow a few hardcore rules.
First, don’t loan. Give. Invariably financial professionals will tell you to think of money shared as a gift, something you don’t plan to get back, just as you don’t expect your ten-year-old to reimburse you for summer camp fees when he’s grown. “I did this myself,” says Garrett,who was named one of the 25 most influential people in the field by Investment Advisor magazine and is a frequent speaker on personal finance. “One of my very best friends in life was in a bind, and I could see there was no way she was going to be able to repay me in the foreseeable future. She said she wanted the money as a loan, but I said, no, it had to be a gift.” Garrett understood that more than bitterness could get in the way. “I knew if my friend couldn’t follow through on a loan, she’d be embarrassed and stay away from me.”
Second, make sure you can truly afford it. “If you have to borrow to give,” says Garrett plainly, “don’t.”
Discussion
The best thing to do is to avoid all of these mess is to save and stop using credit cards. These are jackals, crunching on the bones of the poor and middle class. Save for things. There's a lot of urging for legislation that will restrict credit cards and their shenanigans and a proposed new law is that no one can get a credit card under the age of 18, and those under 21 need a cosigner over that age. It makes sense – a young man just doesn't have anything in the world these days, and it gets harder all the time. Just don't use credit cards – they cause bankruptcy, and do you really need all the useless plastic junk that you'd buy with a credit card?
