My aunt-in-law wants us to loan them $5000...

Miscellaneous and Personal Stuff I Must Share
1

…which we don’t really have.

“Them” would be my wife’s aunt and mother, which of course makes this an extremely uncomfortable family situation.

The two of them live together, which in some ways is great – they’re sisters! They get along! And in other ways it’s not so great, because they both have mental health issues – and neither of them is particularly good with money.

So not good that apparently they’re at risk of losing their house, power, internet connection, car… Basically, they live beyond their means, and most of their efforts to correct the situation involve increasing their means, rather than decreasing their living expenses.

In the meantime, they want to borrow $5000 from my wife and her sister, paid back at 8% interest when they can refinance their new house in the fall. “Unless the market ‘crashes,’” she notes.

None of us can fix their financial situation, of course, or turn them into fiscally prudent individuals. But I still feel guilty – and I imagine my wife feels more so – saying “can’t do it.”

But at this point, if we were to give them money, I’d insist on it being a gift. I have zero confidence (as does my wife) that they could pay back what they borrow, let alone any interest.

But really – not that we’re in dire financial straits, but we can’t easily cough up $5000, or $1000 a month, or even $500 a month on top of current expenses. Doing so would involve taking out loans ourselves, and given that the two of them have been in financial quicksand for years, a monetary relationship with them seems extremely ill advised.

Ugh. I’m not really asking for advice – we know what we’re capable of doing – but this is incredibly emotionally stressful, and we haven’t even talked to them yet – just received an email with the “business proposal.”

2

What a mess! Early in our marriage, my husband and I thought we’d help out his brother and sister-in-law, neither of whom was fiscally responsible. Fortunately, all we were able to do was give them some old furniture, some of which they destroyed. Had we given them money, it would have been frittered away in no time.

We really did want to help them, but there’s no way we could have because they weren’t willing to help themselves.

Good luck to you. Don’t let guilt eat you up.

3

I like that you’d insist it was a gift, because we both know that that’s what it’d end up being. Better to be disappointed up front, than to have it come between your home and your wife’s family later.

4

It seems to me that if you and your wife don’t have $5,000 to give them, then you shouldn’t give it to them… simply because you don’t have it. Surely they will understand that (then again, there are people who just won’t accept no for an answer).

If it were me, I would explain that I don’t have the money they need and offer to help them in other ways, like stepping in to help with finances, or helping them to find a financial institution that will do a small loan of some sort, or help with finding someone to refinance their house. That way, you still are helpful without putting you and your family in any financial strain.

5

My two aunts, who are disabled, live together and spend beyond their means too.

After their sister died (another disabled aunt. Yeesh!) the younger of the two sort of took stock of things and realized she didn’t want to end up like the passed sister, who required a lot of financial help from family. So, she spent her free time doing a lot of research in to what sort of state & county plans and programs they had for her and her sister, in their disabled and non-income states.

Turns out she was able to get tons of stuff for free/cheap from the state and county, and other groups. She got a free furnace, free insulation, free paint, cheap insurance, great medical, etc. All we’re on the hook for is some hard labor here and there, doing things around the house that she can’t get done herself.

I can’t think of a time in the last 10 years they’ve asked for money. It’s worked out great for everyone due to just a little research.

On the other side of the family, both my aunt and uncle asked for money from everyone and were cast in an unfavorable light. They begged and pleaded and said they’d pay back with interest but of course they never did. So people had to give them “gifts” - definitely what you’ll have to do if you want to give them money.

Anyway - since they have mental health issues, they might be eligible for state or county benefits that you’re not aware of. Maybe instead of getting them money, you could help them find money from other sources. If you can’t give them money, don’t.

6

You say you’re not asking for advice, so I’ll give you some moral support - don’t give them money you can’t afford. Your relatives are living in crisis mode, and you fixing their latest crisis isn’t going to fix the underlying problems; it will just put you and your wife further behind financially yourselves.

Maybe look at it a different way; if they were both junkies, and they needed the money for drugs, would you give it to them then? That’s basically what you’d be doing now; your (borrowed) money isn’t the solution to their problems. I personally wouldn’t go into debt for a family member’s car, power, or internet. They’d have to be starving or about to lose their house for me to even consider it. Then it would be the bare minimum they needed to get back on their feet, with them making some changes so it wouldn’t happen again.

Okay, so maybe I gave some advice anyway. :slight_smile:

7

Is theirs a situation where a reverse mortgage would help? Over 62, equity in the home – that’s about all I know about reverse mortgages. Or can you do the loan so that you have an interest in the house, like a lien?

Not because you’d be concerned about repayment, but because getting your money back saves the relationship.

8

I have a sister who is bipolar, and she & her husband also have cant-seem-to-manage-their-money problems.

My other siblings and I do end up bailing them out often, for mortgage payments, utilities, groceries for the baby etc. The reason why we do this is not because we like doing it, or approve of the mis-management going on. It’s like I told my husband a while back - I’d rather pay Sister’s mortgage than live in the same house with her. So we subsidize them. It takes all four of us other siblings, though.

9

Both my mother-in-law and her sister have recurring issues with depression, and we (most of the rest of the family) think they’re probably undiagnosed bipolar. That’s one of the hopeless elements, really – my MIL has long spent time alternating between big bold decisions that are going to change her life forever for the good, and hiding under the bed because the world is so oppressive she can’t deal with opening the mail.

Neither of them is good at incremental change, which is exactly what would save them, or at least make their lives easier. If a change won’t have a huge effect right away, why bother making it?

AuntiePam, I’m not clear on the mortgage situation except that I’m pretty sure they’re currently upside-down on it and I know they bought the house within the last two years. Come to think of it, they’re probably a textbook example of “subprime.”

I think the hardest thing is we could certainly borrow $5000 from a credit card – we’ve paid off most of our debts, and have access to large lines of credit. But since neither my wife nor I think we’d get the money back (or at least we’re not sure enough that we would), that’s not an avenue we want to pursue. Thank heavens at this point we agree on parameters…

10

The only possible reason you could be morally obligated to go into debt to give money to relatives living beyond their means is to pay the ransom on their kidnapped child. Apologize to your relatives, but you shouldn’t do this.

11

You don’t have it, you can’t loan it. Period. End of story.

12

Another vote here for not lending what you don’t have. If you had the money lying around doing nothing, then yes you could lend/give it to them without a second though. But you don’t. What’s the point in getting yourselves into debt just to bail out a pair of financial numpties? If they’re so fiscally irresponsible, lending them money this time is just a band aid and you can be sure they’ll be back for more before long.

13

I’m currently reading a book called “Crash Proof: How to Profit From the Coming Economic Collapse”, and while I don’t agree with everything he says in the book, one point he makes repeatedly that I agree with wholeheartedly is that debt is bad. Living beyond your means is bad. Credit card debt is the worst kind of bad. Going into debt to temporarily bail out people who can’t handle money, while good-hearted, is bad.

14

Believe me – we’re not going $5000 into debt for them. I’m sure we’re going to help however we can without throwing our own finances into the red, but we’re not seriously considering putting their debt on our plastic.

15

I agree that you should not go into debt to help them, especially since it appears you might as well set the money on fire for all the good it’s going to do. You’re not even sure they will be able to refinance their house in the fall like they plan to. We’ve been trying for about nine months to re-fi our house (not anything urgent, just call the bank, can you do it, no, okay, wait a few months, hey remember when we talked about refinancing the house?)

If you want to help, I would suggest not giving them money. Electricity about to be shut off? Pay the bill for them. No food in the house? Go grocery shopping. But under no circumstances should you give money to people who do not have the financial sense to make good use of it.

16

I don’t care if you sleep on mattress stuffed with money. I don’t care if some total stranger left a storage locker full of hundred dollar bills on your front porch. I don’t care if you were digging up your back yard and found a coffin with an original unknown Van Gogh in it.

You should not lend money to fiscally irresponsible relatives. Once you do, they wll never stop borrowing from you.

17

I dunno. I mean, if you help them, it won’t make any long-term difference–they’ll just need more help later.

My sister is always in financial trouble. One thing my dad and my grandmother told me was never to feel financially responsible for her, and never to feel like I had to take care of her. She’s my sister, but my wife and daughter always come first, especially since my sister is responsible for her own woes.

18

They have a burn rate that doesn’t allow them to keep up with expenses. They expect you to believe that, with your loan, they will be able to maintain that burn rate and somehow repay you at the same time. This they propose to do by taking out a second mortgage, putting the roof over their head at risk.

Giving them any money will only, at best, delay the inevitable crash, and take some of your capital along with them. Your answer needs to be a firm no, and if asked for a reason, “You have demonstrated that you can’t live within your means.”

The only sensible reason ever for borrowing money are to spread the impact of large one-time or limited duration (thinking education loans here) expenses that are best not put off until the money can be saved. Borrowing to cover day-to-day expenses is the fast track to bankruptcy.

19

Some people have no shame. I’d work 3 jobs before I asked a relative or friend for money.

My husband’s friend asked him for $30k to pay his mortgage on his farm. Husband told him flat out that friends don’t lend friends money. End of conversation.

20

Yup to both.

I’d be willing, in cases of need, to give money. But never to lend.