How to avoid family financial sabotage

Advisors


Deciding not to expect repayment can reduce your anxiety. You still might second-guess your decision, especially if you have to come to terms with forfeiting a needed purchase or valued activity, or even delaying retirement, as you watch the funds vanish.

Requests for financial help from family members can sabotage personal finances and emotional well-being. Being in tune with your situation and the situation of the family member can help guide you in making a decision you can live with. The key is preserving your sanity and encouraging financial stability for both parties involved.

Here are a few tips to keep in mind when a family member asks for financial assistance:

1. Size up the situation: Choices or charity

Is the financial request due to the individual’s choices, or is charity necessary because of circumstances beyond their control?

When you fund a person whose situation is the result of their bad choices, it’s likely he or she will return for another bailout and get upset if you don’t comply. People who make bad choices feed off those who allow FOG to creep in.

These requests are often masked in good intent — such as assistance with car repairs, rent, etc. — only to find that the family member misspent money on pleasure and not necessities. When poor choices are the reason for a person’s financial mess, providing financial assistance without addressing the cause is like putting a soiled bandage on an infected wound.

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Charity funding comes into play when the person really needs a break. Life can throw curve balls — a family member could lose a job because of illness or a no-fault car accident, for example. Your investment in their good cause could help the family member find financial stability.

Alternatively, you may need to take on the role of financial caregiver because of medical or physiological conditions. In these situations, several infusions of cash could be required to stabilize circumstances as they arise.

Charity could also represent a wealth transfer to a responsible family member. The funds could be used for a down payment on a home or seed money for a business.

2. Set financial boundaries

Regardless of whether you fund a choice or charity situation, it is important to determine how much and how often you’re willing to shell out money and whether you will set up repayment terms. Earmarking how much you will lend or give allows you to say no with assurance.



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