About Donell Edwards: Donell Edwards is President of CWR Media and is also founder and publisher of The College World Reporter (CWR) magazine and CWR World News & Information Service. He is also a professional speaker, freelance writer, and entrepreneur.
Know Your Money
Thursday – March 27, 2014
SPECIAL Family Spending Series
The Family and Your Spending: Relatives and Extended Family
By Donell Edwards
All of this week we have been trying to make a point that the family can and does influence spending, and that it is necessary to understand how those closest to you affect spending decisions that you make. Some times this may come in the form of assistance you are asked to provide. So it is necessary to have a game plan, a plan of action when your assistance is requested or needed, and in regard to parents and grandparents, even adult children to some extent, to set aside funds in the budget to be able to care for these needs when they occur.
Also, within the immediate family circle, mates or significant others and children, there must be communication, education, and cooperation, in order to ensure that everyone is working together to avoid wasteful spending, instead of being detractors and influencing wasteful spending decisions.
The last post in this special series on family spending deals with relatives and extended family, really close friends that are treated like family. If you are viewed as being in a good financial position it is easy for relatives and extended family to come to you when in need financially. Even if you are not viewed as being in a solid financial position, if it is perceived that you are in a position to help, you will probably be the one that relatives and extended family most often turn to.
No one should tell you what your relationship should be with your relatives and extended family, and that is not what this post is about. You must decide what you will do whenever anyone asks you for money. Our intent is to help you understand the impact your decisions may have on your finances in the short term as well as in the long term.
There is a difference when someone is really in need due to an injury, illness, loss of employment, or some other situation beyond their control, than when their situation is the result of poor money management, gambling, addiction to alcohol or drugs, or just laziness. You should make it a point to know your relatives and extended family well enough to have some idea of their situation, which should be a factor in making your decision. Even if you decide to help knowing that their situation may have been caused by their own actions, at least you are making that decision with the awareness of the circumstances, and it is your choice to help, rather than thinking you are helping someone really in need and later discovering that you have been blindsided by someone taking advantage of your kindness.
As I mentioned, your decisions regarding you and your relatives and friends are up to you. We are just encouraging you to always think first, consider how your decision to help anyone financially is going to impact your budget and your finances and make your decision based on knowledge and with compassion.
A rule that I use regarding lending money and helping others which I will share with you, I call The Rule Of One, is based on what I am in a position to do at the time and is an opportunity for the person being helped to demonstrate to me their character. The way The Rule Of One works is that I will only lend what I can do without even if the person does not repay me without it affecting my budget or my finances. If the person pays me back as agreed that establishes some basis for trust in the event they ask for help in the future. If they do not pay back what was loaned as agreed and make no effort to make payment or offer an explanation why, The Rule Of One means that I have given that individual one opportunity to earn my trust and they have failed, and I will not help them again. I am not recommending my methods, I am just sharing this with you for your information.
As I mentioned previously, we should know to some extent the circumstances of our relatives and extended family, or make an effort to discretely ascertain what those are before making a decision to provide help. If I know someone is really, really in dire straits and they come to me and I am in a position to help, I don’t want to add to their burden, and generally I will tell them this is not a loan, I want to help and I am giving you this money to help you.
If you have concerns about the person but you still would like to help, another way to protect yourself is to make the situation a business transaction. Make a contract outlining the amount being loaned, the purpose of the loan, when it is to be repaid, if not all at once the dates and amounts to be paid until the loan is paid in full, and any interest if you decide to charge interest on the loan.
What happens is that those with wrong motives will generally back away from signing a contract, or if they do they understand that now you have a document that makes them liable for following a course of action that they have agreed to, and that may be used against them in small claims court. Obviously, this will not eliminate everyone who has the intention of taking advantage of you, but it will eliminate most, and those whom it doesn’t you won’t have to worry about them in the future, and if you choose, you have a means of taking legal recourse against them.
The point is, always be money wise, think about what you are doing with your money, and although you should want to be a compassionate person and help whenever and however you can, think first before doing anything and make sure that you are protecting yourself, your budget, and your family.
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