The Ant and the Grasshopper, redux

January 13, 2006 1:08 PM

What do you do when a sibling asks you bail them out of a financial problem entirely of their making?

I am careful with my money. I worked to put myself through school, paid off my student loans, and now I'm making a good salary. I save for retirement, pay down my mortgage, buy used Japanese economy cars, and don't carry any consumer debt.

My younger brother is a college dropout who works freelance in a creative field. When he's working, he makes good money, but it's not steady income. He's spendy; he buys luxury Japanese cars new, financing them such that he soon owes more on the car than it is worth. He buys himself a new computer every year. He has racked up tens of thousands of dollars in credit card debt.

He knows I have money tucked away, and asked me for a "loan" so that he can pay off his credit cards. He says he will pay me back. I know, in my gut, that if I make that loan I will a) not get paid back and b) see the relationship permanently strained by the debt. I believe that he can and should dig himself out of the mess he made. I'm a sibling, not a parent! (My parents have helped him out in the past, but they're retired now and on a fixed income.) I fear that whatever I do, my surplus and his deficit will always be lingering in the air at family gatherings. Either he resents me for not giving him the money, or I resent him for borrowing and not paying it back. It would be too much money to just make a gift and write it off. The last time he was in a money jam I was able to send some freelance work his direction, but that won't always be the case.

How do I handle this?

posted by anonymous to human relations (47 comments total)

Yeah, this sounds like a bad situation either way, but from the outside, I suspect giving him money will be worse in the long run. Just the fact that he asked sort of crossed a line and he may feel sore about it if you say now, but giving him money will certainly be a lot worse, for a lot longer time, if he never pays it back. And if he's slow on payments, that's also going to put you in a bad situation where you have to demand payment and stuff.

I'd say be polite about saying no -- that you're on a tight budget thanks to a financial planner or something.
posted by mathowie at 1:21 PM on January 13, 2006

Never loan money to friends or family, I think. Give gifts if you can, and think it's appropriate, but I don't think you're out of line if you don't want to lend money.

Can you (or would you) give him part of it outright?
posted by occhiblu at 1:24 PM on January 13, 2006

What good will it do if you give him all your money and then you're both broke? Say no.
posted by ThePinkSuperhero at 1:24 PM on January 13, 2006 [1 favorite]

Never loan money to people you want to see again. The only people who needed money for things always were going to use them for drugs, are you sure that he's absolutely not into drugs? I'm being serious, people who you would never believe were even on a drug suddenly needed several hundred dollars to pay off another expense. So don't loan money.
posted by geoff. at 1:27 PM on January 13, 2006

You seem quite aware of the common maxim that you shouldn't lend family more than you're prepared to lose, and that's certainly the case here. Is there a smaller amount that you are prepared to lose? Can you help him find other ways to finance those credit card payments - selling some of that fancy stuff he's got on eBay or trading for a cheaper car if he's not upside down on the loan currently? If he could work the debt down to a level where you could consider the loan a loss, perhaps then you could help him. But if he's not willing to make sacrifices at present, there's no call for you to sacrifice your future to help him.
posted by jacquilynne at 1:30 PM on January 13, 2006

As someone who has also racked up way too much credit card debt, I have to believe that if you loaned him the money to pay off his cards he would just charge them back up again eventually. He's not likely to change his spending habits without some outside pressure.

I don't think you're going to be able to get away with saying your money is too tight, though-- he knows that's not the case. Just say that loans between family members are a bad idea, and you care too much about him to risk future problems.

Then let him figure this out on his own-- any advice you give will probably be resented. The worst thing that can happen to him is bad credit and annoying phone calls from collectors-- debtor's prisons are a thing of the distant past.
posted by InfidelZombie at 1:32 PM on January 13, 2006

If you do decide to go through with lending him money, you might consider formalizing it through CircleLending or someplace similar.

Debts are harder to blow off when it's legal, and you get to write it off if he officially defaults (or dies or something).
posted by small_ruminant at 1:32 PM on January 13, 2006

this is pretty much a rhetorical question, everyone is going to say that you should say 'no.' the big issue is how. i think that mathowie's financial planner advice is good, but you probably need something more along the lines of "i really can't do this." Since you're known to be money-conscious, could you say that the money is locked up in a CD, and that you're unable to take it out for a few years?

i got a bunch of money in a CD when i was born, and a while before college it matured and my dad reinvested it to keep my mom from using it as my tuition. it was "out of his hands," so he really came off as being faultless. if it works with real investments, why not fake ones?
posted by soma lkzx at 1:32 PM on January 13, 2006

i would go with jacquilinne or soma lkzx's solution. matt, yours is morally correct but not everyone can deal with such confrontation realistically..
posted by By The Grace of God at 1:34 PM on January 13, 2006

er, small_ruminant's that is.
posted by By The Grace of God at 1:35 PM on January 13, 2006

Pretty tough, but my feeling is that if there is enough money around, help a brother out. You may want to insist on some sort of concession, however, such as a sensible used car. And maybe a regular job.
posted by The Jesse Helms at 1:37 PM on January 13, 2006

Never loan money to friends or family.

Agreed. Been there, done that -- with friends. And I did so with the full expectation that I wouldn't get the money returned. In the end in each situation the payments ceased and the friendship unravelled -- caused by each of the friends distancing themselves in what I can only surmise was guilt and/or embarresment, even when I made it clear to them I didn't care.

If you go the route of lending your brother money, check out Circle Lending which focuses on "the smart way to manage loans between family and friends."
posted by ericb at 1:37 PM on January 13, 2006

On preview -- what small_ruminant said!
posted by ericb at 1:38 PM on January 13, 2006

Maybe you could say no, but pay for him to visit a financial planner, or pay for him to take a class on getting out of debt. I've loaned money to family before, and I just want to repeat what others have said. You never "loan" money to family, you just think you're loaning it, it is infact a gift with years of bad feelings attached until one day you just give up and accept the loss.
posted by blue_beetle at 1:40 PM on January 13, 2006

don't do it. i lent money to a co-worker in a similar situation and had to hound him to death to get paid back. it will ruin your relationship.

the big problem is that by paying you postpone the problem til later. but the pain will come anyway. if you say no, you get the pain up front but you save your money.

soma ikzx has a good solution - why do you have so much money available at short notice anyway? putting it in a longer term saving with no access kills two birds with one stone - it improves your finances and gives you the excuse you need.
posted by andrew cooke at 1:41 PM on January 13, 2006

He's no better off owing you money than he is owing credit card companies money, except if he doesn't pay you back, there are no legal consequences.
You should recommend that he do some kind of debt consolidation and then cancel the credit cards to keep the problem from getting any worse.
posted by designbot at 1:44 PM on January 13, 2006

On preview, blue_beetle covered what I was going to say. Instead of blaming your inability to lend him money on a financial planner, perhaps give him the gift of some consulting from one.

It's cliche, but... give a man a fish vs. teaching him to fish really applies here.
posted by twiggy at 1:44 PM on January 13, 2006

I'm the generous sort. I think what I'd do is give him half of what he wants as a gift. Tell him he can pay you back if he wants, later.

And then I'd tell him that that was the one and only time you were bailing him out for his spending choices. No discussion. Don't even bother to ask next time, I'd tell him.
posted by teece at 1:45 PM on January 13, 2006

He doesn't know how much you have available.

I would consider giving him a smaller amount, and without his knowledge, write it off as a gift from the beginning - do not expect to ever get it back.

Make it clear that this is all you can afford to loan, so much so that he'd have to pay it back before you could loan more. You cannot let this become a precedent for him being able to ask for money.

This means
(a) he knows he can't ask you for more money in the future, and you already have an agreed reason if he asked, so you can refuse without sounding too unreasonable. And he can't get mad at you without being at least partially aware he's in the wrong.
(b) You don't cause any short-term resentment by denying the loan.
(c) You don't ever have to follow him up and ask for payments, which would strain the relationship, you can just forget about it. It's his concern alone.
(d) The money might genuinely help him.
(e) You get to feel good about yourself for doing one of those good deeds that no-one but you knows you did (ie, that you gifted instead of loaned the money). Assuming d is true, that is.

If he pays it back, good for him and good for you.

But make sure it's plausible to him that the small amount you are able to give could be the amount you are able to loan - perhaps say that most of your savings are in a 401K plan, thus you are unable to get it (and wouldn't get it even if you could, since you need it for your retirement).

I've done this before, but under somewhat better circumstances - where the person was a little more responsible, and the bad circumstances only partly their own making.
Years later, it was the right thing to do, but considering the different circumstances, you'll obviously have to judge for yourself.

And if people closer to your situation than me, are critical of this approach, definitely take that into consideration.
posted by -harlequin- at 1:48 PM on January 13, 2006

"he'd have to pay it back before you could loan more"

That should be "before you could loan it again", ie, it would be the same money, reloaned again, not more money, ie not a larger sum.
posted by -harlequin- at 1:49 PM on January 13, 2006

I've been there, with a friend. (And as you point out, I may be there forever.) Loaning money did not help anything, it just allowed my friend to get in debt to me along with everyone else. I only enabled and prolonged the irresponsible behavior.

Maybe you can help your brother understand that you don't think putting a band-aid on his cancer is going to help him in the long run, and that you'd rather help him get on the road to treatment. A budget or net worth analysis in Quicken can be a shocker, as well as those saving-for-retirement calculators that show you how screwed you are for not starting to save since you were 21.

Then give him this.
(Not kidding!)
posted by Tubes at 1:50 PM on January 13, 2006

The most painful thing you can do, based on family experience with this, is to tell him no outright. That said, that's also the smartest thing you can do.

Without some sort of learning on his part, about how to save and manage money, your loaning him money now is not going to help him in the long run. As Machiavellian as it sounds, he sounds like he needs the shock of financial catastrophe to learn how to manage his finances better.

I know that the outright refusal idea won't make it easy for you, but it's the smartest thing to do; offer him, as others have said, copious amounts of non-financial help on managing debt and money, be there for that sort of thing, but don't just give (or lend) him a pile of cash.
posted by pdb at 2:03 PM on January 13, 2006

Consider the use of circle lending service. It's inexpensive, and your chances of getting your money back (and perhaps of your brother becoming more responcible) increase slightly when there is a 3rd party involved. Of course he's already proven himself careless with debt, so going through CL may not add much.
posted by blindcarboncopy at 2:08 PM on January 13, 2006

Maybe you can point him to a Debtor's Anonymous meeting.
posted by CrazyJoel at 2:09 PM on January 13, 2006

If you want to *give* him money, then give him money. But don't loan it...you're setting yourself up for a fall.

Maybe there's another way to go about this. Since you're so good with finances, why don't you offer to sit down with him and help him make the best of a bad situation? Maybe he's got everything at 28% interest on credit cards. Perhaps you could help him figure out how to manage it. Of course, this assumes he wants help. If he's not ready for help, you can't do much.
posted by acoutu at 2:13 PM on January 13, 2006

Blood is more important than money. If you have it, and he wants it, give it to him. You can earn yourself shitloads of money, but you can never earn yourself another brother.

Do you seriously think that you can put a price on having a brother? Every penny that you'll ever have is a small price to pay for somebody that will be there for you for your entire life.
posted by veedubya at 2:27 PM on January 13, 2006

I agree with everyone who says not to loan him a dime -- it's the expectation/obligation factor in a loan that stirs all the shit up in these situations. If you feel comfortable giving him a ONE-TIME amount that A) you can afford to write off, and B) you think will actually do him some good, then by all means, go ahead.

If you believe he's genuinely sincere in wanting to get his financial house in order for real, I also agree with giving him the gift of budgeting/planning with a good book or two, or even by setting up a meeting with a financial planner.
posted by scody at 2:32 PM on January 13, 2006

And then I'd tell him that that was the one and only time you were bailing him out for his spending choices. No discussion. Don't even bother to ask next time, I'd tell him.

You must not know any people like this. They don't pay any attention to lectures or threats (don't you think he's heard it a million times already?); all he'll understand is "Oh good, I got money—now I know where to go next time." If he gets the money, he learns nothing and will repeat the same behavior. I believe in helping people in need, but not in pouring money down a rathole. Just say no, in whatever way you think will be both convincing and (if possible) unalienating.
posted by languagehat at 2:33 PM on January 13, 2006

oh, and I also meant to say that I agree with the advice upthread too that you can also help him out by volunteering to help him out with selling the luxury car and computer merchandise that he clearly can't afford. I'd bet that would be a good litmus test to see how serious he really is about growing up financially.
posted by scody at 2:35 PM on January 13, 2006

Yeah, if you just give him the money, you're just enabling his overspending habit. Maybe it's best that he bottoms out at some point so he'll want to change.
posted by CrazyJoel at 2:35 PM on January 13, 2006

Just say no, in whatever way you think will be both convincing and (if possible) unalienating.

The trouble is, this isn't always possible. (except maybe with the 'i don't have it' in this case?)
posted by By The Grace of God at 2:39 PM on January 13, 2006

It's not an either/or thing and you don't have to turn this into some sort do-or-die test of your relationship. The reasonable thing to do is to gift your brothera minimal amount money on the condition that he make changes in his lifestyle. You give him enough to stay above water--and he never has to pay you back--and he makes you a promise to change. After that, just step back and see. Either he will change his lifestyle, in which case, great, your gift set him on the right track (and now, perhaps, the possibility of a loan is on the table). Or he won't change in which case, yes, you've done your duty as a good brother.
posted by nixerman at 2:41 PM on January 13, 2006

My dad's younger brother had a similar MO as your sibling. The only difference was that instead of the creative arts he was in the high-flying world of finance. When he made a good score, he'd blow it all. When the money was tight, he'd borrow from family. He eventually committed suicide and left two ex-wives, four children, and a girlfriend a total of $46.12 HKD.

Dad lent him money (when it was tight) and never saw it again. It destroyed their relationship.
posted by PurplePorpoise at 2:53 PM on January 13, 2006

"Either he resents me for not giving him the money, or I resent him for borrowing and not paying it back."
Like veedubya says, "Blood is more important than money." Don't resent him if he doesn't pay it back. He's family. Lend him the money in front of your parents, say you're expecting to be paid back at $X a month, make sure everyone sitting there understands you're serious, send him a bill in the (physical) mail every month, but don't bring it up at family functions.
And don't resent it; you've got money, you're not going to the poor house. If he asks you for money again, say you can't trust him with money because he hasn't been paying his old debt regularly. But he hasn't screwed you over financially yet; don't write him off until he has.
If he's paying 20%+ in interest to the credit card companies now, that's money he's not going to have later to help take care of your parents, or himself, or his family.
I've been the lender in this situation; loaned a family member a few thousand dollars (not your tens of thousands, but it was still a lot for me). Didn't get paid back in the agreed time. Then the question of doing something that would require trusting the lendee to be responsible with money, that would've benefitted both of us and other family members, came up. I told everyone I couldn't do it because of that earlier debt; pissed him off, but a few months after that, he paid me back and hasn't asked about borrowing money in the many years since.
posted by mistersix at 3:03 PM on January 13, 2006

Agree with setting him up with a financial advisor. Maybe even provide some start-up money for an IRA.

Agree with helping him sell off some of his crap. Perhaps make some deals with him to help motivate him to the finish line, like any credit card that he can get paid down to a [fill in the blank here] amount, you'll finish off for him.
posted by desuetude at 4:26 PM on January 13, 2006

Put me down in the "don't do it" camp. Unless there's a major shock to the system, he's not going to get out of his bad habits--he'll pay down his credit cards, perhaps, and be in a more tenable position for a while, but sooner or later, he'll slide back into maxing them out, and hit you up for a "loan" again.

It's really hard to dig yourself out of deep credit-card debt like that, I know. But it can be done, and he needs to get serious about doing it, and make the sacrifices he needs to.
posted by adamrice at 5:49 PM on January 13, 2006

As someone who is currently paying off roughly $40k worth of debt her mother accrued, I can quite easily say "do not EVER help out family or friends financially". Of course in my case, I said that I'd help out a little. Now my credit is ruined so much that I've never even had a chance to use it myself (partly due to her lying and partly for me being a sucker).

Anyhoo, you do need to tell him no, and when you do it, you need to tell him WHY. Bring up the points you brought up here. Let him know why you aren't going to do it. Write out a mini-script first, come up with points to hit on. If he knows that this is an inner battle you're fighting, he's more apt to push the correct buttons to make you give him the money.

Now, normally, I'd say, "sure, do it. But make sure you get a legal document signed so that WHEN he "defaults" on his payments back to you, you can take him to court," however, it doesn't sound like he'd even care.

I agree with helping him out any way BUT financial. Don't give a single penny to him or his cause. As sad as it is to say, some people simply do not understand how money works. My mother is 49 and still does not know how to manage her money. She probably never will.

And it's better for him to resent you for something like ruining his own credit and losing your trust than for you to resent him because you took a chance on your brother and it blew up in your face.
posted by damnjezebel at 6:22 PM on January 13, 2006

Well, ok, I'll dissent here. It's sometimes ok to loan friends or family money when they're in a jam. I've both loaned and borrowed from friends; it's what we do for each other sometimes.

Make it short-term, sign something, and, like -harlequin- says, agree in advance to not loan anything else until it's paid back. Also, have you considered asking your parents what to do? They might be total softies, I don't know, but they may also have some insight into this sibling-to-sibling situation.
posted by mediareport at 6:40 PM on January 13, 2006

I'm with a lot of other people here. If you feel comfortable making a gift of money to your brother in some amount, do that instead. Something like, "I can't really see my way financially to lend you x dollars, but I'd be happy to give you $y." It really is true, "never lend more money than you're not willing to part with forever." I have been in a similar situation to yours. My younger sister is also immature and financially irresponsible, and I once "lent" her $400 dollars to pay for her school books. I think I got maybe 80 of it back. I was angry with her for a long time, but I soon realized that it was partly my own fault. If I was a bank would I have made a loan to someone with her credit history and financial trustworthiness? I also sat down and considered what I valued more, $320 or a sibling, who I do have a fairly good relationship with. In the end, the relationship one. Now, I don't lend significant amounts of money to her, but I'm not averse to giving her 30 or 40 bucks if she really needs it.
posted by katyggls at 7:00 PM on January 13, 2006

Never, ever loan money to friends or family.

If you can afford to GIVE him the money (and it doesn't sound like you can), then do that if you want to.

But don't ever loan money, unless you're just looking for a roundabout way to make sure they never call you again.
posted by I Love Tacos at 10:25 PM on January 13, 2006

General rule: don't loan money to family or friends; just give it to them if they're in need.

However, you could have a heart-to-heart about personal finance, managing money, etc. Point him to Clark Howard's radio show, stuff like that. Then work out a loan agreement with payments he can handle, then see how well he does. If it becomes obvious that he's stopped paying you back and won't finish... make the balance his birthday, Christmas, etc. gift. Wrap the paid-in-full note inside a personal finance book to make a final point, but forgive it and let it drop.
posted by mumeishi at 5:41 AM on January 14, 2006

if he was in a tight spot through no fault of his own and had a good record of responsibility with money, i would loan him the money ... however, that's not the case here

the worst that can happen is that he has to declare bankruptcy and give up his fancy car... that is not the end of the world

be aware that if you do loan him money and if he does go bankrupt, your loan would be part of that bankruptcy and he could legally blow it off ... in fact, he would probably be REQUIRED to

i wouldn't loan him the money

sometimes people have to learn their own lessons in life
posted by pyramid termite at 7:43 AM on January 14, 2006

I'll second what Andrew Cooke said about this really boiling down to a question of pain now versus pain later. Wise formulation of the pinpoint issue, Andrew.

I think the best thing you could do to temper things would be to offer to help him do things that will help him alleviate his debt without lending him the money yourself.

Some of the advice offered in this thread may be of use to you in that regard.
posted by WCityMike at 8:41 AM on January 14, 2006

At one time I had a similar relationship to my sister, though she was a slightly more unstable case - she was always running around doing interesting creative things or starting a band or just tripping on acid, while I was temping and working horrible jobs as a telemarketer and saving up money (this was when we were college-age, broke mom, deadbeat dad), and then she'd ask me for money. At the time it made me angry - I was getting up early and going to an office I hated to do menial work for crap money; I'd much prefer to be writing a screenplay with my 17 best friends in the park like she was, but I had responsibilities...

Still, I lent her money a few times, and eventually she did pay me back. In retrospect, I think most of the animosity I felt was my problem more than hers. I really wasn't happy with my "I must take responsibility" lifestyle, underneath it all, and though my sister obviously went too far, there was something I could learn from her. You have to live the life you want to live, not the one you think you ought to live. Of course part of what you want is money to pay the rent &c, but perhaps there are other things you want that you deny yourself because "it's not responsible". Just keep in mind that every choice you make should be one you can explain in your own terms, not in terms of "it's just not done"; "that's not considered wise", etc. Stability is important but so is adventure, personal preference, new possibilities.

If you are really happy with your life, really content with the way things are, and you actually have extra money that's not being invested, etc, then you can afford to give your bro something. So maybe it's worth considering that part of the reason you don't want to is that there's a little bit of irrational envy on your part for the free & easy way that he handles things. For me, it was useful to recognize those kinds of feelings and analyze them so that I was fully aware that they are, in fact, irrational - i.e., I wouldn't really want to be in my sister's situation, even if I somehow (irrationally) felt it was unfair that she was. But of course, I could have been, too, if I really wanted. All this helped me to balance out my own life a little more. I'm still more of an ant, but I've learned to embrace grasshopperish moments more comfortably, and not to resent people who do it the other way around. They're making their own life more difficult in the process; everything has its pluses & minuses.

I realize you are looking more for a practical solution, and since my sister's wild days are a decade in the past, I probably think of them with a uselessly broad view, but just thought I'd share...
posted by mdn at 10:48 AM on January 14, 2006

mdn: If you had posted this question, I'd be a lot more sympathetic to your sister; I can identify with goofing off and being creative, having lived like that for a while myself (though I managed to support myself on minimum-wage jobs and/or unemployent and never bummed off my family). But this guy is a different case:

He's spendy; he buys luxury Japanese cars new, financing them such that he soon owes more on the car than it is worth. He buys himself a new computer every year.

That, I have zero sympathy for. Let him learn the hard way.
posted by languagehat at 11:09 AM on January 14, 2006

I've borrowed, and paid back, money from a family member. I've seen someone borrow money from a family member, refuse to pay it back as promised, and ugliness follow.

I value honesty pretty highly. Tell your brother why you feel uneasy about lending him money. If he's in a serious jam, help him out. Help him learn how to manage his money better; he might be able to get very affordable credit card consolidation on his own. If you lend him money, have him secure it with goods that can be sold to repay the debt.
posted by theora55 at 4:52 PM on January 14, 2006

Some people just cannot handle money, they don't seem to understand it, no matter how much debt they get into, no matter how many times they declare bankruptcy, it just never sinks in. Love them, support them, but never ever give them money. It's like giving a heroin addict more heroin, just to "get them through the tough times". It's a disease, and you won't fix it, they need to find a balance in their life, and that means dealling with the consequences of their actions. It's hard, it hurts, but there is no nice way to do it and no easy way. Education may help, classes may help, but somepeople never ever get better, they just seem genetically designed to mismanage money. I've seen it in my family, and I'm sorry, but it is true.
posted by blue_beetle at 10:28 AM on January 16, 2006