Loan to a family member

How to explain ERE, arranging family matters
Randy
Posts: 36
Joined: Mon Mar 05, 2018 9:03 am

Re: Loan to a family member

Post by Randy » Sun Apr 15, 2018 3:29 am

@suomalainen Why would I like to be transparent? Or why I might limit their info?

I’d like to be transparent because I like my family and value their opinions. It would be great if they could support or at least understand my goals one day without thinking I’m being crazy.

Why I might limit their info - what Jacob said. I think it will take time for them to adjust to the ERE way of thinking. In the mean time I don’t want my mom to try to rope me into family vacations of 10 day cruises because she thinks I have money to burn.

EdithKeeler
Posts: 694
Joined: Sun Sep 01, 2013 7:55 pm

Re: Loan to a family member

Post by EdithKeeler » Wed Apr 18, 2018 10:14 pm

I would advise NOT being transparent with your family about your finances, no matter how much you love and respect them. Why? Well, they may be financially ok now, but sommething might happen in the future if they’re not. If it’s something you want to help them with, fine—you can slip them some cash as you want. But maybe the time comes when your brother has great inside information on a multilevel marketing program selling the artificial neon pink AstroTurf that’s guaranteed to become a “must-have” in every home in America, and he wants YOU to invest in this once in a lifetime opportunity. It’s WAY easier to say “no” when he doesn’t know you’ve got $500k in the bank. Way easier.

I think it’s fine to be transparent to the extent you tell friends you’d like to retire early someday and so you’re trying to make prudent financial decisions, and probably to have that “if I die, you can find all my information here, but I would not be transparent about dollar amounts, where you invest, etc.

suomalainen
Posts: 418
Joined: Sat Oct 18, 2014 12:49 pm

Re: Loan to a family member

Post by suomalainen » Wed Apr 18, 2018 11:08 pm

@randy - the why was the former one. I can understand being open with your family about your values: I'm a frugal person; or I like having a safety net; or I can't afford 10 day cruises because I'm saving money for X goal which I greatly prefer to cruises, so can we do some hiking in the local park instead; or whatever, but the question was about the financials specifically? What difference does it make if they know you have $2k, $20k or $200k saved up?

Randy
Posts: 36
Joined: Mon Mar 05, 2018 9:03 am

Re: Loan to a family member

Post by Randy » Thu Apr 19, 2018 5:09 am

I know it's a valid point about the ease of saying "no" - that was the lesson learned here and my aunt didn't even know how much money I have. That being said, I waffled on this decision because I personally thought there might have been a way for it to be beneficial for everyone involved. I think I would be able to say no to other "investment opportunities" if I thought they weren't worthwhile. If family members come to me asking for help because they are financially struggling, I would probably slip them some money as long as I knew they would spend it responsibly, or at least try to improve their habits. My weak spot would be my parents because they saved money for my college education and gifted me a wonderful used car that I'm going to drive until the day it dies. My mom makes jokes about me someday caring for them when they need help in a retirement home, but I know these aren't really jokes and that shoe will drop someday.

As far as specific financials goes, I think it's almost harmful the amount of our financial picture we hide from each other. I have no idea how much money my parents have saved, which is probably relevant information if I have to take care of them some day. I had no idea that my savings rate was high compared to my other peers. I didn't know the basic proportions of household budgeting. All of my financial basics I learned online or from books, not through discussion with people around me. My parents did have the foresight to teach me the basics of credit cards and how nasty that debt can be, but even when I was in college I had no idea how much money they had really put aside for me or what was reasonable spending, I just minimized it based on my gut.

If we actually talk about and discuss these things, much like we do on the forum here, we can help each other improve and set good examples. As Jacob has pointed out, it can be hard to introduce people directly to the ERE lifestyle, so I'm not going to initially bombard them with my views and opinions. I won't even try to convince them that ERE is the way to go, but I will try to gently sway them in that direct. Probably starting with leaking small financial improvements that can be directly beneficial to them and gently pointing out some of their more ridiculous consumer purchases, e.g. "I just saved $60/mo on my cell phone bill, you guys should look at this company," or "do you really want to spend $50 on a scarf? I found this other one for $10" etc. I could then build up to "I spend $XX per month, how much do you guys spend?" and then the bigger financial picture of "with $XX saved and spending $XX per month, I think I'm going to retire in a year or two." Even if they ignore all my advice, I'd like them to at least be in a position of thinking I may be crazy, but that I know what I'm doing.

suomalainen
Posts: 418
Joined: Sat Oct 18, 2014 12:49 pm

Re: Loan to a family member

Post by suomalainen » Thu Apr 19, 2018 8:59 am

Randy wrote:
Thu Apr 19, 2018 5:09 am
but I know these aren't really jokes and that shoe will drop someday.
Valid concern. I have no idea what to do about this either if it ever happened. Something something big fight with siblings something something. :shock:
Randy wrote:
Thu Apr 19, 2018 5:09 am
I think it's almost harmful the amount of our financial picture we hide from each other.
It's probably important for the parents to share more with the kids in order to teach them about finances but I disagree that there's any good to come from the information flowing the other way, unless, I suppose, you are in a more communal arrangement than is typical in the US. For myself, I would detest a communal arrangement, so again, that's just personality.

Totally agree with most of your last paragraph. My reaction to your initial phrase was probably one of diction. "Financials" to me means sharing personal income statement, balance sheet and cash flow statements. What you describe in the most of your last paragraph is talking more about "finances" or "personal finance" or "budgeting" which is a skill and not necessary personal information. I totally agree there's little downside to discussing those, other than people disagreeing due to different preferences or values. Where I'd still agree to disagree (and I'm not trying to change your mind, honestly, I'm just trying to tease out exactly what it is you're saying) is that it seems like you want to bring them with you on your ERE journey ("even if they ignore all my advice") instead of just wanting to show them that you're thoughtful and educated about these things and aren't stupid or crazy. Props to you if you can inspire and maybe even educate others, but from a horse and water and drinking perspective, I'm more cynical about these things. I'll only share if others are pursuing me; I'm not trying to teach/convince those who resist, if that makes any sense.

Anyway, you seem to have a good head on your shoulders and a good start to your life's journey, so keep it up and enjoy the ride!

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