Family finances

[KGeary]

We have a quandary, and I could use some help from the forum. My wife's brother, who has a steady job probably making in the $30k region, has come to us for a loan. He plans to pay us back in January, because he will get 3 paychecks that month instead of 2. We haven't decided what to do yet and I'd like to hear your thoughts. We plan to call him tonight to discuss. Some important facts:

1) His monthly expenses should be fairly low. His highest bill is probably child support. He is a great dad but his ex has custody so he pays a hefty amount to her each month. I should point out that he spends a lot of time with his kids and doesn't begrudge paying child support. Other than that, he pays some small rent to live with his fiance's parents, and his a cell phone and probably some CC debt. I think he had a big car repair bill a few months ago ($1k or so).
2) He has already told us that he won't be able to spend much if anything on Christmas this year. I am speculating that he is asking for the loan so he can buy his kids gifts.
3) Even though I love him dearly, he is not too good with money. I think he spends a fair amount on what I would call frivolous things, like T-shirts, shoes, gadgets, etc.

I figure we have a couple of options:
A) Loan him the money with conditions. Maybe we help him set up a budget and he reports back on how is doing. Or maybe if it is for Christmas we just buy the gifts directly and let him give them to his kids.
B) Turn him down. Tough love approach. I would think one Christmas without gifts would be enough to steel his resolve (although I think he was tight last Christmas too).
C) Give him the money as a one-time goodwill gesture, but not expect to get it back.

What are your thoughts?

Don't loan him money, period. You might think you're helping but you're not doing him any favors. On top of that, he's family. That's the fastest way to screw up a relationship.

[noppenbd]

Thanks for all the advice. After speaking with him last night, here is the situation.

He is currently on a budget, a very tight one (he carries it around in his wallet with him). It has been working well for the last 6 months. What caused the problem recently was that he set up his cell phone for autodraft. The payment was drafted a week before he expected it, and it caused an overdraft. Even though he claims he normally uses cash, in this case he used his debit card a few times thinking he had money in his account. Of course he ended up with 9-10 $35 NSF fees.

Here is what we decided. We are going to loan him $600. He is going to write us a postdated $600 check for January 15th (when he gets his "extra" check). The conditions for us doing this for him are the following: He is going to continue to look for part time work (interviewing at Toys R Us today). I am going over his budget with a fine toothed comb this weekend to figure out what he can cut. I am telling him that we are going to cash the check on January 15th regardless of what is in his account to give him a little incentive to stay on budget.

I will post back later to let you know how it goes.

[zetta]

Sounds like a good plan. You're being both helpful and firm, and if he's been sticking to a budget for 6 months that's really a good sign. How will you handle it if the $600 check bounces in January?

You might consider giving him a copy of YouNeedABudget for Christmas...help him get toward living a month ahead of his paycheck.

[tripods68]

If you have the money, and it will not be a hardship to help him and you really want to, then lend him the money but do not expect to see it again. You can consider it a gift (although he should still consider it a loan) and if you get paid back, then consider that a bonus!

I tend to agree. I always believe that family come first and foremost. With that, comes with expectation family will come ask to borrow some money some will not you back. I know. If paying back the money is not an issue, consider it as a gift. If they insist in paying you back, its a bonus. But I always make sure that the second time, its no longer a gift.

[disneysteve]

How will you handle it if the $600 check bounces in January?

Very good question. It all sounds fine and dandy, but what happens when the check bounces? Considering he ran up $350 in NSF fees recently, it sounds like he doesn't track his account nearly closely enough.

What is this $600 for, by the way? I guess $350 is to cover those bank fees, right.

[maat55]

There is no reason for someone to borrow Christmas money this early in the year. He has plenty of opportunity to get apart-time job.
What is his possibility of working another job?

I think you should only give for necessity purposes. You should make a short list of good money management principles for him and recommend some books.

I would tell him straight up, that you think he needs personal finance education and that you will help him with knowledge, if he requests it.

I have two brothers that are unwise with money. I've been nicely giving them books and indirect advice. I wish someone had conveyed to me years ago that I could do much better with money, than I was.

Don't help him nicely on the surface, challenge him in a deeper way. I e-mailed my oldest brother and told him I was concerned with his approach to personal finance. I told him about my transformation and the good benefits that come with learning and sacrifice.

Personal finance has been such a handsoff subject between people and families. I try to break that ice the best way I can find, but staying silent leaves me with guilt.

If he rejects your attempts to help him with knowledge, he will understand why you will not give and you will have done all you really could do.