Monday, December 22, 2014

Dr. Boyce Watkins: 5 Ways to keep people from borrowing all of your money



by Dr Boyce Watkins

If your life is anything like my own, you know that both success and failure each carry their own set of challenges and opportunities.   Being black only serves to compound these issues, because African Americans have an economic history that is littered with the symptoms of severe, long-term racial oppression.  We’ve had our money stolen and hidden from us, and had to work hundreds of years to get the same opportunities that white men have long been able to take for granted.  In other words, times have always been a little tough.
One of the struggles you may face has to do with being one of the few people in your family who is doing well economically.  Maybe you’re a first-generation college student.  Maybe you have loved ones who struggle.  Either way, you’re doing well and everybody knows it.  This can be a blessing, especially if you want to help others along the way (I strongly advocate for this).  But it can also be stressful to carry the financial load of lots of people who can’t give very much back.
Being in that unique place of economic success (or what might be perceived as such) means that you’re going to often be called upon as the Family Bank.   People will naturally see you as a possible solution to their financial woes, primarily because they could never imagine your problems being as great as their own.  So, I wanted to throw out a few suggestions on how to deal with the pressures that come with being the biggest financial target of many of your family and friends:
1) Pre-empt possible lending conversations by bringing up your own financial concerns.  In other words, don’t be Superman (or woman):  I’m not suggesting that you lie, but I’ve found that little statements like, “Man, I wish I had enough to pay for all the bills on my table,” lets the other person know that you have concerns just like they do.  This might make someone more hesitant to come to you with their money issues because they realize that you have your own.

2) Don’t brag about how much money you have.  Humility is one of the keys to avoiding unnecessary attention.  Balling, being flashy or showing off your money might make you feel good, but it also sends a very clear signal to any gold digging friend, relative or mate within a 100-mile radius.  If you flaunt it, be ready to share it, because if you’re stingy with the money, people may come to resent you.  There is tremendous value in being humble.  Most billionaires I’ve met don’t try to wear their money on their sleeves.
3) Prepare for any loan to be a gift.  Money is never more valuable than a close friendship or relationship with a relative.  I say that if you’re not prepared to give the money away, then don’t loan it.  If the person you loaned the money to decides not to pay you back, you may end up having to strong arm a loved one in order to get repayment.  The benefits of this move may not outweigh the cost, so try to keep yourself out of this situation altogether.  If you have to choose between money and an important relationship, then let go of the money and move on.
4) Help a little, but don’t enable.  Personally, I enjoy making investments in my loved ones, and I don’t always enjoy giving them long-term charity.  So, if you tell me you need $200, I offer you $50.   That way, I can show my support for your cause without carrying the entire load for you.  If you need me to give you the entire amount, I might offer you a temporary job.  Clearly, if you need the money that bad, you should be willing to work for it.  If you can’t, then that means the problem is not a big deal for you.  I’ll never work harder to solve your problem than you will yourself.
5) Find creative ways to say “no.”  My late grandmother Felicia, whom I give credit for being my first Finance professor (you can read about my awesome grandmother here), had a rule:  If she loaned you money and you paid it back on time, you could always come back for another loan.  But if you crossed her just one time, she’d never loan you money again. So, for the entire 77 years she was on this planet, I would hear her say to my cousins, “I loaned you $15 in 1982 and you never paid me back.  I told you the rules back then so now you’ll have to live with it.”  Usually, that shut the loan conversations down immediately.
Of course, saying “no” directly can squash any of these issues, and it might work most of the time.  The challenge is that there are some people who might take offense to being abruptly shut down by someone who claims to love them.  But if you can get away with saying “no” and establish a reputation for being a tightwad, that might make people more hesitant to asking you for money.  The strategy is up to you, but I can definitely say from experience that trying to save everyone will leave you in the poorhouse.
Dr Boyce Watkins is a Finance PhD and author of the book, “Financial Lovemaking 101: Merging Assets with Your Partner in Ways that Feel Good.”  To have Dr Watkins’ commentary delivered to your email, please click here.