How much financial help to give a family member?

Over at Get Rich Slowly, J.D. has a great post on dealing with a family financial crisis. Responding to a reader’s question asking how to stay out of the red when you’re faced with a job loss and dwindling statements, he brings up a similar problem his brother faced and is still struggling to overcome, and then he lists several points of good, commonsense financial advice. In the series of comments on this post, readers wandered away from coping with job loss to dealing with financially stressed, often dysfunctional family  members.

There’s no question that J.D.’s debt-avoidance strategies are great advice…but what do you do when the family member refuses to listen to any such advice?

For many years, SDXB (Semi-Demi-Ex-Boyfriend) has dispensed exactly that advice (and more) to his profligate daughter. She’s capable of earning a good living (she’s an RN), but she’s even more capable of spending mightily, and she seems unable to recognize the difference between “need” and “want.” A single mother with four children, she rents $2,500/month houses (in a market where you can get a very nice place for $1,000 to $1,200) so that every child has a separate bedroom…and of course, they couldn’t do without a pool! At one point she had five cell phones (until the provider cut her off for nonpayment). Cancel the cable? Unthinkable! The kids have to have it!! She wears expensive clothes, drives an expensive car, and had an (endlessly) expensive divorce. Three landlords have evicted her, and the repo man broke down one landlord’s garage door in his frenzy to repossess her car.

Already on the brink of financial ruin, she suffered a serious accident resulting in head injuries that made it impossible for her to work. She’s now on disability and our state’s half-baked answer to Medicaid. But she still refuses to budget, will not reconcile a bank account, declines to even try to understand anything about personal finance, and continues to try to live up to means that she no longer has.

SDXB has advised her, gone to court with her, helped her apply for welfare, helped her move, given her money he couldn’t afford to part with in retirement.

In some cases, I’m afraid, there’s a point where you have to stop. When you continue to give a person money while that person continues to indulge in irresponsible behavior, you’re not really helping the person. You may actually be making things worse, by underwriting the irresponsibility.

And while you certainly can’t be telling an adult how to behave, neither are you required to support self-destructive and irresponsible habits. No matter how much you love the person and feel responsible for the person’s well-being, you and your family member may be better off if you lay down some ground rules and stick to them.

What might those rules be? Depends on the situation, o’course. But here are a few possibilities:

The financially strapped family member agrees to get a job, even if it’s part-time and no matter how low-paid and “beneath” his or her status it may be.
The person develops a realistic budget that fits his or her current means.
The person moves into affordable housing. If the person can qualify for housing assistance, she or he will apply for it.
She or he agrees to eat at home, not in restaurants.
If the person can qualify for food assistance, he or she will apply for it.
The person disposes of all credit cards but one, and uses that as little as possible.
The person gets rid of all but one car and may, if possible, dispense with cars altogether and walk, ride bicycles, or use public transportation.
The person cancels cable or satellite TV.
She or he restricts phone service to a land line or to a cell phone—whichever is cheaper, but not both.
If no jobs are available in the person’s field, he or she will go back to school for vocational training in some industry that is hiring.
She or he agrees to limit the amount of time spent living in someone else’s home.
If the person has a drinking or substance abuse problem, that issue must be addressed within a specified period or assistance will stop.

Obviously, if a family member is disabled, sick, or mentally ill, it’s reasonable (maybe even a moral obligation) to provide much more support than you would for a person for a person with training, education, and the capacity to hold a job. My point here is that for a healthy, fully abled adult, responsible behavior should play a part in earning family members’ support.

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frugalscholar September 15, 2009 at 7:25 am

I know of some families where all money is left to grandchildren, skipping the profligate member. My brother in law was in charge of a huge settlement for his brother, who died of asbestosis (in his 50S). He had to give a certain amount to the one grown child. She blew through about $300000 in the first year. Not much left for her! He tried to direct most of it to her kids, but they are minors, so he’s been unable to implement that idea fully.

This must be so hard to watch. I hope I never face it with my own children.

John Gerber September 16, 2009 at 8:17 am

I agree with your sentiment. You’re only encouraging the irresponsible behavior to continue at that point.

People have to start becoming more educated when it comes to their money; often times the worst offenders are those who make high incomes from a job but are on the brink of financial ruin because they spend every penny they make. Savings is of utmost importance in this economic environment, no matter how much you take home a month.

Barbara Pompa June 28, 2012 at 9:29 am

We are retired parents and have foolishly put ourselves in a fragile financial position due to heavily investing in the lives of our daughter and son-in-law based upon promises to repay us. At the start of our “investing” our daughter was not working, but caring for our young grandson. She now works in a job that is in conjuction with the boy’s schedule in school, etc. They cannot afford daily child care nor do they have any family in the state where they live. Our son-in-law, however, has been in and out of work while frequently lying to us as to his interviews, work status and much more. Originally, we mortgaged our condo to purchase a home for them with his promise to pay the mortgage monthly and eventually own the home. It was working pretty well at the start until his line of work suffered. We then added to the mortgage to purchase a landscape business after his supposed checking of all necessary facts. This type business has been our family livelihood for 3 generations. When operations began, it wasn’t long before we learned of the many flaws in both the business and our son-in-law. We had also purchased needed equipment and obtained a truck loan for him. Unable to meet expenses both in his own household and monies due to us, the mortgage payments were drastically reduced or eliminated and he soon began selling equipment we had purchased and the business failed more. We don’t really know if he has any operations left. He supposedly lined up a job with a major company and was undergoing training. We heard of all positive stories to come. He soon left the job as we discovered. We have paid the full mortgage for 9 months. and recently sold the house with closing set for mid July. We have lost over $170,000 on the house and will be paying the mortgage balance forever. We moved into this condo mortgage free. Additionally, we have discovered that he has talked his mother into giving him many thousands of dollars for all different reasons (including paying the mortgage periodically). He seems to take little or no blame…”it,s the economy” or “someone elses fault”. They are soon to move to a rental property and have minimal contact with us now. We have learned a hard lesson and wish we could find a way to feel secure once again in our latter part of life.

funny June 28, 2012 at 9:43 am

@ Barbara Pompa: That’s a sad story and one that’s probably altogether too common, especially as parents have tried to help adult children in financial straits because of the recession. However, this guy sounds like a sleaze. You might want to consider talking to a lawyer. The guy needs to pay you back, even if it’s only a few bucks a month, and if you’re in a community property state, the debt is your daughter’s as well as his. Whichever one of them is working should have his or her (or their — both of them, if possible!) wages garnished to repay the cash you advanced them.

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