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The Family Bum: How to deal with family members who constantly ask for money

Money is more important now than ever for many families.  If you are one of the families fortunate enough to be in good financial shape during these tough economic times, this may make you a magnet for the family bum.  Jeanne Fleming, financial ethics columnist for Money magazine and co-author of Isn’t It Their Turn to Pick Up the Check?, surveyed 800 people across the US and found that 36 percent of the people surveyed had at least one family member that they considered a mooch

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When family members constantly ask you for money, it can be a tricky situation.  The easy answer for dealing with this is to just say no. While this is great advice, for a lot of families this is hard to actually put into practice even though it makes perfect sense, especially if they have loaned or given money to family members before.  Still, there are things you can do to make your family less of a bum magnet and avoid being taken advantage of. 

Here are a few tips for dealing with family members who constantly ask for money:

1-Start saying no.  This won’t be easy, but the sooner you stop loaning money to family members, the sooner they will stop asking for it.  For some people borrowing money from family is a habit and the way they learn to handle stressful situations.  Rather than come up with a solution on their own to a financial stressor, they lean on family.  This is not necessarily the wrong thing to do for an emergency situation like an unexpected job loss, but if the borrower perpetually needs help, then they need to take a hard look at their financial situation and work on their own solutions to their financial situation.  If asking for money isn’t stressful or uncomfortable for the person doing the asking, they won’t have any incentives not to do it.  Even if you are firm and say no, don’t be surprised when they ask for money again. 

2-Provide alternatives.  Rather than loan out money that you may never see again, offer alternative ideas.  Sometimes you can take the borrowers’ excuses away by providing alternatives that they can do besides borrowing money.  For example, you could provide an opportunity to earn money rather than just lending or giving money.  They could do yard work, house cleaning, car repairs, or other jobs you need done.  This way you are at least getting something in return for the money you are giving them.  You could also bring them a hot meal, some extra clothes, or give them a ride to work to help with transportation expenses.  The point is, you don’t have to give or lend money to help someone.

3-Procrastinate.  When a family member asks for money, don’t say yes right away.  Even if you might be willing to help them out, procrastinating gives the borrower and you time to see if he can come up with a solution on his own.  Sometimes if you simply say, “Let me think about it”, you can buy some time.  This method doesn’t work with the persistent moocher, but it may be enough to stop someone who has never borrowed from you before.  The person may not bring it up again or may solve the problem on his own before he talks to you about it again.

4-Don’t borrow money from family.  If you don’t want family members borrowing from you, you shouldn’t borrow from them.  Sometimes borrowing is a learned behavior in a family.  People borrow from each other whenever one of the family members is in need, with the idea that it all works out in the wash.  I loaned you money last year when you needed it; therefore, you should loan me money this year because I need it.

If you do loan money to family

Consider the reasons for borrowing:  Before you loan (or give) money to family, you should consider why it is being borrowed.  Is the person borrowing the money generally responsible or is he or she a bad money manager.  If the borrower is usually responsible and has just had a bad set of experiences, you might feel more inclined to help out. 

Don’t respond to guilt or manipulation:  When you think of family bums, parents are not usually who you think of.  But parents are not only borrowers, but they are also some of the most effective family borrowers.  Liz Pulliam Weston, MSN Money contributor and author of Easy Money, discusses this phenomenon in her article, “Should you bail out spendthrift parents?  Sometimes this is because of cultural reasons, for example immigrants sending money back home to their parents, but other times it is simply a matter of parents having a sense of entitlement.  They might feel that parents are supposed to look out for their kids when they are younger and in return the kids should look out for them when they are older.

Don’t loan money you can’t afford to lose:  You should not loan money to someone that you can’t live without.  If you can’t afford to lose the money, don’t loan it – plain and simple.

Document the loan:   If you do decide to loan money to a family member or friend, draw up a contract and make it official.  You don’t have to hire a lawyer for this, you can find legal documents at www.nolo.com  or other sites that you can print out and use.  If the loan is for a large amount, it would be best to consult a tax advisor and get legal counsel. 

Set up a loan through a social lending company:  You can also consider setting up a loan through a social lending site like Virgin Money USA.  Virigin Money USA is a website that sets up loans between family and friends.  What is great about using a social lending site, is that they take care of the collection process, eliminating some of the stress from family lending.  This way you can visit family functions without feeling like the family bill collector.


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