July 25, 2007

Learning to say no: What to do, Part II

Many of your comments to my post on my parents’ possible business venture were great moral support and bolster to my common sense and caution. I truly wanted to hear your thoughts because this is an emotionally driven situation in which I feel a knee-jerk reaction coming on, instead of a carefully considered decision. And as Matt pointed out, if my instinct is telling me something, I should pay attention, whether or not I ultimately choose to listen.

There are a number of issues that concerned me with regards to the money-lending situation:

1. Can I afford to lose this money?
2. Would I resent the loss of this money? Or the waste of any profits, should there be any?
3. Is the business plan and market sound? Is there true long-term potential (we’re talking about years, not months)?

And then of course, Mapgirl came through with an extremely thoughtful and detailed response to my request. She had some great questions as well, a few of which I’ve borrowed for your perusal:

4. Did your parents ask you for the money? Or are you thinking of volunteering the money?
5. Do you want to protect your investment?
6. Do *you* think it’s risky?
7. Have you and your folks done the due diligence and talked to other owners besides their friend and his wife?
8. Do you want a say in how the money is used and when it’s paid back?

The huge red flag here is that I felt the need to ask for advice: if I were comfortable losing this money (or giving it away, since personal loans to family and friends are best considered gifts and repayments as bonuses), I wouldn’t need to ask. That means that I’d better have a very good reason for risking my financial security, if I choose to.

Another factor is that I’ve been retraining myself to stop thinking emotionally: that everything that’s mine is theirs. It can’t be, not if I’m going to make it out of this situation and help them in the long-term. I’m the saver, and they’ve been living on the edge far too long; they’ve lost sight of long-term planning.

I absolutely must be financially secure, and thriving, to be able to support them in their later years. Obviously, that means not throwing money away and not making unwise decisions. The need to help them upon request is born of that old habit wherein I rushed to the rescue in every situation, rather than judiciously, and as English Major pointed out, is probably more enabling than helping. What can I say? I was young and stupid. I’m not young anymore, so I can’t be stupid anymore either 🙂

So, could I afford to lose this money? I don’t include it as part of my net worth, I don’t count it in my savings plans and goals. For all intents and purposes, I don’t have that money until I recall the loan. It wouldn’t really be losing money, in the sense of having a big empty hole in my savings account. But would I resent the loss of it? Yes. Even though I don’t count it, knowing that it’s there and doing some “work,” and could be recalled is another form of emergency fund. In six months, if I really am out thousands of dollars because of my brother, I’ll need and want all the cushion I can get. In protecting this money, I’m protecting all of us against some level of financial disaster. Someone has to pay the rent.

3. Is the business plan sound? Magic 8-ball says: Wait and see.

4. Yes, Ma asked me if she could put some of the charges on my credit card that she’s an AU on. She doesn’t know if the wholesaler takes cards, but she knows that I prefer to use cards over cash, and it’s a good way to track expenses.

Again, I’m not comfortable charging anything that I don’t already have the money for, so I wasn’t in favor of this idea. She also floated the idea of using a 0% BT in her/Pa’s name, but I’m almost positive neither she or Pa’s credit has recovered enough to make that idea feasible. Last time we dug them out of credit card debt by transferring their balances to my 0% card. And eventually I paid off the remainder of the balance for them. Thousands of dollars later, I’m not putting another balance on my cards, even at 0% because I have tons of other savings goals to meet, not just pay-off-others’-debt.

5. I consider this a loan, not an investment, but perhaps there are advantages to thinking of it as an investment? If anything, I just want to give them a start, I don’t expect any profit from it. There are indirect advantages if they regain their financial independence, though, as the daily burden of supporting them would eventually ease. Still, that wouldn’t be expected in the early months.

6-7. My objection is primarily to the lending of money in a venture I don’t know enough about, but more light should be shed on the matter in the next several weeks. Pa is to research the market and plans to discuss the matter with some friends who own the businesses he’d like to supply. They’ll give him a better idea of the services they’d expect if they were to use him, and whether or not they’d be willing to come on board as customers.

8. I expect them to tell me how the money is being used (for inventory) and that it’ll be paid back as they begin to see a profit. However, knowing that Pa has a few other financial obligations that he’s being close-mouthed about, and that he’ll have to attend to those so that he doesn’t have to borrow from me, I’d have to accept that I wouldn’t truly have a say. Again, could I live with that? I’m not sure.

There are a lot of trust issues at play here, and the most important is that I’m not willing to see our relationship further corroded by resentment or arguments over business decisions. And, if I’m smart enough to see that they cannot work with my brother, I have to take a good look at whether or not I can work with them.

Tentatively, I think I could live with this: Ma thinks she can earn enough side money monthly to make a healthy repayment on the loan. Her most insiduous problem tends to be letting that money trickle away to pay Pa’s, or her unexpected, expenses if she doesn’t have a compelling reason to STOP touching that money. She can start giving me that money now and I’ll put it away in one of my high interest accounts while Pa’s doing his research. If enough information supports this as a feasible plan, I will see if I can reasonably supplement the pot with a rational portion of my own money, depending on how much I can save in the interim, and give the whole amount as a loan. Eventually, when they pay it back, I’ll take Ma’s portion of the seed money and keep it in savings for her.

I’ve got to learn when and how to say no, and saying “I can only help this much right now” is a start.