This & That: Intervention Edition

S Wrote: I have been married to my husband since last October. It was always fairly well known that his mother’s small business of now 7 years, was not making any money, but we were at lead to believe it was at least breaking even. We recently were told by his step father (more or less his father) that his mother was not only not making any money, but also in a mountain of debt. I don’t know the specific number, but I know that her interest alone is $25 a day. Over $9,000 a year. The step father and she keeps peerage accounts, as they never married, though have been together 20 years. He has already once given her ten thousand dollars to put towards her debt; he has revealed to us that upon investigation, she did not put that entire amount towards the debt.

I have done some research and know that unless he signed for some of her loans, he is not responsible for her debt, nor would my husband and I if something happened (God forbid) to her. I am just seeking advice on how to tactfully deal with this, as my mother in law is driving herself into a huge amount of debt. It bothers my husband a great deal, as his step dad has done so much financially for him over his years as a child and teenager giving him things that if he had only grown up with his mom, he never would have had. We feel as though she is selfish and irresponsible, and hurting herself and her common law spouse. We know his mother will never give up the business, until someone forces her. Her image in society, even though it is based on a lie as her business is not successful, is very important to her. What should we do?

Gail Says: It’s hard to watch someone you love self-destruct. Ultimately, if a person is determined to destroy themselves financially there isn’t too much you can do about it. How does your FIN feel about giving your MIL an ultimatum about the business; he’s the guy with the most to lose after all. If he’s not going to call her on it, there’s not too much the rest of you can do except make it clear that a) you will not be stepping in to save her later when the caca hits the fan and b) you’re going to distance yourself from her financially so you don’t get hit by the blowback.  

If you haven’t already tried an intervention with your MIL, and you can all get on the same page about what you want to say, sit her down and tell her the God’s honest truth: you’re worried, she’s making a hellovamess; you want to see things get better. Ask her if her “image” is more important that the people she loves.

If she refuses to stop and your FIL continues to bale her out I suggest you gird yourself for the tears and wringing of hands that will eventually come. Your husband will have to come to terms with what he will or won’t do for his mother when it all falls apart.

 

A Wrote: I am 37 and doing kinda fine. It’s my 31 year old sister I am worried about. She has just recently moved in with me rent free. She makes $1345 bi-weekly. She is always broke. I agreed to her living with me as long as she gets out of debt. $13,000 line of credit, $4,000 on her car, and like $2000 outstanding bills. She just told me last night she is going to consolidate her debt for a monthly payment of $500 or so a month to pay it back. I got quit agitated that she can’t do this on her own and pay $1345 to debt every month and forget about a third party because she can do this on her own. I don’t want her living with me forever. She has not paid rent in over 3 years and just spends her money on make up and crap! In those 3 years she had her salary plus $10,000 twice and pissed it all away! She needs a wake up call!!!! Please let me know if she should consolidate or just suck it up like a big girl and get out of debt on her own. I think it will teach her better how to control and appreciate her money…please help desperately seeking something to tell her!

Gail Says: I get quite a few letters like yours. It’s sad when you try to help someone you love and they take advantage of your good nature. You have turned from “helping” to “enabling” and only you can take the steps to fix this problem. This will not be easy.

Sit down with your sister and make it clear that:

a) she will focus all her money (less 10% for her pocket) on debt repayment, or
b) she will start paying rent at $1076 a month to cover her share of housing, utilities and food, or
c) she’ll find somewhere else to live.

Give her one week to make her decision. If she chooses A or B it begins immediately and to prove A she must show you her repayment to her debt every time month. If she fails to make the repayment without a rock-solid reason, she has 30 days’ notice to find a new place to live. If she chooses C she has 30 days to find a new place to live.

I know you love your sister and you’re trying to help. If she follows plan A she’ll be out of debt in less than 8 months. It’ll be tough, but it’ll be done. And she’ll have learned to make careful choices since she’ll only have about $270 a month to spend on her “wants” … remember, all her “needs” are being dealt with (or you’ll adjust what she’s giving you to reflect any needs I may not know about.) As long as you keep on “letting” her take advantage of you, she will.

 

K Wrote: My husband and I have loved all of your shows including The Baby Edition and Prince$$ but most notable the plain and simple Til Debt Do Us Part. I am a high school math teacher. I’m on maternity leave and returning to work for the final 6 days in June. These will be the final days of high school for these students before entering the real world. I could give them a Calculus exam on material I haven’t taught and what they will never use in real life. I want to leave them with 6 days they will never forget. I’m thinking of incorporating your ideas into 6 days of financial planning. It’s not a lot but it’s better than nothing. I was thinking of selecting two shows that would be most applicable to them and showing them the first fifteen minutes (end it right before you do the challenges) so they get the idea of how clueless people are and how much debt people have racked up. I was then thinking of getting them to research a job they would like, calculate their monthly income, divide that money into how much they can afford to spend in each category (6% on savings, 35% on rent, etc…) and finally to determine how much can go in each jar. Separately, I will have them keep track of their spending for the week and have them calculate how much they’d have in retirement if they used that money to invest every month just to accentuate how compound interest will really work in their favour at their age. I’m completely open to suggestions with what I can do regarding financial planning and thought I’d ask for your input.

Gail Says: I applaud you for taking the opportunity to give your students a money boot-camp experience. I would make sure to cover a) what the cost of student loans are if you use only the minimum repayment schedule that the system defaults to and b) how to manage cash flow and lump sum money while at school since this may be the next step for some. Here’s a blog I did with some links to free resources on my website. I created these specifically for students. http://gailvazoxlade.com/blog/?p=192

The tracking spending shouldn’t be linked to ‘spend it or save it’ since that’s not really the choice. Savings needs to be a habit … you just do it … so calculating the compounding on that 6% saved over 40 years is a great exercise. The tracking of spending is more about knowing how much money you have and the conscious decisions you must make. Here’s another blog that explains that: http://gailvazoxlade.com/blog/?p=5335 . Let me know how it turns out.