Monday, January 19, 2015

Sensible Or Scrooge? Sibling Refuses To Assist With Emergency Financial Help

Dear Tazi:

I have always lived my life debt free. I started working at age 16; rode a bus until I had saved enough money to buy my own car and pay for the insurance; attended a community college before transferring to a state university; and financed my education through a payment plan, not student loans. My current goal is to purchase my own home for cash, so I do not have to pay a mortgage. I live at home with my parents, who refuse to accept any money for room or board.

I have a pretty good job, and I manage to bank more than half of my take-home pay every week. By living frugally, I have managed to save over $100,000 in the past ten years. My problem is my sister. "Sue" is my polar opposite when it comes to money. She has very little savings because she took out thousands of dollars in student loans to attend her first choice school, and she now struggles as she follows her dream to make it as an actress. Admittedly she is very talented, but so are a lot of struggling actors and actresses; talent does not guarantee success. Although she has done well enough for herself, she is no where near being a big name star.

Our parents help Sue out whenever she asks for money, which is rare, but I have always been unable to shake the feeling that the big request for cash is the elephant in the room. Last month, the elephant trumpeted. Sue was in a terrible car accident. The driver who hit her car was uninsured so they are unable to pay for the damages, which are severe. Sue was in the hospital for a week, and her health insurance isn't the greatest so she has a 20% co-pay, which is thousands of dollars. Sue is going to be out of work for several months, and does not have any kind of disability insurance. Her car was only insured for the minimum her state requires, so her policy doesn't even pay enough to cover what she owes on her car, which was totaled and had more owing on it than it was worth in the first place. In summary, Sue is now over  $50,000 in debt with no way to pay and is looking at a long stretch of disability. Without some kind of assistance, she is looking at declaring bankruptcy.

My parents have nowhere near that kind of money to pay Sue's debts...but I do, and they have asked me to pitch in and assist her. I refused, reminding my parents of my dream to own my own home free and clear. My parents reminded me that I have taken advantage of their assistance to follow my dream, living with them rent free my whole life. I don't think it is fair for them to hold that fact over me, since they insisted I put the "rent" money towards my goal.

My parents own their own home, and are both retired. They have offered to deed me a portion of the house equal to what I would be willing to give to assist my sister, but this is money I will not see until after they have passed - unless I want to force them to take out a home equity loan to buy me out, and I am not that big of an [anal opening]. Am I being selfish, as everyone claims I am? Or are my sister's financial issues the result of her own poor choices?

Secure and Happy...For Now

Dear Secure and Happy...For Now:

Are you certain that you are not that big of an [anal opening]? Did you get tested? It seems to me that you sold your humanity and your soul in exchange for a few extra dollars in your savings account. Throughout your entire letter, all you do is praise your own choices and criticize your sisters. I had to do some heavy editing out of these criticisms just to keep your letter on topic.

While I commend you on your sound financial choices and your ability to save, not everybody chose the path you did. Your sister chose to take risks, to strike out on her own; she may not have yet hit a home run, but she was safely running the bases when fate threw her a cruel curve-ball. Your judgmental attitude is doing nothing to alleviate her pain or your parents concern.

While I am not going to advise you to assist your sister - the choice to help or not to help must be yours alone - I will suggest that you look at the bigger picture. You say that your parents have offered to deed you a portion of the house equal to what you would be willing to give to help your sister. This may not be a bad idea. You claim that you pay cash for everything, so I am guessing that you do not have/use credit, which means you have no credit history and your only asset is your large bank account. This could come back to bite you in the rear when the day comes that you need some kind of credit history. Credit is not only used to grant loans; it is also used to gauge the quality of a person's reputation (fairly or unfairly). Many auto insurance companies use credit in deciding premiums; many employers run a credit check as part of the interview process; and even the telephone company requires a credit history before granting a contract for a mobile phone account.

Another point to consider is the fact that the housing market is starting to bounce back after bottoming out. A percentage share of a house (rather than a flat dollar amount) will continue to grow over the next few years; a $25,000 investment could increase to $40,000 in only a few years; a $50,000 investment now could easily increase to $75,000 or more by the time you are ready to reclaim your investment and purchase a home of your own. What other investment do you know of that will pay a 33% dividend over such a short period of time? These are details that you could work out with your parents before giving a firm yes or no answer to their request. Furthermore, if your goal is to pay cash for a home, depending on where you live you may have to save for several more years, during which time interest rates on investment savings remain low. Again, I am not telling you that you must assist your sister; I am simply telling you to consider all of the angles before shutting the door on your parents request.

Regardless of your desire, a refusal to assist your sister may result in your parents requesting that you start paying rent or even the demand that you find a place of your own now, rather than when you have enough saved to pay cash. After all, you are now in your thirties; have a sizable nest egg; and still live with them rent-free. Just one more angle to consider. I strongly suggest you talk to a financial planner or attorney who specializes in real estate law.

Perfunctory Snuggles,

Ask Tazi! is ghostwritten by a human with a Bachelors of Arts in Communications. Tazi-Kat is not really a talking feline.

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