My Brothers Second Financial Meltdown

Yesterday we discussed some problems my older brother had back in May. While I didn’t give him the requested cash, I spent time with him to address the emergency and we were able to set up a plan for him to get back on track. Six months later, he is back again asking for more help but the situation is a bit different this time around. Here is what I know…

He is asking for $200-300 to pay his bills and needs the money within a week. The first time he came to ask me for a loan, all he did was ask for the money. He left everything else up to me as far as repayment, interest, whatever. This time he had a plan for repayment already, which is a huge step in the right direction. He gets paid every two weeks and told me that he could repay me within a month but asked if I could consider taking payments for a few paychecks so that he can make sure he is on track.

My brother is not as outright with information as I’d like and his request was vague, but he’s always been that way so I did a little prodding into exactly why he needed the money. Apparently, he failed to renew his insurance on his car as well as his plates and registration. He had been planning to sell the car and move back in with my parents by the end of the year so thought he manage not re-registering the car.

Well, he was pulled over for speeding (45 in a 55, if he had current registration, he never would have been pulled over) and cited for lack of insurance, registration and speeding.

In the process of getting his car registered after getting the ticket, which required him to show proof of registration within 10 days, his car failed the safety inspection and he had to have repairs done.

So the circumstances for his return are completely different than before. The first time he asked for help, he was living off credit and payday loans, spending way more than he knew he was and had dug himself into a hole. This go around the cause is more a single bad choice coupled with some bad luck and a dash of stupidity. 🙂

But the fact that he fell off the map after I helped him last still bothered me so I asked him if he was able to put any money into savings. He told me he was able to save about $400 for emergencies between May and now. He was able to pay for the repairs to his car which were about $600 on his own and he only needed my help to pay for the registration and ticket.

So all things considered, I do plan on helping him out, under certain conditions. Here is the plan.

I will lend him $300 and get it to him within the 10 days so he can renew his registration. That way he doesn’t incur additional fines and can get back on track. The conditions of the loan are that he will pay me back $75 per paycheck until the $300 is fully paid. I won’t charge any interest but if he misses a payment, the bank of little brother will be officially closed. Counseling sessions will also be out. If they don’t do any good and he doesn’t learn to manage his money, why waste my breath.

I know this is a risk. I may lose my money and hemorrhage the rocky relationship that barely exists between my brother and me. But I also know that my brother is my brother. The first time he asked for money, he was willing to take my advice and work to get out of his mess instead. It was harder and more stressful but he succeeded.

I also believe that the whole reason I am working towards financial freedom is so that I can help others and here is my opportunity.

Now you know the whole story. What do you think, would you toss him a bone, or throw him to the wolves?

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30 People have left comments on this post



» Josh MichelsenNo Gravatar said: { Nov 9, 2010 - 02:11:00 }

throw a bone to the wolves!!!and pass me a couple

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» Jesse MichelsenNo Gravatar said: { Nov 9, 2010 - 02:11:00 }

Haha you wish buddy. When you grow up and screw yourself, I'll be there to bail you out as well 🙂 but until then, you'll just have to pray I draw your name for Christmas(One of my other brothers, ladies and gent

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» JoAnn MichelsenNo Gravatar said: { Nov 9, 2010 - 03:11:00 }

Watch your mouth Young Man! And thanks for being the family financial

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» Josh MichelsenNo Gravatar said: { Nov 9, 2010 - 03:11:00 }

haha, oh watch out, mom is here to ruin all th

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» Jesse MichelsenNo Gravatar said: { Nov 9, 2010 - 03:11:00 }

haha I can take

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» Josh MichelsenNo Gravatar said: { Nov 9, 2010 - 03:11:00 }

throw a bone to the wolves!!!and pass me a couple bucks.

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» Jesse MichelsenNo Gravatar said: { Nov 9, 2010 - 03:11:00 }

Haha you wish buddy. When you grow up and screw yourself, I'll be there to bail you out as well 🙂 but until then, you'll just have to pray I draw your name for Christmas(One of my other brothers, ladies and gentlemen)

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» JoAnn MichelsenNo Gravatar said: { Nov 9, 2010 - 04:11:00 }

Watch your mouth Young Man! And thanks for being the family financial guru!

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» Josh MichelsenNo Gravatar said: { Nov 9, 2010 - 04:11:00 }

haha, oh watch out, mom is here to ruin all the fun.

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» Jesse MichelsenNo Gravatar said: { Nov 9, 2010 - 04:11:00 }

haha I can take her 😉

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» FB @ FabulouslyBroke.comNo Gravatar said: { Nov 9, 2010 - 11:11:09 }

I’d throw him a bone with the money, but to expect repayment for sure.

If there is no payment, people tend to take you for granted, like a revolving bank of free money. They have to learn how to manage their money by having responsibilities towards it.

You’re doing the right thing. I’d do the exact same thing.

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Jesse MichelsenNo Gravatar Reply:

FB I agree completely, if people aren’t expected to repay debt, they will keep racking it up and never learn! Thanks for your support.

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» Miranda MarquitNo Gravatar said: { Nov 9, 2010 - 06:11:00 }

Good approach, I think. Although I've never loaned money to relatives. 🙂 I did let my brother live here for six weeks while got things together, finding a job and a place. And I outright gave him $$$ to help with the security deposit on his apartment. The idea of loaning makes me queasy. But, then, none of my relatives has needed more than $150, and they haven't been repeat offenders. So I guess we'll wait and see what happens when someone asks me for

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» Miranda MarquitNo Gravatar said: { Nov 9, 2010 - 07:11:00 }

Good approach, I think. Although I've never loaned money to relatives. 🙂 I did let my brother live here for six weeks while got things together, finding a job and a place. And I outright gave him $$$ to help with the security deposit on his apartment. The idea of loaning makes me queasy. But, then, none of my relatives has needed more than $150, and they haven't been repeat offenders. So I guess we'll wait and see what happens when someone asks me for more.

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» Jeff @ Sustainable Life BlogNo Gravatar said: { Nov 9, 2010 - 02:11:47 }

I think I’d also throw him a bone. It looks like he got his act together after the last time that he asked to borrow money and tried to take a gamble to save some money this time around (probably thought he was being smart with money). He would have been right, had he not gotten caught. Unfortunately, he got caught and that blew his idea to smithereens.

I would caution you on stopping dispensing the advice – it seems like he followed it this time.

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Jesse MichelsenNo Gravatar Reply:

Jeff, he did really well the first go-around. I assumed that when I didn’t hear anything, he hadn’t listened to me and had gone back to his old ways. When I heard that he actually did save and managed to take care of the bulk of his emergency by himself, that really made the decision for me right there. It was great to see his ability to manage money improve.

Sometimes we take risks like that; every once in a while they pay off, but this time they didn’t.

I will also take your caution and I don’t think I could ever stop helping others, it just wouldn’t be right. I did however want to add more weight to his responsibility. If he thought I would never help him again that may motivate him to blow my expectations away and come through shining.

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» MicheleNo Gravatar said: { Nov 9, 2010 - 02:11:30 }

Agreed, you did the right thing. It seems that while he was trying to make changes he got hit with some of life’s unexpected nuisances piled on top of each other.

I will be interested to hear how he does going forward.

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Jesse MichelsenNo Gravatar Reply:

Thanks Michele, we have all been there which is what makes this situation different than the last. We all could use a little help from our friends, every now and then right? 🙂

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» EvanNo Gravatar said: { Nov 9, 2010 - 03:11:08 }

100% doing the right thing. $300 is not going to kill you, AND you are helping someone out AND they are listening to your advice/wisdom.

If you believe in Karma good stuff should be happening to you!

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Jesse MichelsenNo Gravatar Reply:

Evan, thanks for the support. I’ve never thought of the Karma of the situation, but it can’t hurt!

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» Kevin @ Thousandaire.comNo Gravatar said: { Nov 9, 2010 - 09:11:19 }

If I were in your situation I would probably lend the money, but I’d do it under the assumption that I’m giving the money away.

I lent a friend money about five years ago and he still hasn’t paid me back. I was pissed about it for about the first three years (especially when he’d call me and tell me about all the video games and snowboarding equipment he was buying), but then someone smarter than me told me that when you lend money to a friend, consider it a gift and if you’re paid back, that’s even better.

My rule now is, “I’m willing to lend as much as I’m willing to lose on that friendship.” $300 for a brother seems more than fair.

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Jesse MichelsenNo Gravatar Reply:

Kevin, I try to live by that as well. I won’t overextend myself, leaving everything riding on whether I get paid back or not. If I can’t afford to lose the money, I won’t lend it. No one benefits from a grudge!

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» ElleNo Gravatar said: { Nov 10, 2010 - 08:11:51 }

I understand the sticky situation you’re in. I think you did a great job with your repayment plan and I really hope it works out.

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Jesse MichelsenNo Gravatar Reply:

Thanks Elle, I just try to limit the possibility of failure that could result in life-changing problems. If I left things up in the air, and everything went south, I would be pretty upset about it and would hold it against my brother even though I never set things up to succeed. So far, bro has agreed to terms and the money has changed hands. We’ll see how it goes!

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» Khaleef @ KNS FinancialNo Gravatar said: { Nov 11, 2010 - 12:11:31 }

I think you are handling this the right way given the circumstances. The only thing I would change is making it a loan. I would “loan” the money, but brace myself for nonpayment. This may help avoid the destruction of the relationship if you look that way.

The first benefit to you is being able to help out your big brother. The second will be the bonus if he pays you back.

Oh, I just scrolled up and see that Kevin said the same thing. Well, you know what they say about great minds!

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Jesse MichelsenNo Gravatar Reply:

Khaleef, yep you have to brace for the worst and hope for the best; that’s life! Thanks for the support!

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» Investor JunkieNo Gravatar said: { Nov 11, 2010 - 01:11:52 }

If this is the second time, fine so be it. If it becomes a continuous problem I would get more strict on your terms and eventually not give any more money.

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Jesse MichelsenNo Gravatar Reply:

IJ, I think it all comes down to how he manages the situation. With the bank of little bro, your credit score starts out at 850 and with each incident his score can stay the same, or plummet. When it hits average, that’s when I stop lending.

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» Ben@BankAimNo Gravatar said: { Nov 12, 2010 - 02:11:16 }

At least he is making improvements in his life and to get back on track. Maybe its good that he moves back home until he is in a better spot financially. I always lend money to family members, unless of course they never paid me back.. it would be harder to lend money to them, but still would.. because they are family.

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Jesse MichelsenNo Gravatar Reply:

I agree Ben, he is making progress and I think him moving back could help him get his debt paid off as he would have fewer expenses.

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