Family, Friends & Money: Part II

When it comes to friends, things can become tricky depending on the relationship. True friends should not expect a bailout, but we all know better than that. Depending on the level of friendship, you may just let them indirectly benefit from your possessions: inviting them to your vacation on a chartered boat or jet, occasionally taking them along when shopping, etc. I coined the term “Contingent enjoyment” to define this situation. True friends would not expect you to take care of them.

In terms of practical implementation of the tactics above, there are a variety of strategies. On top of helping relatives (and even friends) achieve financial independence, some type of assistance can be given to lighten their loads. It ranges from buying them a car, covering their car note, paying their mortgage, or giving them an allowance. From my experience, it consists in setting up corporations and initiating those payments from there in order to take advantage of the additional deductions. For allowances, said relative or friend can be put on payroll, thus deducting the taxes immediately. When it comes to loans, I believe one should never loan out more than what they are willing to forgive. That way, in case on non-repayment, there is a lower chance of resentment as one did not financially extends themselves overboard. A promissory note should be signed, so as to clearly define the repayment terms of the loan. It will protect both parties and also show that you mean business. It is up to you to enforce it, but I can assure you that psychologically, they work wonders on the discipline of the person that owes the money. The right strategies will benefit both parties and ensure that money does not become an issue between an affluent individual and the people around them.

As we can see, issues of money are definitely going to arise as individuals tend to feel entitled to your riches or can act downright ungrateful. The key is to set the right parameters from the get-go and to avoid becoming an ATM. Once the right systems are in place, there exists little room for misunderstanding and your financial well-being is protected. You have worked hard for your success and you understandably want to share the fruits of that labor with your loved ones. However, that sharing should not necessarily include cash.