Is Love Draining Your Money?
January 16, 2012This is an extreme example. I’ll say that right up front but there are lessons here we can all take away. Yesterday, I took a call to our financial helpline from a caller who was having trouble making ends meet. She said that she made good money but was always scrambling at the end of the month to get her bills paid. As I always do, I started asking her questions not only to get to the root of the problem but to tap into her strengths. Building on people’s strengths is a much better way to achieve real behavior change than to focus on only the problem and the obstacles. Anyway, long story short, the root of the problem soon emerged.
The problem was love. Her boyfriend is unemployed right now and she is giving him money – a lot of money. That could be all well and good because couples need to be supportive of each other and that is what makes relationships work. She, on the other hand, was going into debt to help him and doing it in the worst way possible. She was going to payday loan services, which she said cost a 30% premium to borrow from. She was borrowing money she didn’t have against her upcoming paycheck and paying a bundle for it. Her explanation was “These are matters of the heart.”
We all understand matters of the heart. When we love someone, whether it is your spouse, significant other, children or dear friends, we want to help them. In her case, she was actually harming herself to do it. With a payday loan, she writes a post-dated check to the loan company for a week or two out. They give her cash now (minus a fee) and then cash the check when her paycheck hits. The whole thing is fraught with peril. You can see how easy this can spiral into other problems since most people need the funds from the upcoming check! She may then need to take another loan just to make ends meet.
This is an expensive trap. If she is giving away a hundred dollars a pay period, that is $2600 per year. In ten years time, we are talking $26,000. This money could have been invested in a 401(k) and picked up a company match that could have yielded her about $40,000 even without any interest on the funds. When you aren’t making ends meet, it is extremely stressful and takes a toll on the body and the mind. Imagine the additional health care costs and consider the cost of being distracted at work. This could cost her a possible promotion – you never know.
Giving away money to loved ones when the giver can’t afford it is a common occurrence. When discussing budgeting and savings with callers to our helpline and in worksite financial planning sessions, I often hear statement like, “I am helping support my adult children” or “I constantly am handing out twenties to my teenagers – that is where my money goes.” Even though many people might not have the extreme issues the caller did, the “giving away money” problem may be deeper than people realize.
Consider doing a “money and matters of the heart” check up:
Review your bank statements over the past few months and add up how much money (if any) you have given to loved ones.
Not much? You are probably doing a good job managing your money and keeping a healthy “love and money” balance.
A lot? You may be hurting yourself while trying to help others! Take an inventory of how much you’re giving away and to whom. Calculate how much it is costing you! Use the Daily Savings Calculator (click here) to see how this money would grow if you were saving it instead of giving it away. For example, if instead of giving away $15 per week to teenagers, you saved it and earned 6%, in 10 years you’d have over $9000.
Set boundaries with your loved ones. For example, with your teenagers, you can give them a set amount of money (like an allowance) per month and that’s it. You can have them work for it by helping with chores or tasks or they can get a part-time job for additional spending money. With adult children, give them a set time frame to help them get back on their feet. Granted it is a tough economy but giving them some help now and a definite time frame will provide them the support they need and the motivation necessary to tackle a tough job hunt. With your sweetheart, do the same.
Setting some boundaries around money with people we love is difficult but necessary. Our real friends and caring family members will respect those boundaries and respect themselves more when they carry their own load. For Christmas this year, my husband and I gave plane tickets for our sons to come and visit us and lift tickets to go snowboarding when they were here. Our son Brian who is in the U.S. Navy, announced, “I can buy my own plane ticket, Mom.” He ended up relenting because I explained I had been saving up airline miles and credit card points so I was only out of pocket by $10. But I was struck by his comment (and proud of him) because he cares more about being financially independentthan he does about a “free plane ticket.” He set boundaries with us to say, “I can take care of myself,” which is all a mother can hope for.