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By LIZ PULLIAM WESTON
How To Just Say No To Family Moochers
Dear Liz: I grew up frugally, but some of my siblings spend everything they have, as do other relatives. Several have refinanced their houses to take cash out to support their lifestyles, then can't afford the house or the lifestyle. I also have two stepdaughters in their 30s, including one who has a young son, who are perpetually broke.My husband, who is retired, and I have worked very hard to get where we are financially. We've helped out several of these people and haven't minded for the most part, but I don't want to make it a lifelong response.
How do those of us with more resources handle this? I hate to see friends and family struggling, yet it's often their poor decisions that have brought them to this place and they can't see that. I'm worried that saying no will damage relationships, but saying yes will just mean more requests.
Answer: The easy answer would be to say that the only family you're responsible for is the one under your roof. Then again, it would take a pretty cold heart to ignore a family member facing a real emergency if you have the means to help.
How you navigate these tricky waters is up to you and your husband, but you would be smart to discuss some ground rules before you're faced with the next request.
One way to limit the handouts would be to make it clear that you'll help only in a crisis – and you and your husband are the ones who will define what a crisis is.
Another important factor to consider is whether your contribution will really help, or merely postpone the inevitable or enable irresponsible behavior to continue.
What's essential, though, is not to let yourself get pressured into instant decisions. Regardless of who's asking or why, you need time to think about your response and to discuss the issue with your mate. Tell the petitioner you'll get back to him or her when you've had a chance to think about it.
When you decide to say no, do it in a way that doesn't invite argument. If you say, "We aren't going to give you money because you live beyond your means," the other person will feel compelled to defend himself and perhaps attack you.
If you say, "Bill and I are really not in a position to give you money right now" or "We've had relationships go sour because of money, and we really don't want that to happen with you," you've made your boundaries clear.
If you're faced with further attempts to persuade, you can just repeat your original statement in a calm, neutral voice until the message gets across.
Dear Liz: Can you explain what a short sale is and how it affects one's credit? We own a home and are looking to sell it, but the amount we could sell it for is about $50,000 less than what we owe. Would we still owe the mortgage on that $50,000?
Answer: In a short sale, a lender agrees to accept the sale proceeds from a house in lieu of the full amount owed on the mortgage. Not all lenders will agree to a short sale, and many will do so only if you have fallen behind in your payments (which by itself will trash your credit).
If the lender approves the short sale, you would no longer owe the $50,000 (or whatever it turns out to be after selling costs are deducted from the sale proceeds). But depending on the terms of your loan, you may owe income taxes on that amount, because the Internal Revenue Service could consider forgiven debt to be income to you.
How short sales affect your credit depends in large part on how the transaction and your payments are reported to the credit bureaus by the lender. Trying to minimize the effect on your credit should be part of your negotiations with your lender. You'd be smart to hire an experienced real estate attorney and to consult a tax pro.
Dear Liz: Are household bill payments (for electricity, gas, water, phone, etc.) reported to the three credit bureaus monthly? My husband said a banker told him they are. We got into this discussion because I paid the light bill two weeks late, and he thinks I'm damaging his credit score because the bill is in his name.
Answer: Although it wasn't often true in the past, some utilities now do report their customers' monthly bill payments to the three bureaus. Most, though, report to the bureaus only when their customers become seriously delinquent on their bills.
Either way, your late payment probably wasn't a credit killer. Typically, a payment must be 30 days or more overdue before it's reported as late.
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© 2007, No More Red Inc. Liz Pulliam Weston is author of the books “Your Credit Score” and "Deal with Your Debt,” both published by Prentice Hall. She regrets that she cannot respond personally to inquiries, but questions for possible inclusion in her column may be sent to 3940 Laurel Canyon Blvd., No. 238, Studio City, CA 91604, or use the “Contact Liz” form at her website, www.lizweston.com.
