Exjackly

What is Rich?
A rich man decided to go on vacation to a faraway land, bringing his family with him to enjoy the experience.  When he arrived, he saw some friends and invited them to join him for the weekend.  The entire group went up into the mountains to the private retreat.

The first evening, everybody was having a great time after dinner when they were interrupted by a big ball of smoke exploding in their midst.  As the music died and the smoke cleared a small, stout man with a fat cigar and a smile on his face could be seen.

‘What madness is this?” yelled the rich man.

“I am here to show you the greatest collection of riches in the world.  It will be yours if you want it” said the rotund rascal.  “All you must do is to follow me.”

That got everybody’s attention.  There was some talk about what kind of joke it might be, but curiosity got the best of everybody.  In a matter of minutes, everybody had their coats on and car keys in hand.  “Where are we going?” was the most common question.

“You will not need your keys.  Just follow me out and up.”  With a quick whirl the man turned toward the door and ran out.  Once outside he turned back, inhaled on the cigar until everybody could see the glowing ember, and once there was motion to follow, he continued on his way.

The rich man quickly made his way to the front of the pack.  At first, the going was easy as they walked across lush lawns under bright sunlight.  Still, looking back it could be seen that the group was spreading apart.  The rich man had no problems keeping just a few yards back from their guide.

As they continued, the way became rockier and started going uphill.  It began to darken as a mist came up and the moon waned.  The guide continued on, not looking back.  The rich man looked back less and less, but each time he did there were fewer and fewer friends and family behind.  His wife was the last one he saw before the fog closed in completely and following became more about listening than seeing.

After some time the fog began to clear.  The way grew less steep and much smoother.

The portly man was waiting for him, sitting on an old stone bench, still smoking the same cigar.  Beyond him were two doors, both open, both brightly lit.

Pointing at the doors with his cigar, he said, “You must choose which one you live for.  Whichever door you choose, at some point you will regret that you did not choose the other.  One of these doors is to the friends and family that helped and followed you on your way to here.  Behind the other are the riches you thought I was going to lead you to.”

“Choose financial wealth and you will still have friends and family.  You will still enjoy time with them.  What will be less is the amount of time you spend with them and your bonds will be fewer and not as strong.”

“Choose friends and family and you will still have financial riches.  You will miss many opportunities to expand your financial holdings in exchange.  This choice is not exclusive.  Instead, it is about how you measure success.  The way you measure success determines how you will spend your time and effort, and thus how you will succeed.”

“Which do you choose?”

The rich man thought for some time.  He wanted both, but he knew that he could not strive for two goals with all his heart.  He loved his family and enjoyed his friends.  At the same time, his image of himself was measured in dollars and yen.  With resolution, he made his choice and walked through that door, knowing what he chose and why.

Do you know what door he chose?  There is not a wrong door to choose, although there is certainly a preferred one that most people will suggest to have been taken.

Think about what your choice of doors means and why you picked it.

We all know the economy is not the booming environment that it used to be. Foreclosures, lay-offs, inflation, tight credit and poor investment returns have hit millions of people hard.

At the same time, most of us are optimistic that this is not going to be an excessive downturn. It should not take decades for things to unwind and reach bottom before resuming growth. Still, the next 2-3 years are likely to be rough with belt-tightening required far and wide.

While there is a lot of disagreement about what needs to be done to fix the economy (from letting everything fail and starting things over after to nationalizing our financial institutions and perhaps even more), it is not the economy in aggregate that drives most of us.

If you have a story – good or bad – about how the current economy has impacted you, please add it below. Lets together put a real face on the massive numbers being reported in the news.

The best of the comments will be highlighted and may be spun into independent posts for more conversation.

Being in a reasonable financial position, I want everybody around me to also do well.  I know where I am and where I want to go.  Unfortunately, some friends of mine are in the opposite boat.  They do not have their financial lives together and do not know where they are are or where they are going.

Deep down, I want them to make the right choices and come on a similar journey to the one I am making.  I also know that they are not going to, and usually the worst thing I could do for our friendship would be to give them money to turn things around.

… usually the worst thing I could do for our friends would be to give them money to turn things around.

Friends usually get into financial trouble over a period of time.  It does not come up unexpectedly.  The signs are usually there for anybody who is watching: deferred maintenance on vehicles, problems cropping up around the house do not get fixed quickly, or you notice their spending habits changing for the worse.  A quick and easy fix of more money is not going to fix what caused the problem initially.  If the underlying financial activity that got them into trouble in the first place is not changed all more money will do is delay the final meltdown.

Even if the extra cash is enough to get them out of trouble, the loan can cause worse problems.

In My Heels knows this. She puts it well saying:

“It’s age old advice for a reason.  The problem with lending money to loved ones is this:  If you lend serious cash to someone you care about, you still expect it back right?  Sometimes the people we care about expect the relationship you have with them to excuse or “forgive” loans that you have no intention of forgetting about… especially if you can’t afford to.  Tempers flare, words fly like knives, and those knives sever relationships.  Sometimes those wounds heal, and sometimes the damage is permanent.

So, what should you do?  For starters, say NO.  Be nice about it.  Explain that financially you cannot support the loan without putting yourself into a bad position.  You can offer to help them non-monetarily.  Perhaps offer to go over their budget with them or help them look at their financial big picture to offer suggestions.  Maybe offer to make a gift of a visit with a financial planner who will do the same but with more authority than you have.

If You Decide to Say Yes Anyways

Should this not be enough deterrent, and you want to say yes, ask yourself the following questions:

1. Can I afford to not get this money beack, ever?
2. Am I willing to forgive this loan to save the friendship?
3. Will they sign a promissory note for the full amount?
4. If it is for an asset, will they accept a lien for the loan amount?

If you cannot answer Yes unreservedly to all of these questions, you should not make the loan.  End of story.

If you can answer Yes to all of these questions, proceed with caution.  You must ensure that both parties see this as an ordinary business transaction.  Otherwise, if your friends get into financial trouble later, you will be the first obligation that they ignore.  They will trust in your kindness to overlook them not paying you back.  It usually will not be malicious.  But they will expect you to understand and to be fine with it.

That will be where the friendship begins to unravel.  Let it go on long enough, they will forget about the loan completely and you will feel misused and abused.  The friendship will be poisoned with a slowly burning drug.  You will begin to see slights and insults where there were none before.  They may begin avoiding you out of guilt.  Eventually, you will drift apart if the friendship does not simply implode.

That is why it is better to not loan the money yourself.  It can work out great.  It can strengthen your friendship or family ties.  More easily, it can straing and destroy those same ties, and much faster.

If You Need to Borrow

If the situation is reversed, do everything you can to avoid borrowing from friends or family.  If the situation requires that you do borrow, follow these rules:

1. Treat it as a business arrangement – because it is
2. Review your own financial situation to ensure you can repay the new obligation – be honest
3. Behind food, shelter, and clothing make this obligation your top priority
4. Pay it off as early as possible.
5. Sign a promissory note and allow a lien to be placed to secure your friend’s position.

Offer these things without asking.  Money is worth less than friends and family.  Do everything you can to prevent money from getting in the way.