I Kept My Brother's Family Afloat - and Now I Regret It

Before you go, we thought you'd like these...

BNY82D American dollar american; dollar; banknote; cash; currency; dollarbill; money; 40-44; years; buying; caucasian; close; up
Alamy

By Danielle Woods, as told to Marianne Hayes

All names have been changed in this "My Secret Money Life" essay from LearnVest.com.

My older brother and I have never been particularly close. We got along well enough as children, but our relationship didn't grow into the strong, tight-knit kind I've seen other siblings share. Let's just say we're very different people: He's an introvert, while I'm a social butterfly. And the truth is that if we weren't family, we probably wouldn't run in the same circles.

But when I saw my brother start to struggle financially, I couldn't help but feel the natural tug to step in. He's family, after all, and I had enough room in my budget to spare a little. So, really, it was a no-brainer when I made the decision to start giving him money -- but it had to be secret, so he'd never realize it was me writing the checks.

A Pattern of Secret Giving Begins

My husband Mike and I are no strangers to charitable giving. I'm a corporate executive, and he's thriving as a business consultant, so we can give to various philanthropies and charities. But no matter who the recipient of our charitable giving is, we've always followed a single guiding mantra: We're not looking to be heroes. My husband and I know that we've been blessed and want to share it with others-and giving anonymously allows us to do just that. What's the point of seeking recognition?

We also firmly believe that charity should start at home. So shame on me if I can write a check to a charity, but won't do anything to help a struggling family member.

My brother, Peter, and his wife Samantha had always struggled financially. In fact, my parents had been throwing money Peter's way for years -- for down payments on homes, to pay various bills and to buy school supplies for their kids.

Facilitated Through the Church

But when I noticed him and Samantha facing particularly difficult money decisions, like whether or not to buy new clothes for their three children, I knew it was time for me to act.

%VIRTUAL-pullquote-I handed over my credit card and paid half of the outstanding balance -- a grand total of just under $10,000.%That said, I didn't feel comfortable just handing Peter a check for fear of insulting him or making him feel self-conscious about his economic situation. So I got the idea to use our church as a way to facilitate the secret giving, and the fact that Peter also went to our congregation made the decision even easier. We simply wrote a check and asked the church to create a benevolence fund for Peter and Samantha. It was a win-win situation -- and one that, to this day, my brother doesn't know about.

We covertly wrote checks this way to Peter and Samantha on two occasions in the early 2000s, which added up to about $2,500. And, for a while, it made a difference. I don't know exactly how they used the money, but Peter once told me how he felt cared-for by our church -- that his community was looking out for him.

I was happy to hear that, and couldn't help but feel encouraged that maybe they were using the money wisely and learning good habits that would help them find their financial footing. Well, I couldn't have been more wrong.

The $10,000 Gift That Changed Everything

In the decade that followed our secret giving, Peter and his family managed to stay afloat -- with more not-so-covert help from me and my parents.

My husband and I didn't mind occasionally footing the bill for random expenses. I picked up the check at restaurants. I covered the costs of some of their vacations. Years earlier, I'd even paid for their honeymoon -- so this was nothing new.

To be fair, my brother never asked for this help. But with so many of his sentences beginning with, "We wish we could, but ... ," I felt inclined to step in when I could. Unfortunately, the opportunity to give anonymously didn't present itself again -- from here on out, our efforts to help were completely transparent.

Was Peter grateful? I'm not sure. It wasn't something we talked about -- I just did it.

Eventually, in 2011, Peter and his family moved to a different part of the country, and communication became less frequent-until disaster struck. While waiting for Peter's health insurance through a new job to kick in, Samantha suffered a stroke. Thankfully, she recovered, but it left them worse off financially than they'd ever been.

Faraway and Facing Big Medical Bills

Between the hospital bill, anesthesiologists, surgeons and more, Samantha's stroke cost them upwards of $40,000. Whenever we spoke on the phone, which wasn't often, the picture Peter painted was bleak. He never outright asked for our help -- but I knew he really needed it.

Mike and I agreed we couldn't just sit back and watch, so we sat down and seriously discussed what we could do. Because we've always had such a communicative relationship -- and we both agree that family comes first -- the conversation was easier to have than you might expect. Knowing we'd do the same if it were his family, Mike was fully on board.

The first thing we did was ask Samantha for access to her medical bills, so I could negotiate them down on her behalf. After sorting through the paperwork, I flew down to see Peter and share with him the plan that Mike and I had agreed to: We'd pay half of their largest bill, with the understanding that any ancillary medical expenses would remain their responsibility.

They agreed -- and promised to set up pay schedules for the outstanding bills -- although Peter seemed pretty solemn throughout the conversation. In fact, he barely made eye contact with me. I wasn't sure if he was thankful, ashamed or a mix of both.

As our visit came to a close, Samantha and I went to the hospital together to settle the $40,000 bill, which I had negotiated down 50 percent. I handed over my credit card and paid half of the outstanding balance -- just under $10,000. This was met with tears and gratitude from Samantha -- which is why I was surprised when our relationship began to cool shortly after.

Why I Regret Our Decision to Give

Peter and Samantha rarely reach out to Mike and me anymore. The phone calls have dwindled, and the emails are scarce. Do they feel guilty for the money we sacrificed for them? Embarrassed? Resentful of our more fortunate position? I have no idea.

What I do know is that they ended up filing for bankruptcy about a year after I paid their hospital bill -- although Peter never actually shared this with me. It was my parents who let it slip.

Learning about the bankruptcy infuriated me: Had I known that there would be no real commitment to financial stability on their part -- even after they'd agreed to cover the rest of the medical bills -- I never would have given them the money.

Perhaps the worst part is hearing about how they are currently choosing to spend whatever money they have. My parents tell me Peter just dropped $700 on a new puppy. My 14-year-old niece is also getting a new iPhone 6. I don't even have an iPhone 6!

Indulging in Impulse Purchases

The hard truth is that my brother doesn't have a high-paying salary, but they do not deprive their children of anything. The latest jeans, electronics, shoes ... When it comes to their kids, they never say no. Such careless spending is hard to swallow for me in light of their mounting financial responsibilities. In my opinion -- and given my role in the situation, I feel entitled to an opinion -- their financial obligations should take priority over impractical impulse buying.

My parents have also stopped extending money to Peter. My father's new stance is that he'll lend them cash if Peter provides a budget of how they'll spend it. Of course, no budget has ever materialized.

Over the years, my parents have given him over $70,000, which includes all the times he's lived with them as an adult. As for my part, I've given my brother something in the neighborhood of $15,000 over the years.

But I don't regret it because, at the time, I felt it was the right thing to do. I never had any illusions of being paid back -- all the money was given as gifts. I'm more upset with the way my brother chose to use those gifts.

Clarify Expectations

I've been thinking a lot about what I've learned from this process and I think it's this: If you're considering loaning money to friends or family, make sure you fully understand your expectations throughout the entire process, and make a plan together for how the money is to be used -- before you give.

I've also learned that charitable giving is very different from familial giving. When giving to a charity, the donor is free of expectation -- they just trust that the money will be distributed wisely. But when it comes to family, you can't always designate how the money will be used.

And another thing I know for sure? Next time I go out to eat with my brother, I will not be reaching for the check.

I Kept My Brother's Family Afloat - and Now I Regret It
Yes they can.

The CARD Act did get rid of the most outrageous abuse: they can no longer increase the interest rate on existing balances unless you go 60 days past due.

However, you need to remember that:
  • Most credit card interest rates are variable and are linked to the prime rate. Your high rate will only go higher when interest rates increase.
  • Based upon risk, your credit card company can still increase your interest rate on all future purchases. Your existing balances are protected, but future purchases would be at the higher rate. And determining risk is not limited to your behavior on your existing card. If you miss a payment with another lender, that could lead to an increase on all of your credit cards.
  • After 12 months, they can increase your rate for almost any reason. But the increased rate only applies to future purchases, and they need to give you 45 days notice.

Credit cards are incredibly expensive ways to borrow money. If you use a card, your goal should be to pay off the balance in full every month. Then, the interest rate doesn't matter.

Bottom line: If you do have debt, you should never be paying the purchase APR. Look for a balance transfer, or get a personal loan to cut your interest rate. And take a long hard look at your spending to put more money towards paying off that debt.
 

No, they are not.

There is a big difference between a 0% balance transfer (where the interest is waived during the promotional period, discussed above) and 0% purchase financing offered at many stores (where the interest is only deferred).

I regularly encourage people to use balance transfers to help them pay off their debt faster. With a balance transfer, interest is switched off or reduced during the promotional period. Once the promotional period is over, interest starts to accrue on a go-forward basis. This can take years off your debt repayment.

But stores offer 0 percent financing at the checkout. With a lot of these programs, interest is charged from the purchase date if you do not pay off the balance in full during the promotional period. So, if you have a 12-month 0 percent offer -– and do not pay off the balance in 12 months -– then in month 13 you will be charged a full 13 months of interest. They retroactively charge interest, and it will be like you never had a 0 percent offer at all.

 

This is a common practice. Online, Apple (AAPL) does this, via their partnership with Barclaycard (BCS).

And stores like Walmart (WMT) do the same thing.

Bottom line: I don't like deferred interest deals. Most people do not understand the difference between waived and deferred interest, and this practice feels deceptive. If you take one of these offers, make sure you pay off the balance in full before the promotion expires.
 

Not always.

Credit card companies have different rates for different types of transactions. The interest rate charged on a purchase (high) is different from a balance transfer APR (low).

Before the CARD Act, banks would apply your payment to the lowest APR balance first. Imagine you have a $1,000 balance. $500 is at 0 percent (balance transfer), and the other $500 is at 18 percent (purchase). If you make a $100 payment, banks would apply that to the balance transfer. That way, they reduce the balance transfer (at 0 percent) to $400, while protecting the $500 purchase balance (at 18 percent).

The CARD Act changed that. Banks now need to apply payments to the highest interest rate first. But this only applies to payments higher than the minimum due.

If you only pay the minimum due every month, your payment will still likely be applied to the lowest interest rate balance first.

Bottom line: You should never spend and have a balance transfer on the same credit card. Banks can only "trap" balances when you have multiple balance types on one card.
Not exactly true.

The CARD Act has stopped the handout of T-shirts on the steps of the school libraries, but they can still give sign-on bonuses. And they advertise on campus. For example, Citibank (C) has a "Thank You Preferred" card for college students. If you spend $500 in the first three months, you get 2,500 thank you points as a bonus. That is $25 of value.

Bottom line: I actually find this worse. Before, you got a free T-shirt just for signing up. Now, the credit card companies encourage spend on the card for the "free gift."

In the past, banks would charge you a fee if you went over your credit limit. Today, the CARD Act requires banks to receive your consent to charge an over-limit fee. So, in most cases, banks just eliminated those fees -- which is good news (kind of).

You can still go over your credit limit, if the bank approves your transaction. But the full amount by which you've exceeded your limit will be part of your minimum payment come the next bill, which could cause a payment shock.

More importantly, utilization (the percentage of your available credit that you use) is a big factor in your credit score. Your credit score determines the price you pay for credit. So, if you're over-limit on an account, you are considered riskier. That can result in the credit card company increasing your interest rate. And it could also result in other lenders increasing your rates with them. So you do pay, but it's an indirect cost.

Bottom line: We're glad the fee is gone, but you still need to be diligent and try to avoid going over your limit. If you pay your balance in full every month but are frequently bumping up against your credit limit, ask for a credit line increase.

Completely false.

I have heard from so many people that the way to eliminate overdraft fees is to opt out of overdraft protection. But it is impossible to completely opt out of overdraft.

Federal regulation requires consumers to opt into overdraft protection only for debit and ATM transactions.

But, the regulation does not cover checks and electronic transactions (including bill-pay and monthly direct debits, like gym memberships). The banks have all the power. If they approve the transaction, you would be charged an overdraft fee (typically $35 per transaction at banks and $25 at credit unions). If they decline the transaction, then you would be charged an NSF fee (non-sufficient funds), which is usually just as expensive as the overdraft fee.

Bottom line: You can't opt out of all overdraft fees. To avoid them, keep a buffer or find an account, like Ally, that doesn't charge those junk fees.
Not always true.

To be protected, you need to report the fraudulent transaction within 60 days. Otherwise, you give up a lot of your rights.

On ATM/debit cards, the bank can make you responsible for up to $500 of fraud if you report more than two days (but less than 60 days) after the transaction. On a credit card, you would never be liable for more than $50 (and most banks won't even hold you accountable for $50.)

One area where you will almost always lose is when your Personal Identification Number is used. If someone manages to get your PIN and takes money out of your account, then the bank will almost always assume that you authorized the transaction. Make sure you change your PIN often and never write it down.

Bottom line: Avoiding liability it your responsibility. Track your transactions regularly and call as soon as you detect any suspicious activity. And make sure you never share your PIN with anyone, or make it obvious.
of
SEE ALL
BACK TO SLIDE
SHOW CAPTION +
HIDE CAPTION

Read Full Story

People are Reading

The Latest from our Partners
1 - 3 of 15