It's a problem everyone with a few bucks faces from time to time: how to gracefully turn down a request for money.
Most of us have perfected the art of hanging up the phone when a telemarketer calls, but it gets harder when you're approached by your alumni association, a favorite charity and especially family or friends. For those who struggle with the word "no" and fear hurting or angering someone, here are some tactics to try.
Keep it short. If the request is from a close friend or family member, you may feel that you have to give a reason why you're saying no. But as a rule, you don't need to provide a lengthy explanation.
"You don't need to explain or feel guilty, which is the motivation for long explanations that lead to engagement, and the unintended message that your arm can be twisted into making that gift or donation or loan," says April Masini, an online advice columnist at AskApril.com. "Terse is clear. Rambling, circular responses are not."
Be polite. If you're nervous about saying no, this won't be a problem. But it's good to keep in mind that there's no reason to fly off the handle or make the person feel bad for asking for a loan.
"They just asked you for money, not a kidney or a sperm donation. Keep your perspective," Masini says.
If this request is from someone you know well, it may have been a big deal for the person to ask you for money -- and quite possibly the last thing he or she wanted to do. Your friend may feel humiliated and agonized, which is all the more reason to keep perspective and be kind while you're declining the request.
Start a foundation. Maybe you've had someone ask you to help pay for a kidney operation or a donor sperm insemination procedure. And much as you'd like to, you just can't. If you have deep pockets, you could start a foundation. (Most experts suggest you'll need to start with at least $1 million.)
That's what Charles Crutchfield, a clinical professor of dermatology at the University of Minnesota Medical School, did. He says his brother, an attorney, came up with the idea.
"Now when people ask for money, I tell them, at the strict direction of my accountant, we have a special foundation that meets twice per year to review such requests. If they would like a detailed application to fill out and submit, we can have the request considered at the next review cycle," Crutchfield says. "This eliminates 90 percent of the requests, and the remaining 10 percent then can be reviewed and awarded if there is funding left, and they are deemed worthy."
Know what you can afford to give. Even if you are nowhere near wealthy enough to start a foundation, it makes sense to think like a foundation. "Determine an annual amount that you are willing to give to good causes, both charitable and family and friends," suggests Kelley Long, a certified public accountant in Chicago.
That way, at least you will know if you have the money to give when someone asks.
Be firm. If you're going to say no to a request for money, don't get squishy and suggest you might be able to pony up funds later. Keep in mind that if you're dealing with an organization with no feelings or shame, you will be asked for money again -- and again.
And if that happens, "don't expect them to suddenly stop," Masini says. She advises: "Use your caller ID, and don't pick up calls you don't want to take. No guilt required."
Offer advice instead. If a friend or family member needs money, and you can't help but wish you could, you could suggest ways they could earn or raise money in a hurry. Even if you just bore or discourage the person, at least you're showing that you care -- just not quite enough to give up any cold hard-earned cash.
When a friend, family member or organization asks you for a loan or donation, here's how to respond.
Two friends talking outdoors.
When you're telling a friend or family member no, you should always be firm but never rude.
Offer time. If your alumni association, a charity or a political party contacts you with a monetary request, you could instead offer to volunteer for the organization. Say you don't want to donate money, but you'll be glad to make phone calls like the one you just received.
And you can always give your time to a friend or family member. Perhaps you can clean their house or watch the kids while your friend goes to a job interview or spends time putting together a garage sale to earn money.
Of course, requests for your time may be a problem, too. Maybe friends, family members and your child's school, your church and your local animal shelter are always asking you to volunteer your time. In that case, you can politely tell the PTA, church or family member that you're too stretched and can't possibly help out.
Then, to ease your guilt, you can offer to do something else instead -- like give them money.
10 Financial Rules You Should Break
Tired of Giving Money? Here's How to Just Say 'No'
This is the granddaddy of them all. Start to type "emergency" into Google (GOOG), and the first suggestion is "emergency fund." The rule is to make sure you have six month's of living expenses tucked away in cash in case you losefyour job or suffer a financial setback. Of course it's important to have a financial safety net, but when you earn virtually nothing on your cash, this rule can cost you. For example, if six months of living expenses for you is $25,000, you'd be sacrificing close to $1,000 of income a year by keeping this money in a checking or money market account.
For years, I've broken the mold on this financial rule by telling clients they shouldn't have their emergency fund in cash. Instead, choose a short-term bond fund that pays 3 percent or higher for your safety net. If you need the money quickly, you can easily sell the fund and get access to the cash. If you don't need the cash –- and these emergency fund accounts are rarely used –- you can still make money on the assets.
Not so fast. There are many good reasons to contribute to a 401(k), such as tax savings, tax-deferred growth and a possible employer match, but there are also good reasons not to contribute as well. Don't blindly dump money into your 401(k) if you don't have an emergency reserve of some sort and there is a chance you will be laid off. It is taking longer for most to find a job, so if you think you may be out of work, make sure you have the resources to pay rent and buy food until you land a new job.
Also, if your employer doesn't provide a match and you are in a low-income tax bracket, it may make more sense to pay the tax now (since you are in a low tax bracket) and invest in a Roth individual retirement account instead. Use this 401(k) vs. Roth IRA calculator to crunch the numbers.
You cannot cut your way to wealth. Too many people and financial advisers focus on trimming expenses when they should be focused on the other half of the equation -- income. I'm a proponent for living within one's means, but too often that creates an artificial barrier or ceiling. "This is what I make, so I have to cut back to save more," is often the thought process. Rather than living within your mean, work on increasing your means.
There are many ways you can make more money, including asking for a raise, boosting your skills –- your human capital –- and getting a promotion, starting a side project in the after-hours or going back to school and starting a new career. What you make today is not necessarily what you can make tomorrow. Cut unnecessary expenses and then use your energy to increase your income.
You should only save for your children's education if you can afford it. That means when you're on track to having enough assets for your retirement. Assuming you have the retirement assets and now want to save for college, most advisers will recommend a 529 college savings account.
Not so fast. These 529 accounts have some real advantages, such as tax-free growth of contributions if they are used for approved higher education expenses. This tax-free growth is a big benefit. However, if you withdraw money from this account and do not use it for approved higher education expenses, the gains will be subject to ordinary income tax and a 10 percent penalty.
The big risk is if you fully fund your child's college education but he or she decides to not go to college, drops out, finishes early or goes to a less expensive school. You have the ability change the beneficiary to another qualifying family member without penalty, but if you have just one child, there may not be anyone you can transfer the funds to. You would then have to liquidate the account and pay the tax and penalty. If you are undeterred and still want to pay for your child's college education, start with a small contribution into the 529 and fund up to a maximum of 60 percent of the cost in case one of the above scenarios occur.
The average age of cars on U.S. roads is 11.4 years. So if you're average, then it may make sense for you to buy a car -– especially a car a year or two old –- instead of leasing. However, if you do not intend on driving the same car for over a decade, a lease may be a much better option. A new study by swapalease.com found it was better to lease than buy based on its criteria. And under certain circumstances, you may be afforded a larger business deduction with a lease compared to a purchase.
The certified financial planner designation is the gold standard when it comes to financial planning. I wouldn't think of hiring a financial planner if they weren't a CFP practitioner. However, just because you are working with a CFP doesn't mean you shouldn't research your adviser, his or her areas of expertise and how he or she charges. The CFP tells you he or she has advanced training in areas related to tax, investing and retirement planning; has passed a comprehensive and difficult exam; and has agreed to adhere to a high code of ethics.
The onus is on you to know what you need and to make sure your CFP financial planner can deliver. Don't get lulled into thinking that just because he or she have three letters after his or her name that he or she has been screened. Ask tough questions before you trust your money to anyone -– even a CFP.
Most financial pundits will advise taxpayers to have just enough taken out of their paycheck so when April 15 comes around, they will neither owe money nor receive a refund. The rationale is if you get a refund from the Internal Revenue Service, it means you paid too much in over the year -- and the government has had use of your money without paying you any interest. Keep the money and invest it yourself is the theory.
'Again, that's the theory, but reality is much different. It all comes down to psychology. I look at paying a bit more to the IRS as a forced and automatic savings account. Sure you won't earn interest, but human nature tells us you probably won't save the money anyway. There is a greater chance you will squander $100 a paycheck then if you receive a $2,400 check from the IRS. One approach takes a plan and discipline each month to save and invest while the other doesn't. A check from the IRS isn't an interest-free loan; it is an automatic savings plan.
Nobody wants to endure an IRS audit, but too often I see honest and ethical taxpayers avoid claiming certain deductions or taking certain positions that are completely legitimate because they fear it will increase their chances of an audit. First, your chances of being audited are small –- about 1 in 104 chance. If your return doesn't include income from a business, rental real estate or farm, or employee business expense deductions, your chances are even smaller -– 1 in 250. Second, if you and your tax preparer are not crossing the line, you have little to worry about. In fact, thousands of taxpayers get a check from the IRS at the end of the audit. Don't let a small chance of an audit keep you from taking advantage of every tax strategy for which you qualify.
Do what you love, and you'll never have to work a day in your life, or so the saying goes. It sounds good and feels good, but it's not necessarily true. Sometimes –- often, actually –- doing what you love can be a great hobby but not a good career. There are a lot of things I enjoy that I'll never make a dime doing. A better approach is to find something you enjoy, are good at and that you can get paid to That is the financial trinity you should aspire to find because it ties your interests with your skills with the marketplace
Follow this rule, and I'll send you straight to detention. We know college costs are soaring, and we don't want to bury our kids in college debt, so most parents prioritize college saving over retirement saving. Big mistake. If worse comes to worst, Junior can get a loan, work while in school or go to a less expensive school. Basically, Junior has decent options, and you have tough choices.
If you haven't saved enough for retirement, you are stuck. There's very little you can do other than slash your expenses, work longer or both. Save for your own retirement first. That's the financial rule you should follow. If you have amassed so much wealth when your children head off to college that you can afford to help them, go for it. If you haven't, you'd be doing your kids a disservice by jeopardizing your own retirement by paying for their tuition.