Close to half of all Americans find it extremely difficult to talk about money topics. Finances are often a taboo subject, and some conversations about money can be harder than others.
If you need to get involved in a conversation about a touchy money matter, it helps to go in prepared. Fortunately, we've got you covered with some important advice about five of the most difficult money conversations you're likely to encounter.
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1. Asking to borrow money from a family member
Lending money to a family member can put your relationship on the line. More than a quarter of Americans who borrowed from family members report negative consequences like hurt feelings, resentment, and arguments.
Despite how fraught with problems these transactions are, three in four Americans admit to borrowing money from a relative sometime during their lives according to a recent Lending Tree survey. Borrowing from family could be your best or only option if you aren't able to qualify for other financing or don't want to pay high borrowing costs.
If you must ask to borrow money, come prepared with a plan. Create a budget to determine exactly how much you must borrow and what your repayment timeline will be. Explain why you need the money and offer to write up a formal agreement to repay the loan on a set schedule with interest. While close to 95% of people surveyed by Lending Tree said they wouldn't charge interest when lending to a family member, making the offer shows you're serious about treating this as a business transaction.
You'll also need to be prepared to accept a no if your family member isn't willing or able to provide financial help. Politely say thank you anyway and move on, as you never know if your family member is facing financial troubles of their own.
2. A family member asking to borrow money from you
If your family member comes to you with a request for cash, you have a difficult conversation ahead of you -- and a difficult decision to make. When money is leant to friends or family, the chances of repayment in full aren't high: Lending Tree found that typically only 57% of the balance due on loans made to family members ends up getting repaid.
If you can't afford to lose money, politely decline by explaining that a loan is just not in your budget right now. You can offer to help in other ways, like assisting the would-be borrower in setting up a budget of their own.
If you're unsure, don't be afraid to say you need to think about it and that you'll get back to your relative at a later time. If you're considering saying yes, insist upon a formal written agreement detailing the amount owed and when and how it will be repaid. You may want to include a clause in the agreement specifying your relative won't ever ask you for money again if the loan isn't paid back.
3. Talking to aging parents about their financial situation
Talking to your aging parents about their money situation is important to make sure they're not falling victim to scams or living outside their means and at risk of running out of cash during retirement. You'll also need to be prepared to step in if they become incapacitated, and you'll have to cope with cleaning up their financial situation after they pass on.
While tackling these topics is inevitably uncomfortable, many experts recommend having several brief conversations addressing specific issues rather than one long talk.
Focus each conversation on specific goals -- like making sure your parents have a plan for long-term care -- and be ready to point your parents in the right direction if they need help but don't want it from you. If your parents are open to making an estate plan, provide the name and contact details of a trusted estate planning lawyer.
4. Cutting off your kids
More than half of all millennials received financial support from their parents last year, with millennials who are parents themselves receiving more than $11,000 annually in unpaid labor and financial help.
Unfortunately, helping out adult kids could derail your own retirement if you're not careful. If you're not meeting your own financial goals, it's time to close the bank of Mom and Dad. To do this, you'll first need to get on the same page with your spouse so you can present a united front. Then sit down with your kids and offer a specific deadline or cutoff date when the help will stop.
When you talk with your kids, you may want to explain you need to end your contributions because your own financial security is suffering. Consider offering other assistance, like help finding a cheaper apartment, and be detailed about any continued support -- financial or otherwise -- you're willing to give. If you can afford it, consider offering a little bit of seed money, perhaps to fund a move, as a final step to setting your child on their own path.
5. Telling someone you're seriously dating about your debts
Close to three-fourths of survey respondents consider high student loan debt balances to be "baggage" in a relationship, and just over one in five millennials surveyed said a big debt load was a relationship deal breaker. So bringing up debt with a partner can be a high-risk proposition.
Coming clean when you start to get serious is important so your partner doesn't feel blindsided. You should also be prepared with details on the debt, an explanation for how it happened (especially if it's not educational debt), and what your plans are to climb out of debt.
If your partner is confident you won't be financially irresponsible going forward and there's a plan for payoff, debt is less likely to be an insurmountable obstacle.
Getting ready for the conversation
The bottom line is that these talks -- and other uncomfortable money conversations -- will go much more smoothly if you can plan ahead and find ways to put the other person at ease about the future. Having the conversation at the right time and in the right way can take some of the awkwardness out of your talks and help you to ensure your relationships aren't hurt by money issues.
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