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I got the idea for this post when Mr. Groovy and I were taking one of our daily walks. We were listening to an episode of the Financial Rockstar with Scott Alan Turner, where a listener wrote in for advice. He described a “meeting” he was invited to by an acquaintance. When he arrived he learned it was about an investment opportunity and he immediately “smelled a pyramid scheme”. He asked Scott how to spot such a scheme so he could determine whether or not to invest. He obviously knew something was up yet he was compelled to seek confirmation from an expert. I began thinking about typical scenarios in which we have doubts when it comes to our money, but don’t follow our instincts.

What about you? When in doubt, are you in or are you out?

Here are several scenarios where you might have doubts. Consider what you would do.

Scenario 1

Your friend, Adam, recommends a financial planner to you. At your first meeting the guy seems knowledgeable. You think he’d probably provide good guidance but he’s very pushy. He talks over you and doesn’t answer your questions. Which of the following describes what you would do?

a) Thank him for his time and tell him you’ll get back to him if you’re interested.
b) Ask him for a second meeting.
c) Tell yourself  “Adam is a lot smarter than I am and he’s happy with this guy”.  And then say to the financial planner, “Sign me up”.

Verdict:
I think we all know the correct answer is a) Get the hell out of there! But wait! What about Adam? Are you feeling bad about not following his advice? Do you think to yourself, “Aw, what the hell. How much can this guy harm me if I don’t give him power of attorney?”

Are you freaking kidding me? Walk out that door!

Possible Exception:
I can’t think of one. And if you start feeling guilty and ponder giving the guy another chance, DON’T! It would be like going on a second date with someone who had body odor on your first date. If Adam is a real friend he’ll understand—or he’ll get over it. What you decide to do with your own money is a personal choice. Never forget that.

Scenario 2

Your brother-in-law asks you to invest in a property with him. He wants to buy a fixer-upper, fix it up, and flip it. Your BiL is not in real estate and he’s never flipped a house before. He’s not what you would consider to be a handy person, and neither are you. He hasn’t shown you a market analysis and doesn’t know what a comp is.

You get my drift—you know from the get-go this is a BAD idea. Still, your BiL is aware you’re not hurting for money, and your wife has made it clear he can’t do the deal without you. She wants in because her brother has had some hard knocks, and he really needs a win. Do you:

a) Say you’ll think about it and hope you can keep putting your BiL off until he stops asking you about it.
b) Exclaim emphatically “I’m in!” and run off to the bank to work out monetary details.
c) Explain that you have no interest in investing in real estate at all.
d) Tell your BiL your money is earmarked for retirement and other necessities but you might consider going in on a property with him in the future.

Verdict:
Some of you might be inclined to take the let-him-down-easy approach with d). This is so wrong I can’t begin to tell you. Why give him hope and leave the door open for future arm-twisting? That door needs to be slammed shut and padlocked permanently. Don’t give him any wiggle room. The correct answer is c). Put the kibosh on it right away!

Possible Exception:
None.

Scenario 3

Your good friend doesn’t have a job and can’t come up with rent money. He knows you’re approaching financial independence and asks to borrow $200. You don’t want to lend him money because experience has proven you’ll never see it again. He swears this time it’s different and says he’ll pay you back. You’ve advised him numerous times to have an emergency fund before he lost his job, but he told you he had it covered. Do you:

a) Feel sorry for him and give him the money—there’s no such thing as lending here. Expect never to see your money again.
b) Tell him you’ll give him the money but you need to work out a bartering plan. Ask if he’d agree to clean your house for the next two months.
c) Tell him no.

Verdict:
You might be tempted to believe b) is a win-win situation, but it’s win-lose. This friend will come between you and your money and he will disappoint. Tell him no.

Possible exception:
He needs money not for rent, but because his mother just died and he has to book a flight to go to the funeral. If you have the money just give it to him, and don’t expect it back.

Scenario 4

You and your husband won a raffle vacation trip to a Marriott resort in Florida. You attend a breakfast gala at the Marriott for the raffle winners and find yourself smack in the middle of a sales pitch for timeshares. You’re enjoying the smorgasbord with three other couples who are friends of yours—until you’re asked to commit to purchasing a timeshare. The other couples have researched timeshares and claim the offer is a bargain. They agree to purchase. Up until this moment, you’ve never thought about buying a timeshare, although you and your husband have discussed spending more vacation time in Florida. Suddenly, this timeshare idea looks very appealing. What should you do?

a) Agree to purchase.
b) Pass on the opportunity.
c) Pack up the timeshare literature and take it home with you to do your own research. Only then will you decide if you want to purchase.***

Verdict:
Pass. Timeshares are fraught with restrictions, additional costs, and they become a burden for most people who own them. Yes, there’s a small chance it would work out for you, but it’s a complication you don’t need. And it’s a complication you didn’t even want until the idea was planted in your head. Down the road at least one of the other three couples will probably want out of the contract and be stuck with it. Don’t let that happen to you.

***Did You Know?

Did you know that many of the resort timeshare companies (Marriott, Hyatt, etc.) offer opportunities for booking rooms belonging to timeshare owners not using them? Better yet, do you know you can get super deals on these same rooms, and in many cases entire suites or apartments, on Airbnb? Check this out:

You can book the Marriott Harbor Lake for $153/night in April, plus a $100 service fee. For this same 1082 SF two-bedroom condo, you will pay $273/night on the Marriott Harbour website. (The AirBnb listing requires a one-week stay.)

Final Thoughts

To quote Suze Orman in The 9 Steps to Financial Freedom:

When it comes to every financial decision you will make for the rest of your life, you will choose correctly if you go with the answer that reflects your instinctual response.” She also says:

You are far better off taking no action than taking an action that feels wrong to you”.

So, how are you at saying no to parting with your money?

When your gut tells you something is not right, do you follow your instinct?

When in doubt, are you in or are you out?

11 thoughts on “When In Doubt, Are You In or Are You Out?

  1. This is so much easier since my husband and I have a blanket policy to not decide anything big until we’ve had a chance to talk about it privately.
    I situations like these, one of us may be suckered but the other one will smell a rat. With our policy, we have time to talk the other one back to sanity.
    Plus, we’ve also agreed that yes + yes = yes, but yes + no = no.

    1. That’s a great policy, Julie. Unfortunately for our cousin is that almost nothing is private. “Boundaries” is not in her vocabulary. But the bigger issue is that even in private she won’t stand up to her husband because “he needs to win”. Win what? I can’t even begin to describe their real estate woes.

  2. I think in general I’m a very risk averse person, so saying no isn’t that hard for me. I find big savers to be risk averse — it’s kind of the nature of wanting to save money for security.

    1. I hear you about risk aversion. It’s good you’re able to say no. Some people don’t have that in them no matter what their financial situation. Thanks for stopping by. By the way I took a quick look at your site and it’s pretty cool. I’ll poke around it some more tomorrow.

  3. Excellent examples that do occur in real life. I always advise people not to lend money to friends or family even if it seems like the right thing to do. Money doesn’t get returned, friendships turn sour, and bad financial discipline is often encouraged. My only point of slight disagreement is on the RE investing opportunity. I would say that if the BiL is serious about starting to learn RE, goes home and does his homework to really learn the comps and other numbers, and the total investment is considered a part of “gambling” money rather than retirement money, then it could be considered. For me, there is an added benefit of potentially saving a family member a ton of money by encouraging him to learn his craft before putting up a large monetary investment. To your point though, I would not put any of my own retirement/freedom at risk though.

    1. You bring up a good point, Larry. And I’d be all for supporting the BiL to learn about RE and become good at it. But that’s quite different than putting up my own money for him to learn, or because he needs a win. I don’t want to be coerced into something just to make life easier for someone else. I guess a lot of this has to do with setting up boundaries.

      In general I think it’s a bad idea to get involved in any kind of business venture with family or close friends, whether it be RE or something else.

      Thanks for commenting.

  4. These are very realistic scenarios, but it’s still much easier to pick the sensible answer when it’s not real life. I’d like to think that even though I’ve made similar mistakes in the past, that I’m beyond that now. But I’m not so sure, especially when it comes to family and close friends. Next time this type of scenario comes up, I’ll be thinking of this post and hopefully that will give me the conviction to walk away.

    1. The situations with family and close friends are definitely the hardest, Gary. When those involved are not so close you can always place the blame on your spouse. “I have to talk it over with my wife” (or husband) is a great delaying tactic. It usually buys you time to regroup and come up with a strong reply.

  5. Great post. I’ve definitely made some financial decisions that I wasn’t entirely convinced were good ideas at the time, and regret at least not voicing my concerns and having them addressed at the time.

    On the other hand, I know darn well timeshares are a lousy bargain and have made it clear to the hubby that he darn well better not take me to another time share presentation as a “surprise treat” again.

    1. Thanks, Emily. I’m sure most of us have made some financial moves where we didn’t pay attention to the little voice in our head saying no.

      Gotta love those surprise treats! I fear for many seniors who get suckered into buying annuities they know nothing about because of the free meals. Suze Orman used to say on her show “People PLEASE stay away from those free breakfasts!” The breakfasts are commonly used as a lure to reach seniors in those big communities in Florida.

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