When In Doubt, Are You In or Are You Out?

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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?