Wealth Secrets: When Family Asks For Money

Hey there, Aluer. So you've made a little bit of money, and now you're faced with this awkward situation where some people are in your life, and they might want or need some of it. What do you do? Should you give money to your family and friends, especially if you're so well off yourself? How do you give without becoming their piggy bank? How do you establish rules so you protect yourself and still keep your friendships and relationships alive and healthy?

Well, let's break it down together. Welcome to Alux! The short answer is yes. Okay, family comes first. Parents and siblings tend to get priority, but it does get a bit more complicated when it comes to extended family and friends.

There's a golden rule that governs the financial relationship you have with those you care about when you're the one with money. The rule is: we can offer to help, but please don't ask, because this allows you to pick and choose when you're going to be generous without everyone else seeing you as some kind of default problem solver. You don't want anyone to struggle, but at the same time, you want to make sure they're able to take care of themselves. We strongly recommend you and your spouse put together some clear rules about how you deal with this.

How far in the family does the help extend, and to what degree? Since you now have money, you'll find yourself in three distinct situations where others might ask for it or need it.

One is pain relief. Think medical bills. Almost always a yes. If your money can save someone's life or at least alleviate their pain, you should almost always do it. This is why you decided to go after the money in the first place—money solves money problems. If your parent's pain or health is a money problem, then deploy your money to solve it. Don't think twice, because you'll regret it for the rest of your life.

This is what it means to be successful—the ability to minimize the pain and suffering of those you love as long as you don't put yourself or your family in financial risk. We have a moral responsibility to help our inner circle. Anything health-related should be a default yes unless you have a really good reason to say no. Blood work, treatments, eyes, teeth—anything that contributes to their longevity. Because these are people you care about, so you want them next to you for as long as you can have them.

Your money will not work backwards. Okay? You won't be able to go back and buy another year with your mom or dad after they're gone, so be proactive.

Now, second up: individual progress and memorable experiences. Sometimes yes, we find it rewarding and easy to pay for education—courses, seminars, training, certification—anything that contributes to their personal and professional development. This ensures they're getting the know-how to accelerate their progress in life or at least make something of themselves. You want to feel like you're contributing to their evolution without taking away the need for effort. They still need to use the knowledge to get the outcome.

If the expense is greater and they're more on the extended side of the family, you can still pay for education but require a level of performance. For example, we'll pay for everything, but we need you to maintain a certain score. This keeps the focus on effort, and they won't take your money for granted if they know it could go away. If something is too expensive, we'll match whatever they're putting up or cover the rest as a gift.

On the family side, our favorite way to contribute is by paying for holidays. When you look back on last year, you find you don't remember the late nights at the office, the business dinners, the meetings, or the time you spent in traffic, but you do remember the celebrations and the trips you took. This realization made us double our travel budget, and we made it a tradition to have at least one trip a year with everyone in our family.

Once you start making money, you realize just how valuable time is, and you want to use your funds to create opportunities to make lifelong memories. It's one of the greatest returns you'll get on your investment. Now, as a rule of thumb, we cover the hard costs—accommodation and travel. Occasionally a fancy dinner or a boat trip.

You want them to show up and enjoy themselves, so removing the biggest expenses right out the gate puts everyone at ease. How many times have you been in incredible environments and just thought to yourself, "Damn, I wish my parents could see this"? It hits you in the feelings, right? Well, if you've got the money, make it happen.

Take your mom on a dream holiday and show her the world. Take your dad to the Super Bowl or on a great fishing trip. Create extraordinary opportunities for everyone in your family to be at the same table, share food, and laugh all night long. Allow them the opportunity to discover who you've become. Give them an opportunity to spend time with their grandkids while they're still able to run after them.

Although they get to benefit from your money, this is actually an investment in yourself. Okay? Because these are the good old days. These are the days you will remember, the ones you'll talk about for years on end. The value of those memories goes up with every passing day.

Now, third, we've got business opportunities. Investments, work, and money loans. So, just say your cousin Vinnie hits you up because he wants to open a restaurant. He needs $100,000 to get started. He wants you to either give it to him as a loan or become his business partner on what he calls the next big thing. So, what do you do? Do you give him the money? Do you give him some of the money, or do you just say no?

Well, turns out the answer really does depend on a couple of things. So first, is Vinnie the kind of person that three months ago pitched you on a recycling business? Does he bet on horses, crypto, or football games? Does he have any actual experience running a restaurant? You've made your wealth by being financially savvy and working your ass off, right? A handful of people just need a tiny bit of help to get started, but most people don't have what it takes.

By this point in your life, you've got a good enough nose to distinguish between these two. Deep down, you know that Vinnie doesn't have it, but you grew up together, and since you care about the guy, you want to save the relationship. Which brings us to your real options. There are three levels of business help we provide to our friends and extended family as follows.

So, first up, we provide expertise on a limited runway. We leverage our own experience to tell you the truth about your business plan. We identify your weak spots and even recommend ways to make it work. We love you, so we will tell you the truth, and we will set expectations and get yourself grounded. Money is not the thing that will make or break your business, and that's where you need a little bit of finesse if you care about the relationship.

Now, if need be, we'll leverage our personal network of accountants and lawyers to set you up. If Vinnie is smart, he'll realize this kind of help is more valuable than the money, and you're done. Smart tip: if you do pay for things, make sure to set up a time limit on your services of support, and you pay the cost directly to the source instead of it going through Vinnie. An example could be: we'll pay for your accountant for one year or for your servers or for rent, but after that year is over, we're done. This gives them a real shot to prove themselves and positions you as someone who actually contributes.

Number two: we'll give some money as a gift, with one big condition. So the rule here is pretty simple: this is your lucky day, Vinnie. How much do you need? A $100,000 loan? Great, all right, here's what we're going to do: we're going to give you $35,000 as a gift. You don't have to pay it back. The only condition is you never ask us for money ever again; that is a one-time deal. Vinnie will be in his feelings over it a little bit, so you have to be ready for that. But what this does is create a clear understanding moving forward.

Best case scenario, Vinnie is serious about his life and finds the remaining $65,000 somewhere else or makes that $35k work somehow. Okay, great! Now, worst-case scenario—it costs you $35k to get rid of Vinnie for the rest of your life without taking anything away from your reputation, and you can sleep well at night knowing that you've done the right thing.

The last option is number three: partners on the deal. So basically, they're offering you a percentage of the business for putting up the money upfront. Generally, we avoid doing business structures with family members because, well, you know the likelihood of things hitting the fan is pretty high, and you don't have the same objectivity in doing what must be done to make that business work. Plus, you're already rich; you have your own things going on. The last thing you want is another business to manage.

So, as a rule of thumb, give them business if it makes sense, but don't take a cut of their earnings because it shifts that relationship dynamic. Now, here are two personal stories of how we've made this work. Instead of cousin Vinnie, it was our brother-in-law who wanted to go into business for himself. This is someone who's in the inner circle for over ten years. He's been a top performer in a specific industry working for someone else; he's had all the connections, customers lined up, and he wanted to go into business for himself in order to provide a life that he wanted for his family.

So he insisted on us becoming partners in his business for our business expertise, and we had the funds to get this off the ground. He wouldn't take the money as a gift because it would ruin the relationship. Plus, for this to work, he needed more than $35,000. So ultimately, we agreed to become a silent partner for a 33% stake, with the condition that he has to fully buy us out of the business as soon as the business allows it.

This protects us because the business does own some assets and gives him the opportunity to own 100% of the business in time. We want our family to succeed because they're great at what they do—not because they know us. We want them to be proud of what they're able to achieve and to be free of the emotional chains that money brings. If you're not actively contributing to the success of the business, give them the option to buy you out eventually or don't take a percentage in the first place.

Now, something similar happened when our sister decided to start a property management business and take over the management of our properties. She wanted to give us a 20% stake, but that's not how you maintain relationships with close family. Businesses are supposed to prioritize profit; family should prioritize long-term survival.

We provided full setup, transitioned our portfolio of properties under her new company's management. Instead of the management fee going to a third party, it now goes to someone that we care about—someone who's loyal, someone we trust, and someone who we want to see win. You're making a lot of other people rich either way, so if they're capable, make your family rich instead.

One of our personal goals is to make sure everyone in our inner circle is set up—from family members to friends. We think of it as a measure of who we are as a person. There are some things we won't do; we don't like giving out loans. The expectation of the money to be paid back just ruins the relationship. Each request for financial help is often intertwined with feelings of obligation, love, guilt, and responsibility.

It is not easy navigating these emotions, because it requires wisdom and empathy. The moment you lend money to your friends or family, you're no longer just their friend. This is going to be hard to hear, but it is the truth, and we want to keep it 100 with you. Loans set a new status for the relationship; you go from being primarily friends to having a slave-master relationship.

Their friendship part kind of becomes secondary. As much as you don't want to believe it, that is what happens until that debt is repaid. The relationship cannot go back to just one of friendship, no matter how nice both of you are. It'll always be there in the back of both of your minds. That is not how we are wired as humans, and you feel it internally. Dinners become weird, the energy shifts; things are easily interpreted. Just, you know, best to stay away.

And you know, Alexa, there's actually a lot more to this, and we didn't even get to the good stuff yet. If you want to know how to retire your parents, how we set up a charitable trust, what percentage to give away to charity, and the lessons we learned the hard way, as well as a time when things totally backfired, you should listen to the full session on the Alux app. What you listened to is just a snippet. Go to alux.com/app and start a free trial to listen to it in full.

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