Do you believe in paying off a $24,000 family debt at 0% interest as quickly as possible? We can pay what we want each month, but feel short-term struggle for a quicker way to freedom is the way. But what are your thoughts? Do you even…

…paying off a $24,000 family debt at 0% quickly? We want to pay each month, but feel short-term struggle for quicker freedom. Okay, so I'm… I've got to make a bunch of assumptions here, right? I've got to make assumptions that you borrowed some

money from family. Uh, maybe this is parents, maybe it's grandparents, and they were in a position where they said, “Hey, I'm going to give you 0%.” One, I think that's incredible, assuming this was something where, like, it was an opportunity. “Hey, I need to go out and I'm

going to go buy my first car and I've got to borrow money, and I'm going to follow 238, and the auto dealership told me that my first auto loan is going to be 8.5%, and Mom and Dad, or Aunt and Uncle, or Grandma and Grandpa said, “Hey,

you know what? We will loan you the money. We'll loan you $24,000. You pay us back and we're going to do 0%.” If you come from a situation like that, I am not of the opinion that you should feel guilty or feel bad or think that that's, like, a

negative thing. I think it's wonderful that you just happen to have the opportunity where that's available to you. What you have to do is you have to recognize the benefit of the opportunity that you have, but also the responsibility of the… of the… uh, social…

contract that you've entered into because yeah, if you're thinking about mathematical optimization, okay great, I've got this $24,000 loan, I'll just never pay it back and it's 0% interest forever and it'll just sit out there. I think that

that would be taking advantage of an opportunity that presented to you. So what I would love to see you do is, I would love to see, because again it depends on the type of debt, depends on your financial situation, I would want for you to find a reasonable method and

mechanism to pay it off over a timeline that makes sense for you as well as the lender. So if it's like 3 years, 5 years, 10 years, I don't, I don't know. Again, I don't know your situation or the

specifics of this. Because what I don't want to see you do is, because it is 0%, I don't know that I want to see you focusing on paying off this debt as quickly as possible to knock it out instead of doing things like getting

your employer match, instead of doing things like putting money in a Roth IRA, instead of doing things like an HSA. But I also don't want to see you taking advantage of a generous family member simply because you can. There's some, there's some tension there in the middle

that you'll have to figure out. Agree, disagree? Want to fight? Well, I remember when I was taking legal studies in accounting. I love that I had to take two, I'm old, so quarters of legal studies as an accountant. One of the first things

or one of the curious things I learned was that in law, love is consideration when it comes to family members. So, and we know that our parents love us and they'll do anything for us. And sometimes that creates where there's unclear expectations or communication on what is expected, and I

and I've shared, you know, in Millionaire Mission, I share, um, cash is such a valuable thing in the financial order of operations that, um, if I could have had another hand, I'd hold up even more stuff. But it's, um, that it actually gets two steps in the financial order of

operations, both step one and four. And I even detailed, my knowledge comes a lot of times from also experience in the struggle. And I got to a point when, when I was first starting to, to do the adult thing, that I, I, I really screwed up with

credit cards and some other stuff. And I had to call my parents, and they, they lent me some money. And then when I went to go pay them back, they're like, "Don't worry about it." Um, and I remember, no, it was a principled thing for me

because I was down and desperate, and I felt like I had not closed the loop on my change, on becoming a different person with the way I viewed this, that I, I, I forced the issue of paying them back the, the few hundred bucks. Now, your situation's a little different,

Craig, is that you're talking about $24,000. Sounds significant, but, but here's the thing where, and, and you need to go revise this if this was not set up on the front end, is that anytime you're doing these family engagements, I would

First, design a plan of success. Meaning, on the front end, what are the assumptions and expectations from both parties? Meaning, did you all have a five-year plan? Did you have a seven-year plan? Did you have even a 10-year plan when you were doing this?

stuff for a loved one. Tell them there's nothing wrong with helping out loved ones, but put it on the front end what your expectation is. Now, if your parents said, "Hey, we're going to do this. This is a tax strategy because it's slightly beyond what the annual gift tax

exclusion is. We're going to give you this money, and then we'll slowly forgive it." That's a completely different thing. But if you feel like there was this desire, this was not a gift, this truly was a loan, you need to go back and

maybe revisit that conversation with your parents, or whatever family member worked this out. And then, assuming you now have the steps, or the assumptions set up of what their anticipation is on when you should pay this back, if you now get to steps

eight and nine of the financial waterfall of operations, a 0% interest rate is a low interest rate by all means. I think you pay this thing back even ahead of schedule of what they're anticipating getting that money back. Um, but you've got to go through those several

determination steps. Was this a gift, or is this a loan? Because those are very distinct, different things. Also, set yourself up a plan of success. Know what they're anticipating and expecting, and then treat this like, you know, a step eight or nine type thing where you are

going to prepay it. I mean, pay it back because it's a low interest rate and that's your obligation. Can I, um, can I do like a little soapboxy thing? Yeah, this is unsolicited advice, but I'm going to give it to you anyways because I know

you and I have both run into this where, you know, there have been people, uh, in our lives at some point where they've been in a spot and they needed to borrow some money, right? Right. And we were in a place where we were able to do

that. And that's fine. First thing, if you're ever going to let someone borrow money, family member or otherwise, in my estimation, it's always a good idea to assume you're never going to get that money back. Like, when you go into it, don't go into it with any preconceived

notions. Because what will happen is, is something goes squirrely, it gets, like, it can get real nasty, especially when it's with family. But have you ever seen this happen? Somebody borrowed money and they're like, "We're in a tight spot," and they need to pay back. But then, all of a

sudden they just start making financial decisions and you're like, "Whoa, whoa, whoa, whoa, hold on, hold on, hold on. Wait, wait, wait, wait, wait, wait, wait, wait. You were in a tight spot. Now things are better." And then you went and bought the

new car, and then you went on the trip, or then you took the vacation. And, like, and you're just, you just want to be mindful of that. If this loan originated out of a place of need that you were in, and now you're no longer in that place of need, I

Do you think it's reasonable to honor the folks that lent you the money and don't just start, like, whining? You know, is that... I think that's a very... 'cause that's something I... especially if this came from an ask of need, it's because I have

experienced that, where you help somebody out with the anticipation that this is not a gift, this is a loan. Um, because I get it, the economy stinks right now. I don't want you to lose that vehicle. I don't want you to put your family through this.

I can help you out. And then it is amazing that, you know, better days start coming and... and I know this is... I think the person who's struggling, you look at the person that gave you money like they're... they're doing good. They don't

need the money. They don't need the money back. But it's back to the behavioral things, and I'm glad you brought that up, is because it's true. If you got this out of need and now you're starting to do some extras, you know, that are visibly

publicly visible, um, you might need to revisit that. Because I... I've experienced that. And then, you know, one of the worst things, even though you're right, Bo, it is... you probably don't want to do this with loved ones or family unless you're

considering it a gift. But it does break your heart when you see that they... that even though they came to you in need and they... they treated... they called it a loan and said without a doubt, "I'm going to pay you back," and then they... they basically ignore paying you back.

I Owe My Family Thousands

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The Money Guy Show

A viewer asks for advice on repaying a $24,000, 0% interest family loan quickly, questioning if prioritizing other financial goals might be wiser.

The host acknowledges the viewer's situation and makes assumptions about the loan origin, likely from parents or grandparents.

The host praises the family's generosity, especially if the 0% loan helped avoid high-interest alternatives like car loans.

While recognizing the opportunity, the host emphasizes the responsibility to repay the loan, discouraging exploiting the family's kindness.

The host advises finding a reasonable repayment plan that respects both the borrower's and lender's needs, considering a 3, 5, or 10-year timeframe.

The host suggests balancing loan repayment with other financial priorities like employer matching, Roth IRA, and HSA contributions, without taking advantage of the family.

The discussion shifts to the legal and emotional aspects of family loans, emphasizing the importance of clear communication and expectations.

The host mentions the legal concept of 'love as consideration' in family matters, highlighting potential ambiguity in expectations.

Personal anecdotes are shared about the value of cash and the importance of repaying family loans even when forgiveness is offered.

The host advises revisiting the loan agreement to clarify expectations and timelines, especially if a repayment plan wasn't initially established.

The importance of a clear repayment plan is reiterated, along with considering the possibility of the loan being a disguised gift or part of a tax strategy.

Different scenarios are discussed, such as the loan being part of a family tax strategy or a slow gift forgiveness plan.

The host recommends prioritizing repayment due to the low interest rate, after clarifying whether it's a loan or a gift.

The conversation broadens to the general topic of lending money to family or friends, advising to assume non-repayment and highlighting potential behavioral changes after borrowing.

The host suggests assuming non-repayment when lending to avoid future issues, especially within families.

The discussion touches on the potential for borrowers to prioritize non-essential spending after receiving a loan, even if initially requested due to financial hardship.