Should I pay myself back for paying family's rent out of our pool of money?

Question

A few months ago, I paid the $1,500 rent on the house where my family and I lived. My siblings and I are in college and we work part time jobs to get by.

My father could not afford to pay the rent because he lost most of his money in bad investments. Before moving to another country to live with his mother, he sold the last of his assets and gave the proceeds to us for our expenses ($18,000). He promised to send additional money to help out but I do not trust that he will do so in some vague amount of time. Since he moved, the four of us now live in an apartment on a very small budget.

I do not want to take money out of the account since I worry that the $18,000 will have to be stretched in order to last awhile to support us. But I think I deserve to be paid back.

• Do I pay myself back from this pool of money for the paying the $1,500 rent on our old house? I work a part time minimum wage job and I had planned on using this money to pay off my credit card debt.

• Do I wait an unknown amount of time to pay myself back in case my father does keep his word and send us money (which I am skeptical about)?

• Are there any other options?

Answer 1

David Schwartz's answer is great, I just wanted to add that since you have credit card debt, that $1,500 in rent could cost you a lot more due to interest. Average credit card interest rate is ~16%, that's $20/month in interest on $1,500 and more each month as it compounds.

If you are carrying a balance from month to month on a credit card I suggest you do all you can to get rid of that debt so it doesn't pile up and overwhelm you. Your family should understand that you are carrying $1,500 in extra debt due to this expenditure.

Keeping as much of that $18,000 cushion intact as possible is a great idea, but carrying credit card debt to do so is counter-productive.

I'd also suggest looking into federal/state assistance programs in the meantime, having some assistance with food/rent could alleviate a lot of stress.

Answer 2

There is no right or wrong answer to this question. It's really about how much you are willing to, are expected to, or should help your family. You could certainly gift the $1,500 to your family and you could also rightfully insist on an immediate full reimbursement from pooled funds.

I'd suggest you try to have honest conversations with the rest of your family about your funding situation and people's expectations. The worst possible would be if others think you are gifting them this money and then when you reimburse yourself from family funds they feel like you are treating them unfairly.

Answer 3

First and foremost, your hesitation is commendable. I think your quality of asking before doing is appreciated. I also think you should approach your siblings the same way.

There are are a few things to consider when evaluating the situation:

• Your father left with a debt to be paid to you. In his absence, he left money, so it's reasonable to assume that you should be paid. As with a company, the debtors are paid before the shareholders.
• The interest you will accrue from your credit card will grow and compound if you do not pay it back. A $1500 outstanding debt today could easily become $2000 in the future. There is also a time-value to consider.
• You should plan for the future based on what you have and what you know, not what you speculate. Assuming something will happen is partly what led to the Great Depression in the United States, which then evolved to mass conservatism where many families became frugal with money and hoarders of food and supplies -- not as glorious, but very effective. You don't know that more money will come or something will not happen to your father, so deal with that situation when it's encountered.

My advice:

• Talk with your siblings. This is less a question about finance and more about psychology, relationships, and family. It's important to establish clear expectations with all parties involved. You should ensure that they are aware of the situation, understand the benefits/costs and all the risks, and make your case. In the process, you should find out your siblings' concerns and learn if they have similar arrangements with your father? Perhaps they pay for things you may not be aware of.
• I would propose having a sole responsible executor of the account so money does not go "missing". If this money is supposed to be your nest egg to pay for something specific, you don't want it to be depleted by the time you need it. You should have regular reports of how much money is in the account. If you don't pull money regularly, then inform your siblings (quarterly/annually) for transparency. I would have a conversation with the siblings, vote on who the executor should be, and draft how/when the executor would be authorized to withdraw money in writing. For example, perhaps you come up with a rule that the majority of siblings must be aware and authorize transactions from that account. Make it legally binding.
• Don't feel bad about the situation. Before you know it, your school will be finished and hopefully you will no longer be dependent on this sum of money.
• If the money is not expected to be pulled from frequently, consider placing a portion of the money in some secured higher-interest savings account -- a money market or as a Certificate of Deposit -- so it is working for you while you don't need it.