More Money - Money Magazine's personal finance blog » Do the Right Thing

Spending a school fund

2010-03-04T05:30:59Z

Q: Having decided not to go to college, our son Kyle wants us to give him the money we saved for his education. He says that since we paid to send his sister to school, he deserves a comparable sum. Could he be right?

A: Contrary to what your son may believe, your money is not his money. True, parents often try to be equally generous with their kids, out of a sense of fairness and a desire to keep the peace. And one day you may decide to give Kyle a leg up -- say, by helping him buy a house -- just as you've done for his sister. But that's your choice, not your obligation. Being fair means taking everything about your children into account, not doling out identical funds.

Our advice: If your savings are in a 529 plan, investigate the tax ramifications of not using them for college. And tell Kyle that if he wants money, he needs to find a job.

Questions? Email Money Magazine's ethicists – authors of "Isn't It Their Turn to Pick Up the Check?" (Free Press) – at FlemingandSchwarz@right-thing.net.

Filed under: Do the Right Thing

Still sponging off mom and dad

2010-02-24T20:09:34Z

Q: Our sons are in their late 20s and have good jobs, but they never pay for anything when they're with my husband and me (they live on their own). Whether it's a family vacation, a dinner out or popcorn and a movie, Tim and Nick automatically expect us to pick up every tab. My husband says he's sick of their sponging and wants to "change the rules." But since we can comfortably afford to treat them, I don't think there's a problem. Who's right?

A: Two questions: May we call you Mom? And what time's dinner?

Seriously, sponging is never excusable, especially by an adult. It's irrelevant that you, the spongee, don't mind. And it's irrelevant as well that you can afford to be sponged off. Your sons, Madam, are freeloading. That they "automatically" expect you to pay removes any doubt. So your husband is right: It's time for a change.

Were Tim and Nick fresh out of college, living at home and looking for work, that would be one thing. Or had one of them just lost his job, say, or his house in a divorce, that would be another. But these young men haven't hit a rough patch. They're on the brink of turning 30, and, as far as we can tell, they haven't even hit a bump in the road.

We realize that Tim and Nick are still getting established in life, and it's your pleasure to treat them. But being an adult means being independent, and that means paying your own way. You do your sons no favor by encouraging them to believe there are situations in which they needn't, and you do the world no favor by adding to the population of moochers. People of character always insist on paying their share, and your children will be the worse off if you allow them to believe otherwise.

Questions? Email Money Magazine's ethicists – authors of "Isn't It Their Turn to Pick Up the Check?" (Free Press) – at FlemingandSchwarz@right-thing.net.

Filed under: Do the Right Thing

Help! My bill got bumped up

2010-02-03T02:15:00Z

Q: When I sold my condo last spring, the homeowners association billed the escrow for my share of painting the building. Now the association says it made a mistake, and I owe $750 more. Am I obliged to pay this?

A: "Hang on, you owe us more money": That's got to be one of the most unwelcome phrases in the English language.

If you knew the original bill was wrong, you should have pointed out the error then, and you should pay the correct amount now. Otherwise, talk to a lawyer about where you stand legally. But ethically speaking, you're not obligated to pay up. Organizations with bookkeepers and accountants are responsible for getting their bills right. Your former homeowners association knows that in real estate, closing means closing and escrows don't have do-overs. So that $750 shortfall is their problem, not yours.

Questions? Email Money Magazine's ethicists – authors of "Isn't It Their Turn to Pick Up the Check?" (Free Press) – at FlemingandSchwarz@right-thing.net.

Filed under: Do the Right Thing

Squandering a minor's trust fund

2009-12-22T23:45:35Z

Question: When our sister died ten years ago, my brother became the trustee of her five-year-old daughter's trust. Drew invested Mandy's money in a business he was starting, and Mandy received stock in return. The business folded this year, and now the stock is worthless. Shouldn't Drew repay our niece the money he lost? He says what happened is nobody's fault.

Answer: That's just the way the investment cookie crumbles, is it? Drew's probably also thinking that if his company had been the next Google, he'd be a hero for making Mandy rich.

Well, he's right that a good outcome can obscure bad judgment. But he's wrong to imagine that what happened to Mandy's inheritance is nobody's fault. It's his fault. Moreover, your brother wasn't just foolish or unlucky, he was unethical. First, instead of handling your niece's money responsibly, he poured all of it into a single, untried business. If Drew either didn't know enough or didn't care enough to invest more wisely than that, he had an obligation to turn the job over to someone who did.

Worse, not only was Drew irresponsible, he engaged in self-dealing. That wasn't just any business he put Mandy's money in, it was his business. What could be a clearer conflict of interest?

If we had your brother's photo to hang on our Money & Ethics Wall of Shame, we'd be putting it at least as close to Bernie Madoff's as to Scrooge McDuck's. The guy is unequivocally obligated to make Mandy whole. Pronto.

Questions? Email Money Magazine's ethicists – authors of "Isn't It Their Turn to Pick Up the Check?" (Free Press) – at FlemingandSchwarz@right-thing.net.

Posted in Do the Right Thing

When marriage means medical bills

2009-12-01T19:59:51Z

Q: My fiancé, Alan, recently had a heart attack. If we go ahead with the wedding, he will be covered by my health insurance (he has none), but I'll become liable for all his current medical bills. What should I do?

A: Like Humphrey Bogart in Casablanca, you've been misinformed. Individuals are not legally liable for debts their spouses incurred before they were married. As a practical matter, though, those bills do indeed come with your fiancé. The fact that you're not personally on the hook doesn't mean that, as a couple, you won't have to figure out how you're going to pay them off.

We understand why you're reluctant to put yourself in this kind of hole. But before his heart attack, Alan was the man you were committed to spending the rest of your life with, and now he really needs you. Are you obligated to marry him? No. But you do have a big-time moral obligation to help the guy out.
Questions? Email Money Magazine's ethicists – authors of "Isn't It Their Turn to Pick Up the Check?" (Free Press) – at FlemingandSchwarz@right-thing.net.

Posted in Do the Right Thing

Lending to a flakey friend

2009-11-11T16:45:29Z

Question: Is there anything wrong with asking a good friend to secure the loan I'm giving him with the title to his car? Tom really needs the money, but he can be pretty irresponsible, and I don't want my $2,500 to become a gift.

Answer: In a word, No. And in two words, Absolutely Not.

Lending a flakey friend that kind of dough is a very generous thing to do, and insisting on some security in no way dilutes your generosity. After all, nowhere is it written that, in lending people money, you are required to make it as easy as possible for them not to repay you. And neither is it written that at the Bank of Friends and Family, the borrower gets to set the terms. If Tom is unhappy with the arrangement you propose, he can always try to find a friend or relative —- or, of course, a real bank —- who'll offer him a better deal.

That said, we suggest you not secure the loan with his car. Why? Because if Tom's as irresponsible as you say, there's a good chance you'll end up having to choose between two equally unattractive alternatives: taking possession of your buddy's car (and there goes your friendship) or ending up with nothing.

Instead, consider asking Tom to give you some collateral to hold until he repays you: a fine watch, say, or his prized Stratocaster -— something of sufficient value to give him a real incentive to pay off the loan. Because you're right: You don't want to bet $2,500 on the good intentions of an irresponsible friend.

Questions? Email Money Magazine's ethicists – authors of "Isn't It Their Turn to Pick Up the Check?" (Free Press) – at FlemingandSchwarz@right-thing.net.

Posted in Do the Right Thing

Dad's girlfriend is bleeding him dry

2009-10-28T15:54:48Z

Q: My parents were always careful with money. But since Mom died, Dad has taken up with a much wealthier widow and is blowing through his savings entertaining her. Isn't she wrong to let him undermine his financial security like that?

A: Maybe. The key question: Is your dad's lady friend in the dark as to his resources or is she just uncaring? If your father has been pretending to be her financial peer, you can't blame the woman he's squiring around for his extravagance. If not, though, she -- like every adult -- has an obligation not to allow someone to spend more money on her than the person can afford.

But unless the merry widow has been holding a gun to his head, it's your dad who's responsible for jeopardizing his financial security. While he has a right to spend his money as he chooses, he also has an obligation to see that he doesn't run out of dough and leave others - you, for one, us taxpayers, for another - stuck with his support.

Questions? Email Money Magazine's ethicists – authors of "Isn't It Their Turn to Pick Up the Check?" (Free Press) – at FlemingandSchwarz@right-thing.net.

Posted in Do the Right Thing

Replacing a returned gift

2009-10-02T18:43:48Z

Question: A friend gave me a subscription to a magazine I don't care for. When I canceled after one issue, the magazine sent the refund to Gretchen. I don't want to seem small, but especially since I'd given her a nice present, shouldn't Gretchen have given that money –- or another gift –- to me?

Answer: Call us unsentimental, but gift-giving is a transaction as well as a pleasure. And, usually, part of the deal is that the presents don't just go one way. Reciprocation of some type isn't only gracious, it's required. So had your friend, say, accidentally left a gift intended for you behind on a train or ordered something for you that never arrived, she'd still owe you one. Bad luck and good intentions don't wash away obligation.

But your situation is different. Your friend gave you a gift that you chose to reject. While it's nice to get something you want or need –- and these days we've all gotten used to the failsafe gift (a gift card, for example, or exchangeable merchandise or an item from a "wish list") –- the fact is that givers have no obligation to give a gift that is certain to please, only to give one that they hope will please.

Obviously, Gretchen struck out on her selection of a gift for you. But she unequivocally reciprocated your gift to her, and that's all she needed to do. It doesn't matter that she got her money back, because what she gave you was a present, not an I.O.U. Would it have been thoughtful of Gretchen to replace the subscription with a different one? Absolutely. But as long as she made a note to never send you that magazine again, she hasn't done anything wrong.

Questions? Email Money Magazine's ethicists – authors of "Isn't It Their Turn to Pick Up the Check?" (Free Press) – at FlemingandSchwarz@right-thing.net.

Posted in Do the Right Thing, Family Money

'Do I still have to pay him back?'

2009-10-02T18:45:01Z

Question: My boyfriend lent me $12,000, saying to repay him when I could. Six months later, when I broke up with him and didn't pay the loan back right away, he e-mailed my friends, family and new boyfriend revealing secrets I'd told only to him. He also e-mailed prospective clients of my new business saying I was unreliable and untrustworthy. Especially since I lost customers because of Adam, am I still obligated to repay him?

Answer: Apparently Adam doesn't take rejection well.

We hope you've talked to a lawyer and the police about whether you have grounds for bringing a civil complaint or pressing harassment charges against your former squeeze.

But don't put your check book away just yet. After all, two wrongs don't make a right: The fact that Adam's behaved badly doesn't cancel out your obligation to repay him. Even if you have a strong claim against him for money damages related to his contact with your business prospects, it's not okay to declare yourself the winner of a lawsuit you haven't filed and award yourself $12,000.

Plus, Adam wasn't wrong to expect you to pay him back promptly once you split up. True, when he lent you the money, he didn't set a repayment date. But in accepting his generous terms -– an unsecured personal loan with no repayment date and, probably, no interest –- you were also accepting the obligation to honor the spirit in which the loan was offered, namely, that it was a sweetheart deal (in this case, literally). Girlfriends don't have to rush to pay back open-ended loans like this. But ex-girlfriends -– especially ex-girlfriends who dumped the lender –- do.

Posted in Do the Right Thing, Family Money

When advice is one-sided

2009-10-02T18:46:04Z

Question: Karen, my otherwise good financial adviser, often e-mails me articles on Obama's handling of the economy. These pieces are politically one-sided, and it's not my side. Should I complain?

Answer: Very irritating, these folks with an ax to grind who relentlessly forward "interesting" e-mails to everyone they know.

Of course you can ask Karen to stop with the clipping service. But there's another issue here. We presume that her financial advice is informed by her assessment of the government's economic policies. That doesn't necessarily mean she's steering you to investments that are wrong for you. But you might ask Karen how her philosophy shapes her recommendations. After you hear what she has to say, you need to make a decision. You can skip the e-mail, but you can't duck the question: Do you want your investments managed by someone whose take on the economy is the opposite of yours?
Questions? Email Money Magazine's ethicists – authors of "Isn't It Their Turn to Pick Up the Check?" (Free Press) – at FlemingandSchwarz@right-thing.net.

Posted in Do the Right Thing, Family Money

When siblings split the bills

2009-10-02T18:47:11Z

Question: The stock market wiped out my elderly parents' savings. My two sisters and I now have to help with their bills. How should we divide them, given that some of us have more money and some of us have more kids?

Answer: Hold on. Before you divvy the bills, there's a lot more to consider than bank accounts and kids. What if, for example, one sister is providing most of your parents' day-to-day care? Or one of you previously received large gifts of money from your parents? Or the only reason one of you can't contribute is that she's a spendthrift? To equitably apportion your folks' expenses, you need to put everything on the table.

Not a discussion you want to have? We sympathize, but have it anyway. While the three of you needn't do exactly the same things for your parents, you have an ethical obligation to one another to share fairly -- truly fairly -- the responsibility for looking after them. That's unlikely to happen without, as the diplomats say, a full and frank discussion of all the issues -- and, we suspect, a little friendly persuasion.

Questions? Email Money Magazine's ethicists – authors of "Isn't It Their Turn to Pick Up the Check?" (Free Press) – at FlemingandSchwarz@right-thing.net.

Posted in Do the Right Thing, Family Money

Living with an ex, sharing the bills

2009-07-23T03:47:05Z

Question: My husband and I are divorced (no kids), but we've been unable to sell our house, so we're both still living in it. Since I'm away a lot on business, shouldn't he be paying more than half of the utility bills?

Answer: But what if you take longer showers?

We're not kidding. There are countless ways you and your ex consume water and energy unequally. Perhaps one of you likes to crank up the air conditioning or to grow tomatoes or to stay up late microwaving popcorn and watching movies. You can't pick just one variable in the utility bill equation and then cry foul.

Moreover, life is filled with per person, as opposed to per usage, fees. Planes, trains and buses, for example, charge per seat, not per pound, even though heavyweights cost more to transport than bantams. Rare is the car wash that has more than two price points, even though autos come in all shapes and sizes. And, as you'll discover once you sell the house and start looking for new digs, rarer still are roommates who are willing to split the utility bill on anything other than a per person basis.

Questions? Email Money Magazine's ethicists – authors of "Isn't It Their Turn to Pick Up the Check?" (Free Press) – at FlemingandSchwarz@right-thing.net.

Posted in Do the Right Thing

Tipping vs. bribing your bartender

2009-07-07T21:17:49Z

Question: A friend who goes out a lot tells me he tips 25-30 percent in bars, so bartenders are always giving him free drinks. Jake says everyone knows to do this. Even if they do, isn't this cheating the bar owner?

Answer: A penguin goes into a bar and says to the bartender "Have you seen my father?" The bartender says "I don't know. What's he look like?"

Don't bartenders put up with enough as perennial straight men without catching flak for pouring the occasional free drink? Seriously, a happy customer is a return customer. And while Jake may not know it, the hospitality industry has a long tradition of offering perks to regulars and big spenders -- a cocktail here, a room upgrade there -- to keep them coming back.

So if Jake's getting those complimentary drinks because his fanny's frequently on a bar stool, there's no problem. And there's no problem either with bartenders accepting Jake's fat tips, whatever his motives may be.

But is there a dark side to this practice? Absolutely. It's if, in exchange for Jake's largess, bartenders are serving him more free drinks than the bar owners -- the folks who are actually paying for the alcohol -- would approve of. In that case, you're right: the bartenders are stealing and so is your pal. And what Jake's leaving isn't a tip, it's a bribe.

Questions? Email Money Magazine's ethicists – authors of "Isn't It Their Turn to Pick Up the Check?" (Free Press) – at FlemingandSchwarz@right-thing.net.

Posted in Do the Right Thing

Picking up a friend's bar tab

2009-06-03T13:15:17Z

Question: We often eat out with another couple, always dividing the check 50/50. Since Pam and I are economizing these days, we no longer order drinks in restaurants. Our friends do, though, and they don't seem to notice that splitting the check has become an awfully good deal for them. I think they should offer to pay for their booze, but Pam thinks our long-standing 50/50 arrangement is fine. Who's right?

Answer: No wonder your friends aren't cutting back on the cocktails in order to economize. They've got you to pick up half their bar tab. Count your blessings they're not drinking more, now that their libations come with a 50% discount.

While we sympathize with Pam's desire to avoid unsettling the friendship, this boat needs rocking. Presumably you've been splitting checks with your friends, not only because it's gracious and easy, but because over time things have more or less been evening out. But unless the stimulus package includes some cocktail tokens for you, that's no longer true -- which means it's time to change the deal.

Our advice? Stop wishing your friends would offer to pay for their drinks and tell them nicely but directly that, since you're no longer ordering alcohol in restaurants, you'd like them to ask for a separate bar tab. Of course, you might want to first fortify yourselves with a stiff one at home.

Cheers -- and good luck.

Questions? Email Money Magazine's ethicists – authors of "Isn't It Their Turn to Pick Up the Check?" (Free Press) – at FlemingandSchwarz@right-thing.net.

Posted in Do the Right Thing

Bigger job, same salary

2009-05-21T19:25:04Z

Question: My boss recently laid off a lot of people. As a result, she's given me much more responsibility - but no raise and no better title. Is this fair? She says she won't promote me until she sees how I do.

Answer: Call it a wild guess, but we're betting your boss didn't lay those people off just to be mean. We agree that in a perfect world, an increase in responsibility should be accompanied by a bump in pay. But today's economy is anything but perfect. When organizations are forced to reduce their payrolls, many prefer to minimize layoffs rather than cut even more jobs to increase the compensation of workers who remain. In making that tradeoff, employers aren't behaving unethically, even if some employees (like you) may deserve a raise.

As for the promotion, though, we're on your side. Assuming the payroll's frozen, your boss should try to reward you in other ways. A better job title is a good place to start.

Questions? Email Money Magazine's ethicists – authors of "Isn't It Their Turn to Pick Up the Check?" (Free Press) – at FlemingandSchwarz@right-thing.net.

Posted in Do the Right Thing

Should wedding guests have to sign a waiver?

2009-05-07T15:16:15Z

By Jeanne Fleming, Ph.D. and Leonard Schwarz

Question: My fiancé's wealthy aunt and uncle agreed to let us use their beautiful lake-view home for our wedding, and we've sent out the invitations. But now they're insisting that each guest sign a form releasing them from any liability in the event of an accident. I'm appalled. Are they being unreasonable, or am I just naive?

Answer: You're naïve only if you imagine that liability isn't an issue here, because it is. Too bad no one thought of it before the invitations went out. We'd place most of the blame for that on your fiancé's aunt and uncle, as presumably they're worldlier, as well as wealthier, than you. But we can't blame them for getting nervous, especially if you're planning to serve alcohol.

So where do you go from here? These folks are sure to have homeowners' insurance, and it almost certainly covers personal liability. If they don't realize this, a call to their insurance agent may put their minds at ease.

If it doesn't, talk to your insurance agent about "special events coverage." A one day policy will insure your fiancé's aunt and uncle against any liability arising from your wedding and will cost you a lot less than a ballroom or banquet hall.

If neither of these approaches satisfies them, then we'd agree: Your fiancé's relatives are being unreasonable. It's one thing to be more-than-a-little late in raising the liability issue. But once the invitations go out, it's wrong to insist that your guests sign the kind of legal document they might expect to be handed were they signing up for skydiving lessons, not attending a wedding.
Questions? Email Money Magazine's ethicists – authors of "Isn't It Their Turn to Pick Up the Check?" (Free Press) – at FlemingandSchwarz@right-thing.net.

Posted in Do the Right Thing, Uncategorized

When a deal is a steal

2009-04-22T01:26:38Z

By Jeanne Fleming, Ph.D. and Leonard Schwarz

Question: My husband has negotiated a price for painting our house that's significantly lower than a bid we got a while back from the same small business. I think he may be taking unfair advantage of people who are hurting in the recession. Is he?

Answer: Remember the good old days - you know, two years ago? As we recall, painters weren't reluctant to push their bids up then, when demand for their services was strong. That behavior wasn't unethical, and neither is it unethical for you to take advantage of the fact that today business is slow. Indeed, the effect that supply and demand have on prices is at the core of a market economy. You'll be paying a price the painters agreed to, and you can rest assured they want the work.

Is it possible to overstep? Yes. Squeezing the desperate isn't right. So if your husband has extracted a price from these painters that's genuinely exploitative - for example, if you know the business owner needs the cash to save his house but will have to do the work for five bucks an hour - then you should revisit this bid and agree on a more equitable price.

Questions? Email Money Magazine's ethicists – authors of "Isn't It Their Turn to Pick Up the Check?" (Free Press) – at FlemingandSchwarz@right-thing.net.

Posted in Do the Right Thing

Can a parent spend the kids' inheritance?

2009-04-08T00:50:12Z

by Jeanne Fleming, Ph.D. and Leonard Schwarz

Question: Two years ago my father left a large inheritance to my brother's young girls - that is, to his grandchildren. Recently my brother used all of it, plus some of his own money, to buy a vacation home for his family (he says there are good deals out there these days). Was this ethical, or did Michael cheat his kids?

Answer: Not only did Michael cheat his kids, but he betrayed his father. Whatever his rationalization may be - that the whole family benefits from the vacation home, that the kids wanted to do it, that he'll reimburse them someday - his what's-yours-is-mine attitude toward his daughters' inheritance is unethical. If your brother desperately needed to pay the heating bill, that might be one thing. But raiding the girls' nest eggs to buy a vacation place? In our book, that's stealing.

We hope you'll contact a lawyer in your area for some advice. Even if you can't take Michael to court - or can't bring yourself to - we hope you'll try to shame him into putting his daughters' names on the title to the house.

Finally, we have a suggestion: If you have designated your brother as the executor of your will, say, or as your children's guardian in the event of your death, it's time to get out an eraser.

Questions? Email Money Magazine's ethicists – authors of "Isn't It Their Turn to Pick Up the Check?" (Free Press) – at FlemingandSchwarz@right-thing.net.

Posted in Do the Right Thing

Paying for your partner's divorce

2009-04-05T21:41:35Z

by JEANNE FLEMING, PH.D. and LEONARD SCHWARZ

Question: The man I love is married to another woman. He wants to leave her, but he says that he can't afford to get a divorce - that he'll lose his house and end up with huge child support payments. I have the resources to help him out. But I'm wondering, is it ethical for me, his girlfriend, to subsidize Danny's divorce?

Answer: There is nothing unethical per se about helping a boyfriend with the expenses that weigh him down. After all, what are those resources of yours for if not to help you find happiness with the man you love? Trouble is, what you're considering doing is not so much helping Danny with a financial problem as encouraging him to end his marriage. And that's not right.

Had Danny gotten divorced before you came into the picture, your easing the financial burdens of that divorce would be an act of kindness. But while Danny remains married to and living with his wife, your bank account should not be playing a role in his thoughts about his marriage - and, to be frank, neither should you.

True, these things happen, and your question is about money and ethics, not marriage and ethics. But on either score, what matters is that Danny's married. And until he isn't, you shouldn't be giving him reasons - romantic or financial - to leave his wife.

Questions? Email Money Magazine's ethicists – authors of "Isn't It Their Turn to Pick Up the Check?" (Free Press) – at FlemingandSchwarz@right-thing.net.

Posted in Do the Right Thing

Should friends charge finder's fees?

2009-04-05T21:40:01Z

by JEANNE FLEMING, PH.D. and LEONARD SCHWARZ

Question: A good friend is investing $25,000 in an alternative-energy deal that looks very promising. He says he can arrange for me to get into it, but in exchange he wants 10% of whatever profit I make. I think he's being incredibly greedy, but he says that he deserves to be compensated for opening an otherwise closed door. Does he?

Answer: If the dealmaker's name is Madoff, run. And even if it's not, remember: While alternative-energy projects have a certain cachet these days, so did hedge funds and Las Vegas real estate not that long ago. In short, caveat investor.

Should you still decide you want in, however, it's not unethical in the business world to compensate someone for opening an otherwise closed door (bribes are another story). But to flip Michael Corleone's famous phrase, this isn't business, this is personal. And in the personal arena, friends don't charge their friends fees. Unless your pal is a professional financial adviser - that is, someone who earns his living finding and vetting investments - what he deserves for a favor like this is your sincere thanks and a nice bottle of wine. If the deal turns into a jackpot, then a more substantial gift - some nice green cash, perhaps - is in order. And if it goes belly up? Well, don't say we didn't warn you.

Questions? Email Money Magazine's ethicists – authors of "Isn't It Their Turn to Pick Up the Check?" (Free Press) – at FlemingandSchwarz@right-thing.net.

Posted in Do the Right Thing, Uncategorized