How to Make Sure a Helping Hand Doesn’t Make You Go Broke

Building Black Wealth: It’s important to set parameters when trying to help family and friends get out of a financial bind.

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Editor’s note: This is part 1 in a five-part series on growing and maintaining wealth.

When a university failed recently to award Marlon D. Cousin’s nephew thousands of dollars in anticipated financial aid, the managing partner of an Atlanta-based recruiting firm was happy to step in and close the financial gap.

In fact, he had set aside a fund for such family emergencies, especially those that pertain to education. And he advises other individuals and families in the process of building wealth to do the same. It’s especially important at a time when jobs in the African-American community are sparse and financial needs high.

“I have an emergency investment account that is funded by one of my businesses,” says Cousin, managing partner of the Marquin Group. “If something happens, it’s there for that. If you prefer to set aside a certain amount for emergencies instead of setting up a fund, you could set aside up to 10 percent of your wealth. But you do need to set parameters. Do you use the money to get your brother out of jail? I don’t know. The fund isn’t set up for that, but it’s really real-life stuff.”

Indeed, it’s important to set boundaries on giving to avoid the pitfalls of overspending while building wealth. He says it’s important to lose the Vegas spending attitude; drop hangers-on, be they friends or family; and begin investing wisely.

Yes, it’s easier said than done, he says, because you want to help friends and family, especially at a time when the black unemployment rate is 12.4 percent, compared with 5.8 percent for whites, according to the U.S. Department of Labor. And someone always needs help paying rent, buying groceries, and raising the kids.

“I like to see people work,” he says. “I want them to show me they are looking for a job. I’m here until 10 p.m. to 11 p.m. trying to make my dreams a reality; I want to see you working toward your dreams, too. If I see the effort is there, that’s good. But I’m not interested in helping if you’re asking just to be asking because you know I can help.”

Another way to help is to invest in dividend-paying stocks, Cousin says. In that light, he decided to establish a college fund, financed through one of his businesses, to help children in his family who go on to college. While helping them through college, the fund will also teach them the importance of financial planning, saving and investing, he says. Without proper planning and investing, the money wouldn’t be there for them.

“The fund is there to help them pay for books and tuition,” he says. “It’s a self-funding entity that allows them to be in school so they don’t have to have that burden of finances. It also teaches them the importance of saving. If I hadn’t established it, the money wouldn’t be there for them.”

Cousin provides the following tips to help family and friends without breaking the bank: