The question
Five years ago, my wife's parents offered us a financial gift so we could afford a down payment on a starter home, rather than the condo we planned to buy. Against our better judgment, we accepted. Once we'd closed the sale, her parents waffled, insisted on all sorts of conditions, said the gift was a loan, and eventually gave us less than half what they promised. We almost defaulted. We recognize that we were responsible for our decision, but now, with a second child coming, her parents have offered us money to help build an extra room. We graciously refused. Her parents are offended we won't accept their generosity, particularly since we all come from limited means. They're barely speaking to us, and it's killing my wife. She wants to relent. But I don't want to be further indebted to them. Plus, if her parents don't come through we'll be financially ruined - for good. What do I do?
The answer
First, this notion of permanent financial "ruin" has an antiquated, Victorian feel to me.
It derives from the days when one's income and social mobility were strictly static. Your family had a fixed amount of money: If you lost it, that was it. The notion of getting out there and earning a living caused your powdered proboscis to wrinkle in disdain, then you'd feel a little faint, lurch over to the side table, causing the finger-bowl to wobble, and finally retire to the boudoir and ring for the manservant to bring your smelling salts.
These days, if you lose everything - well, you're going to have to start hustling, it's true. But it's one of Damage Control's central tenets: If you truly hustle, anything is possible.
Take Michael Krasny. When he quit selling cars in his father's dealership in 1982, he became so broke he had to take out an ad in the paper to sell his personal computer. He was surprised by the response, started buying and selling computers from his apartment, and eventually formed one of the largest direct retailers of electronics in the world.
He retired in 2001 with a net worth of more than a billion dollars.
You may say: But those were different times, he got lucky, and yadda yadda whatevs.
But can we agree that the notion you'll be "financially ruined - for good" if your in-laws renege on a spare-room-refurbishment loan/gift is a tad melodramatic?
I understand not wanting to take money from your in-laws, especially if you feel there are strings attached and you got burned in the past. I also understand wanting to be "adults" and responsible for your finances.
And of course conventional wisdom says you should avoid borrowing from anyone, especially family. The sayings, proverbs and homilies on this score are almost too numerous to mention. "Neither a borrower nor a lender be." "Never lend to family, never borrow from family." "The rich rule over the poor, and the borrower is servant to the lender." "Before borrowing money from a friend, it's best to decide which you need most."
But all of this conventional wisdom strikes me as, well, awfully conventional. Our whole society is based on credit and borrowing money. Most businesses are started with loans, or borrow some along the way. I'm sure that at some point en route to billionaire-dom, Michael Krasny borrowed money to expand his business.
Just about everyone uses borrowed money to expand, grow, prosper. I live in a house I could never have bought with upfront cash..
We all know what greed and over-borrowing can do. Even the most august enterprise can sink into the morass of debt, like a horse and buggy in a pool of quicksand. (I've seen it up close: One day my brother's working at Lehmann Brothers, a 150-year-old company, the next it no longer exists and he's outside the building, blinking in the sunshine, holding his personal effects in a cardboard box going, "Wha-happen?")
But prudent borrowing can be a healthful thing. And this seems like a case of that. Moreover, your wife might banish you to the couch if you continue to refuse the loan.
Two things seem clear vis-à-vis your in-laws' offer: 1) Perhaps because of "limited means," they may write the cheque with shaky hands and/or tears in their eyes; 2) they really want to help you out.
To me it's the very painfulness of their offer that makes this such a touching gesture. The gift that's most painful to give is the most poignant, don't you think?
So do them all a personal favour and take the money.
If you must, say you'll pay them back. Maybe this time get the dough up front - before you hire the contractor.
Look upon it as an investment, as I'm sure your in-laws do, in your growing family - and in your home equity. Adding an extra room can't hurt the resale value of your house.
Aren't you glad that, whatever friction you may have felt, you took their loan in the first place? Now you at least have the option of expanding your house. I mean, it's pretty hard to add extra rooms to a condo.
David Eddie is an author and the co-creator of the TV series The Yard, airing this summer on HBO Canada.