Here is a conversation I have all the time:
Me: Tell me about your debt.
Person: Well, I owe $5,000 in medical bills, I have two credit cards totaling $15,000, my mortgage is $89,000, and my student loans are $27,000.
Me: Alright, let’s start-
Person: Oh! I also owe $3,500 to my Grandma, but it’s not a priority to pay back. She said I can take all the time I need.
I can’t even tell you how often this situation has played out. Anyone I’ve encountered who owes money to family always keeps it on the back burner. It’s rarely, if ever, a part of their debt pay down process. Why is this? People say it’s because there is no interest rate and no scheduled payments, but I think it’s because family loans often get forgiven out of guilt. There is an understanding that the money may get paid back eventually, but not any time soon. I shouldn’t have to say this, but that’s not cool.
Money owed is money owed. You can’t have a serious debt pay down plan in place if it doesn’t include all debts. Including anything owed to friends or family.
I laid out a plan for paying off debt owed to family in this segment from Fox59. Check it out here:
Peter Dunn a.k.a. Pete the Planner® is an award-winning financial mind and a former comedian. He’s a USA TODAY columnist, author of ten books, and is the host of the popular radio show and podcast, The Pete the Planner Show. Pete is considered one of the foremost experts on financial wellness in the world, but he’s just as likely to talk your ear off about bass fishing.