My girlfriend and I live together, share expenses, and raise our blended family together. We are not married but own a home jointly. We share all finances, but don’t have joint finances.
I recently learned that she made a major error at work and compounded it by trying to cover for it temporarily with her own funds. She eventually told me, but not immediately. Now she can no longer keep it quiet — and the bill has come due.
‘I’m wrestling with the thought that all we are as people is our ability to help the ones we love in a time of crisis.’
She wants to come up with about $60,000 to cover her mistake and bad judgment. If she doesn’t repay the money, she believes she will lose her $100,000 job and possibly be sued for the $60,000.
I have the ability to pay this bill via a HELOC on a property I own alone or with a 401(k) withdrawal. I have a pension so it is only a part of my retirement and, therefore, not essential.
I know these are all less-than-ideal solutions and it’s “not my problem” technically, but I’m wrestling with the thought that all we are as people is our ability to help the ones we love in a time of crisis.
This was a major error in judgment on her part, the biggest in her life. I want so badly to help her get out of this dire situation.
The Boyfriend
Dear Boyfriend,
No, no and no.
Don’t take out a HELOC. Don’t dip into your 401(k). And don’t give your girlfriend $60,000. The first rule of making mistakes is acknowledging them. That’s how you learn lessons. Your girlfriend’s plan is to somehow reimburse her company without admitting she made a grave error of judgment. You are not helping her. Instead, you are enabling her.
Taking out a HELOC or dipping into your 401(k) is rarely, if ever, recommended to pay bills. If you have to resort to these measures, you simply cannot afford to pay off your girlfriend’s debt. It’s as simple as that. You also face a 10% penalty by making an early withdrawal on your 401(k) and will have to pay income tax on that. So you’ll need to take out more than $60,000.
This is the kind of letter that — in a couple of years — risks turning into something like: “I loaned my girlfriend $60,000 to get her out of a bad situation at work, and she has not made any repayments on the loan, despite her many promises, and now she says the loan was a gift. What can I do?” If only I had a penny for every case of loan vs. gift.
Who is going to pay for that 10% penalty? Your girlfriend? What about the income tax? Will you set up a notarized loan agreement? Is putting yourself under this kind of financial pressure the solution to your girlfriend’s financial problems? I say “problems” because her problem becomes your problem when you have to incur those 401(k) or pay interest on your HELOC.
Something doesn’t add up
There’s also a missing piece to your letter. If she worked as a trader and made a bad trade, why not inform her supervisor? If she is an advertising agent and went way over budget, why not tell her manager? Why shell out $60,000 to make sure she doesn’t lose a $100,000-a-year job? It doesn’t add up. She either did something illegal or she needs the cash for another reason.
I once interviewed a group of people who engaged in white-collar crime. The reasons for their misdeeds ranged from greed to opportunity and financial pressures. One of the convicted felons I spoke to had a family member who had legal bills, and had access to blank checks. In other cases, they willfully set out to avoid taxes and then saw how easy it seemed to do the same to investors. One told me, “We had no empathy whatsoever for our victims.”
Another man, however, was a CEO of an international trade company. He was convicted of mail fraud, wire fraud, securities fraud and conspiracy to commit securities fraud. He said he was unaware that what he was doing was illegal at the time, and he told me, “I’m not dumb enough to commit a crime, and I’m not smart enough to run such an enterprise.” I still don’t know if I believe him.
Not everything is as clear as it seems and your girlfriend’s “error of judgment” is a big red neon sign to you that you should not try to solve this problem by making a second error of judgment. Asking you for $60,000 merely shows she is willing to borrow from Peter to pay Paul. If this was a mistake, she should own up to it. That’s the simplest and most honest way forward.
Don’t help her cover it up.
The Moneyist regrets he cannot reply to questions individually.
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