Mistake...

I made a mistake.  Against my husband's wishes I cosigned on a car loan for my nephew.

I talked to him extensively about what he was getting into, what it would require, what he would do if everything didn't go according to plan, and what his exit strategy would be.  I stipulated that he contact me as soon as he knew he wouldn't be able to make his payment on time.  I lectured him on responsibility and how to break away from the losing example of his father.

It seemed like everything was going to be fine.  I felt really good about giving this boy, at 19, a helping hand; an opportunity to establish a credit history, and show responsibility.  I remembered trying to buy a car at 19 without a cosigner, and the exorbitant interest rate I paid because of it.

I started paying for this mistake in the second month.  Because it is considered a high-risk loan (I've learned) the lender starts making phone calls within 10 days of being late on the payment.  It was then that I realized that I was the primary on the loan, and apparently the only one answering phone calls.  I tried to get a hold of him, but like I said, he wasn't answering his phone.  Neither could he return a phone call.  Or an e-mail.

Eventually he made the payment.  But it continued like this every month for a year.  I would receive a phone call, try to track him down, then he'd make the payment.  Rarely did he call me, and usually only after I'd gotten so mad I'd leave a nasty message on his voicemail.

And then, one month, he didn't make the payment.  I got a call warning me it was going to be 30 days late, and again I jumped through hoops to get him on the phone.  His mother finally called me to inform me that they had made payment arrangements with the lender, so it was all good.  I let it go until I found out I had gotten a delinquency notice on my credit report.  I was pissed.  I called him again.  He promised he'd get it off of my credit report.  I called him again a couple months later, and he said they had agreed to remove it.

That's when I started calling the lender.  Eight months later, they haven't removed it as promised.  Now I'm wishing every day I had not believed in this boy.

It gets worse.  Last month, he didn't make a payment at all.  When it got close to the 30 day mark, I made the payment.  I figured I'd give him a break, and when he made the payment he would then be ahead of the game.  Only, he never did.  Now we're getting close to the 30 day mark on the second month, and I've decided to repossess the car.  After getting no response to e-mail, I called a repo man to go pick up the car for me.  I even asked the police in their city to do a welfare check to make sure they were still in their house.  I then left another nasty voicemail.

Finally, he called me.  I told him I was taking the car.  He was remarkably cooperative.  He gave me the information I needed to look up the value on KBB, and I find that it's worth about $6k less than what he owes.  So it looks like I'm going to be paying for this mistake for at least 3 years to come, even after unloading the car.

If this was the first financial mistake I've ever made, I probably wouldn't be so torn up about it.  Live and learn, right?  But I seem to have a long history of "helping" people who can't seem to help themselves.  Time after time I loan money to people who are desperate, just to get them "over the hump", only to find out that the hump is really a steady incline.

A few months ago Suze Orman was on Oprah saying now is not the time to cosign for a loan.  Apparently, two years ago wasn't either.  I apparently have to learn my lessons the hard way.  Again and again.

Children and Money

I have been struggling with the need to teach my son about money.  He's six.  He won't be going into credit card debt anytime soon, but I know that true education starts much younger than we consciously think.  Learning starts by watching and emulating the people around you.

I have had conversations with friends who have kids, and some who don't, about how to teach my son the value of a dollar.  My husband and I do very well, we aren't wealthy, but we definitely don't scrimp at the grocery store.  We live in an upscale suburb, so he's surrounded by friends who also aren't hurting for money.  

In addition, he has grandparents who are well off, and being the oldest grandchild by a few years, he has had no shortage of attention from that front.  He's also my older sister's only child, so she can't help but spoil him, and she and her husband are doing just fine as well.

He's surrounded by people who don't really put a lot of worry and thought into paying the bills.  So how do I teach him that there are lots of people that do worry, that he can't take for granted that he will always be taken care of, and that even if he never has to worry a day in his life, it is still good practice to know how to conserve.

I apparently have to give kudos to my mother.  We were dirt poor when I was growing up.  She was a single mother of seven, and making do on fairly little.  It wasn't just the fact that we couldn't afford any of the things the other kids had, but that she made it clear why we couldn't afford it.  I remember early on, well before I was 10, being shown the breakdown of her income, and what the bills were, and how much money that left for food.

My mother didn't believe in credit.  Actually, my mother couldn't afford credit.  If she couldn't set aside enough to save for whatever extra thing needed buying, then she definitely couldn't afford to make a monthly payment plus pay interest on whatever it was she had to buy.

I also remember doing our grocery shopping at whatever big warehouse food places came before Costco.  We definitely didn't pay for membership, but we did use the huge flats and buy in bulk.  For us, that meant 20# bags of dried beans, 40# bags of flour for tortillas, 20# bags of rice.  These were essentials.  We survived on rice, beans, and tortillas.  Potatoes, eggs, and oatmeal were also staples.  I remember getting a fat black grease pen at the door so we can keep a tally of what we were spending.  Foodstamps made these trips possible.  I also remember feeling grateful for the block of American cheese, powdered milk, and sometimes bread given out by the government, although being equally conscious of not wanting to be seen in that line.

I also remember sitting at the car dealership watching and listening as my mother bargained for a car.  Maybe this is where I got the idea that an inexpensive new car is ultimately cheaper than a used car if you have no money for repairs.  That 5 year warranty is essential.  Reliability is much more important than a lower car payment in the long run.  However, that didn't mean she didn't work that payment down.  I remember her ordering a car without a/c, without a radio, without automatic, without any of the extras that ultimately added to the bottom line.  This was before everything was "bundled" and you didn't have a choice.

All of this gave me a sense of the cost of things.  I knew what running a household cost.  I knew not to expect to go on field trips at school if they cost money; there was none to spare.  I knew why we got our clothes from the local charity organizations.  So, even without really noticing, I was learning a lot about money.

I'm definitely not frugal, but I understand the finite nature of money.

So back to my original thought, how do I pass this on to my son when he sees his dad's extensive collection of toys, his mother's extensive collection of books, and his own room full of toys.  He definitely isn't getting everything he sees and wants.  He also isn't spoiled like many of his friends seem to be.  But I still want to teach him about costs, and the choices in where to spend; how spending one place means less or no money for something else.

All in all, I'm thankful for the education my mother gave me in this.  There were so many things she did badly, but this... this was good.