Should You Lend to Family, Buy Mortgage Life Insurance, or Invest in Gold? Here’s What Ric Edelman Says
Lending to Family and Friends? Think Again.
Ric Edelman says one of the quickest ways to ruin a relationship is to lend money without a plan. If a loved one can’t—or won’t—pay you back, it creates tension, guilt, and sometimes permanent damage. That’s why Ric recommends treating any personal loan like a business deal. Create a formal agreement outlining the repayment schedule, interest, and late penalties. This doesn’t just protect your finances—it shows whether the borrower truly intends to repay you. If they won’t sign it, that’s your red flag. And while unpaid loans might be deductible as bad debt, the IRS only allows this if you’ve taken real steps to recover it, like filing in court. Most importantly, don’t jeopardize your own stability to help someone else stay afloat. You’ll just create two financial emergencies instead of one.
Can Renting Your Home Actually Save You Money?
When a caller named Linda asked if she should rent her home to save $800–$1,000 per month, Ric didn’t say no—but he did raise caution flags. Yes, renting could offer income, but landlords also deal with late payments, repairs, and liability. Ric advised doing the math carefully and consulting a financial planner to pressure-test those numbers. Linda preferred renting over getting a roommate, and Ric respected that—but warned her not to underestimate the hassle factor.
Best Way to Save for College: 529 Plans
If you’re saving for a child’s college education, Ric says look no further than a 529 plan. These tax-advantaged accounts let your investments grow tax-deferred and your withdrawals remain tax-free—if used for qualified education expenses. That includes tuition, housing, books, and even laptops. And it’s not limited to U.S. colleges—529s work for any accredited institution worldwide. Not sure how much to save? Estimate future tuition and work backward to calculate your monthly goal. Even if the child doesn’t use the funds, you can transfer them to another relative or use them for experiential learning programs.
What NOT to Do With Extra Cash
A woman named Minett asked whether she should use her $1,000 monthly surplus or $20,000 in savings to pay down her mortgage or buy gold. Ric was blunt: don’t do either. Instead, he said Minett needs a cash reserve of at least $50,000 to cover her $4,000 monthly expenses for a year. As for gold? Ric called it “absurd” and warned against falling for fear-based sales tactics. His advice: max out your 401(k), build your emergency fund, and only then consider other investments.
Why Millionaire Athletes Still Go Broke
Sports agent David Falk joined Ric to explain why even superstars with $100 million careers can go bankrupt. The main issue? Poor planning. According to Falk, maintaining a $1 million lifestyle requires $20–25 million in net worth. And too many athletes treat signing bonuses like lottery wins, spending it faster than it can grow. Falk emphasized the importance of hiring skilled agents, negotiating wisely, and educating players about budgeting and investing. Antoine Walker, who made over $100 million in the NBA, was cited as a cautionary tale.
Negotiating With Purpose, Not Ego
Falk also reflected on how his negotiation style evolved. Early in his career, it was all about winning. But by his 40s, he realized that fairness and long-term relationships mattered more. In industries like sports, you’re going to see the same faces year after year. Being fair builds trust—and being unreasonable can backfire. Falk’s advice? Understand your value, come prepared, and aim for mutual benefit. It’s not weakness—it’s strategy.
The Truth About Mortgage Life Insurance
You’ve probably seen ads for mortgage life insurance—the kind that pays off your home if you die. Ric Edelman says skip it. These policies mostly benefit the lender, not your family. They’re overpriced, have declining value over time, and don’t offer the flexibility of traditional term life insurance. If protecting your loved ones is the goal, a regular life insurance policy offers better value and broader financial protection.
All information provided is for educational purposes only and does not constitute investment, legal or tax advice; an offer to buy or sell any security or insurance product; or an endorsement of any third party or such third party’s views. The information contained herein has been obtained from sources we believe to be reliable but is not guaranteed as to its accuracy or completeness. Whenever there are hyperlinks to third-party content, this information is intended to provide additional perspective and should not be construed as an endorsement of any services, products, guidance, individuals or points of view outside Edelman Financial Engines. All examples are hypothetical and for illustrative purposes only. Please contact us for more complete information based on your personal circumstances and to obtain personal individual investment advice.
Neither Edelman Financial Engines nor its affiliates offer tax or legal advice. Interested parties are strongly encouraged to seek advice from qualified tax and/or legal experts regarding the best options for your particular circumstances.
