I have about 100k available to help out a friend - we’ll call them J. I already have a reliable mid six-figure income, near-perfect credit score, and plenty of my own retirement savings and investments. I’d like to use this money to help improve J’s quality of life in a lasting way as much as possible.
About J - $2200 monthly income after taxes - single parent of one 3-year-old - $70k debt in high interest loans between federal student loans, car loan, and medical bills - $900 monthly rental in affordable housing complex for 2BR - $100 monthly daycare with federal assistance - $300 monthly car loan payment
J’s Goals - pay off debt - move to better neighborhood - improve credit score
Debt
I understand the typical advice for someone with low cash-flow would be to pay off the high interest loans, but I think that it is possible we could instead refinance with me as a co-signer to bring down the interest rates below 4% and pay them off more gradually. This way J could improve their credit score and still have effectively no debt. We could use more of the remaining money on other expenses. The majority of the debt is from federal student loans. EDIT: Whatever debt I co-sign, I intend to pay the full amount myself. I am just considering this as a way to remove the debt from J's plate quickly without negatively affecting J's credit score.
Housing
The better neighborhood would mean about $1400-$1700 monthly rent for the amount of space J needs. I believe they should qualify for Section 8 benefits but I am unfamiliar with how that works. I’m considering either co-signing on a rental or buying a condo unit and renting it to J at a price they can afford. Also looking into setting up a rent to own contract so J can build some assets. It is a good area and I would expect the value to increase over the next 15 years. A condo unit would likely cost about $180k for this neighborhood and I could probably get around a 3% interest rate on a mortgage. I do not know the details on how owning a rental property might affect my taxes, particularly if I rent below market rate.
Income
J is a CNA. I’m not very familiar with nursing degrees but would love to discuss options with J about affordable schooling options or other methods to increase their earning potential. J has started running a small cleaning business on the side, but I don’t think they have considered any tax implications for this yet or how it might affect their current assistance benefits.
Child
Moving to the better neighborhood should help J’s child a good amount with a better school district and more safety. I could start funding a 529, but I’m concerned this might affect the child’s access to financial aid in the future. i don’t know the details of J’s current childcare assistance, but I would also be willing to contribute to those costs if it meant finding a higher quality option.
Investing
I’m not sure whether it would be more beneficial to move a portion of the cash to an investment account and give it out more slowly. J really needs some increased means more quickly, though.
Assistance
I don’t want to leave money on the table if it is otherwise available. I plan to look more into Section 8, childcare benefits, and educational scholarships. I’m not sure what else to consider in terms of existing student loan debt and other general assistance.
Professional Consultation
I’m not sure what kind of professional I should be looking for. Would they be willing to meet with me without J present? How much of J’s financial details should I expect to show them? Currently I have a credit report from J but not sure how much other information I should try to gather beforehand.
Thanks in Advance
Submitted October 24, 2021 at 10:47AM by takecareofnachos https://ift.tt/3nlfXlb
