Today I am presenting a very important life skill – and it’s to do with money!
And the figures I am using are to make it simple to understand.
Many years ago, after both my parents passed, their will was divided up between my brother and myself.
When I was starting off in business, I borrowed $20,000 from my parents. They said they would settle this from their will rather than me paying them back.
Let’s imagine the total will value was $100,000.
Our solicitor at the time, who owned the business, said to me, “The total value of the will is $100,000. You owe the family $20,000 …”
Let’s stop it there.
Please do this exercise: How much money do I get and how much does my brother get?
Back to the solicitor …
“… Therefore, you receive $50,000 (half the value) less the $20,000 you owe which is $30,000. Your brother receives the balance of $70,000.”
Most people agree with this. It’s appears logical.
Or is it?
Because I know a bit about maths, I challenged him.
“No, that’s incorrect. I should receive $40,000 and my brother $60,000.”
The solicitor was adamant he was right, and I was adamant I was right.
“OK” I said. “There is $100,000 to divide into two. I owe $20,000 so if I pay that back, there is now $120,000 to be divided up. Half of $120,000 is $60,000 for my brother and myself.”
If I don’t pay the money back, my brother receives $60,000 and I receive $60,000 less the $20,000 I owe which is $40,000. $60K plus $40K equals $100K.
For the solicitor to get this, I had to physically pay the $20,000 back and both my brother and I then received $60,000 each.
I’m sharing this with you because it is so easy to trust a professional and get ripped off where money has to be paid back.
This is a great skill to learn and teach family members.