Have you ever seen Judge Judy's TV show?
The program is hard to miss, airing worldwide. She's also the highest-paid television personality, which is appropriate because most of her cases involve money.
What we find interesting is that her decisions often contain an important lesson about personal finance. Here are 10 pieces of financial wisdom, courtesy of Judge Judy:
1. Money makes people irrational. Even the nicest folks can get vicious and vindictive when their finances are threatened. Consider this before engaging in economic dealings.
2. Don't co-sign a loan. But if you must, always draft a legal document between you and the co-signer stipulating who's to repay the loan and what happens if they don't. Remember: When you co-sign a loan, the lender can come after you for the full amount if the person for whom you co-signed fails to pay.
3. Don't take out a loan for someone else. Someone who can't get a loan himself might ask you to do this. Don't. If your relationship sours or that person defaults, the loan is yours to repay.
4. A gift is not a loan. Plaintiffs on Judge Judy's show often sue to recover money they say they lent to the defendant, but the defendant claims the money he or she received was a gift. If the recipient didn’t sign a loan agreement, the loan is not a loan.
5. Oral contracts aren't binding. Plaintiffs in Judge Judy's court prove this time and again when they try to sue someone for money they claim that person orally agreed to pay back — but there's no written proof. A verbal promise to repay doesn't hold up in court.
6. Lending money can ruin relationships. That's true of all types of relationships — romantic, familial and friendships. Judge Judy's cases frequently involve people whose ties are irreparably torn apart when someone fails to repay money. Hurt feelings, tension and rifts can last for years, making family gatherings tense and uncomfortable. The best way to prevent this is not to lend money in the first place; instead, try to help the person find alternative solutions to his or her money needs.
7. Be smart about managing your money. Most defendants in Judge Judy's court are there because they made poor financial decisions, spending their money unwisely or irresponsibly or trying to help someone else who couldn't manage theirs.
8. Have paper trails for big purchases. If you and someone else make a large purchase together, such as a house or car, or if you give cash to someone to pay off a large loan, make sure you keep written records of how much you personally spent and when. If you claim in court that you paid for something and don't have the paperwork to verify it, you'll likely lose your case.
9. Don't lend money you don't have. It's unwise to lend money in the first place, but it's far worse when you lend money you personally need for yourself. Never put yourself into debt for others. Unfortunately, we often see this occur, such as when parents jeopardize their retirement by using what little money they have on college costs for children.
10. Don't expect anyone else to pay your bills. Many of Judge Judy's cases deal with children or significant others who expect to be provided for while they contribute nothing toward the household finances. Remember: You are the one responsible for your own bills, and no one is obligated to bail you out of a financial mess you created.
This material was prepared for informational and/or educational purposes only. Neither Financial Engines Advisors L.L.C (also referred to as Edelman Financial Engines) nor its affiliates offer tax or legal advice. Be sure to consult with a qualified tax or legal professional regarding the best options for your particular circumstances.