Friday, April 13, 2018
Should I Lend Money to a Friend?
They say a friend in need, is a friend indeed. Sounds pretty crumby. I have been on both sides of the coin in my lifetime, the lender and the borrower. I know that being the borrower always felt worse to me. I have friends that owe me money from years ago. I have mentally moved on from that nonsense. I will admit it is hard to know if lending money to a friend or family is the right thing to do. I know some people that will give away their last dollar. I know others that step over homeless people on the street. While everyone can develop their own opinion on what is right and wrong, today I am going to give you 7 things to think about when lending money to someone you care about. We must think logically about an emotional decision and that itself is very hard.
1) They are often open-ended loans
What this means is that there often is no timetable on when you have to pay the loan back. When there is no deadline to adhere to, the loan is not priority number 1. With open-ended loans, my advice is to not expect the money back anytime soon. A few years back, I paid a family member money I borrowed for university 10 years earlier. She had all but written it off and admitted to forgetting about it completely. I don’t blame her. I know it weighed on me every time I saw her. Because she loved me she didn’t expect the money back anytime soon or even at all maybe. I know for me, paying it back was an important thing to do. Don’t be surprised if this money doesn’t come back for a long time, if ever.
2) It could make get-togethers awkward
No one likes feeling awkward around the people you care about. Owing someone money is a sure-fire way to make the next family gathering strained. It is definitely something to think about when lending or receiving money from a close friend or family. Would you feel upset if you saw them with a new wardrobe even though they owe you money? Would you feel bad about buying much-needed supplies when you owe someone you know money? It reminds me of the “Family Guy” episode where Brian owes Stewie money. When Stewie sees him with fake glasses he let’s loose on him saying, “You have money for glasses, but you don’t have my money.” Obviously, that level of anger won’t happen, but it might. Think about the things you do with that person and understand they might be jeopardized because of money.
3) You become the lender’s slave
While this sounds a little extreme, the point is valid. Owing someone money makes you feel beholden to them. The lender may think it’s no big deal, but the borrower may feel emotionally indebted to them. This will definitely make things awkward. Once I became the lender, I did not want the borrower to feel that way. No one likes fake sentiment, well unless you are a fake person or the president. Think about how lending money to someone might change their actions towards you and how that would make you feel. If someone is already in servant mode, let them know that it is not necessary. This one reminds me of the Seinfeld episode where Kramer gives blood and Jerry must comply with his every wish. Don’t be the guy laughing while your friend shines your shoes.
4) It may happen again
You don’t want to be the go-to guy or gal when it comes to borrowing money. Another reason not to flaunt wealth. People who have borrowed from you once, are likely to try to borrow from you again. I once had a friend borrow $600 dollars from me with the promise to pay it back next payday. Come next payday he asked for $400 more. The next payday after that he asked for $1000. I lent the money once and then I lent it again. Once the 3rd time came I finally said no. It cost me $1000 to learn that lesson. Fool me once, shame on you. Fool me twice, shame on me. You also don’t want to be the banker in your group of friends or family. Having those awkward conversations will become the norm and no one wants that. Which leads me to my next point.
5) You aren’t actually helping them
One of the best lessons I ever learned was when I went to a family member for money when I was in a jam. This time, he said I can’t help you. I was a bit upset at the time but then channeled my focus on getting out of the jam that I was in. After I got through my predicament, it then became my focus to never be in that situation again. I spent the next 5 years eliminating debt and building up savings. I look back at that time and think that being told no was what drove me to get out of it on my own. I am not sure if I would have done it anyway, but up until that point, I hadn’t shown signs of getting my act together. When you lend someone money, you almost enable them to continue doing the things that they are doing that have gotten them into that place, to begin with. Lessons are learned through pain, not pleasure. Sometimes a swift kick in the butt is better than a soft hug. I know that worked for me.
When it Rains, it Pours: My Money Karma Theory – Budget Boss
6) It could hurt your own situation
You should never lend anyone money if you yourself don’t have your financial ship in order. I am a firm believer in getting your act together, so you can help others. Some people, bless their hearts, will literally give you the shirt off their back. While it is admirable, it often leads to two people being shirtless instead of one. The first thing they tell you is put on your own oxygen mask before helping others when a plane is going down. The reason is simple. Your attempt to help others will be thwarted if you yourself are not taken care of. There is a reason my man Dave Ramsey has building wealth and giving back as the 7th and final Baby Step in his financial freedom guideline. Giving is important, but only if you are able to. Giving back should only be done if it is of no threat to your personal situation.
The Most Important Money Habit You Can Ever Develop – Budget Boss
7) It could ruin the friendship
There are about 7 people I have lent money to that I have literally never seen again. Weird how you can see someone a few times a week for years and then suddenly, they are gone into thin air. Be prepared to lose a friend if there is money between you. You don’t even have to be rude to the borrower for them to go away. They might do it out of shame without you even mentioning the debt. I know I never mentioned the money owed to the people who went ghost on me. I am definitely not an enforcer with my 5’8” frame. Only Joe Pesci can pull that off. Money ruins more relationships than anything else so understand that it could come between you and your loved ones. You must fight to make that not happen if it is important enough to you.
In no way, I am advocating for not helping a friend or family member when they are in need. I know my life has had many people who lent a hand when I was down and for that, I am forever thankful. All I am saying is that some thought should be put into it. Communication is key so don’t close those lines. For those of you who are owed money and are angry about it, understand that the money is gone and if it comes back you are lucky. The best lessons always come with a price to pay.
“When you owe money to people, you’re always going to owe money to people, so you should take care of it as soon as possible. It doesn’t go away just because you ignore it.” – Sophia Amoruso
Email – joe@budgetboss.ca
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