- Don’t loan money to friends and family.
- If you must give money to them, do so freely, and without strings attached.
Have you ever had the experience of lending money to friends or family with the expectation of them paying it back only for them to let you down and not repay? How did this make you feel? Did it change your relationship? Did you find yourself feeling a tinge of anger or even envy if they then turned around and took a vacation or bought some new clothes or bought whatever fill in the blank item that didn’t seem necessary to you?
I can tell you, from experience, that loaning money to friends and family is a bad decision.
When I was in my early twenties, one of my friends fell on hard times. We, being my wife and I, decided to help them out and let them stay with us for a little so they could get back on their feet. They were, of course, a good friend and it seemed like the right thing to do. As a few months passed, our relationship began to become stressed due to our conversations sounding more like a landlord trying to draw rent money out of a tenant that is past due.
It was no longer fun because the debt between us had caused ill feelings. After being behind about three months, we had to make the hard decision that my friend would have to leave. Things hadn’t really gotten better for my friend, but we couldn’t afford to keep them there any longer. This, of course, was a hard conversation that occurred and ended up ruining the friendship. As time went on, things never really patched up as they never repaid.
It will change your relationship. You will see things, experiences, and even blessings that that person does in a different light. You will have the feeling that they should be paying you back rather than doing XYZ thing.
Why shouldn’t you loan money to friends and family?
- Loans to family often end up being open ended since terms don’t get set and they are often made with a handshake or just verbally.
- Not being a true creditor, getting paid back by family or friends puts you at the bottom of their priority list.
- When you don’t want to damage the relationship, you might find it harder to ask for the money back.
- Dave Ramsey always jokes that “Thanksgiving Dinner isn’t the same”. This is because you are no longer just family, you are also in a payment relationship.
- You are actually enabling your family and friends bad behavior when you lend them your hard earned money.
- What happens if you end up in a pickle and need the money? It would be really hard to get blood out of a turnip as the saying goes.
- You could end up actually letting the loan cost you your money or, more importantly, your friendship.
So, what can you do to make sure that you are being a good sibling or friend but still setup proper boundaries with them?
Don’t feel pressured to lend the money to them.
If they are trying to put pressure on you, you could always ask for more time or flat out refuse. Don’t back yourself into a corner. It may feel like you have no other alternative because they are “blood” or whatever. But, they aren’t your friend or sibling because of your money.
Use the “I have to talk it over with my spouse” method.
Basically, you are just stalling for the time being, saying that you can’t make the decision yourself and that you have to talk it over with your spouse or financial accountability partner. Although this may seem like you are not in control, if you are married, this does affect them as well.
Don’t make any exceptions.
You don’t want to be caught giving money to one sibling or relative but not willing to make the same deal with another. This can cause even more strife in the relationship.
By not loaning money to your friends and family, you are actually loving them well. You are putting up proper boundaries that will grow your relationship stronger in the future. However, in case your borrowing money situation ends badly like mine has, there’s hope that the relationship can be restored.
A few years passed and I actually ran into this friend. Seeing this person again brought all the feelings back to the surface. I decided to take things in a different direction, I wanted to restore the relationship, so I told my friend I forgave them and that the friendship was more important than the debt. This was a big shock to my friend. They accepted, we hugged and moved forward.
Our relationship is nowhere near as good as it was in the past, but we aren’t hostile any longer. I will say, forgiveness on this has not been a one time thing. I still have feelings that make me angry from time to time and I have to go through the forgiveness process in my head occasionally. It has been a hard lesson for me to learn, but it was a powerful one.
Now, after going through all of this, if you still want to help your friend or sibling out, there is one way you can do it. Your relationship is worth more than a $50 loan or whatever money is at stake here.
If you are in the position to, you could always give them the money with no strings attached. This means that you don’t get to have a say in how they spend the money, although you could require them to take some financial steps in the right direction before you give it to them like getting them to start creating their monthly budget, paying off debt, or building some savings. By doing this, you are becoming a blessing in their lives and not just another creditor looking to collect. You remain on their team this way.