Listen instead

On occasion, I’ve lent a few dollars to different friends. At one point before I got married, one of my friends and myself had low incomes and would bail each other out when money got a little tight for the small expenses we had in our lives at that time. We had an open understanding that we would not leave the debt unpaid to each other.

It can be very stressful on a relationship to lend money. Make sure all details are clear for both parties when lending the money. How much is being lent, on what day, the day it is due again, is it a straight lump sum payback or periodic small payments, will interest be charged or just the original amount paid back, what will happen if the money is not paid back on the day agreed upon.

When I am asked to lend money to a friend, I enter that amount as an expense in my budget (using CalendarBudget) and scroll forward months to see if we can afford to spend that money (to see if we will go in the red at any point in the next few months). Now when I say “spend” that money, I am talking about not expecting the money to come back. One policy my husband and I have adopted is whatever money we lend to a friend, we will count it as gone (in our budget) to avoid that uncomfortable feeling/stress on the friendship. On the other hand, our number one responsibility is to make sure our needs are met, so our necessary expenses would come before lending to our friend. As we go through our budget, there may be some expenses that could be eliminated freeing up the money needed to give to our friend. Occasionally you may have a customer/friend that repeatedly returns. In those cases, I am concerned for them and want to help them avoid the level of debt they are getting themselves into.

From the borrower’s point of view, decide what you need more, the money or the friendship.

Have you had any experiences with lending to friends/family?