When To Say No To Your Friends
Put money and friendship in a blender and you will get a bitter shake.
Money can strain relationships to the point of breaking them, according to a New York Times article. As friends discuss money, feelings of inferiority may arise creating tension and awkwardness in the relationship.
Regardless of the tension that money may cause, about a quarter of Americans borrow money from friends and family when they have a debt problem. It’s estimated consumers borrow close to $3 billion from friends every year, according to the Daily Finance.
When a friend asks to borrow money your instinct is to help out, but keep in mind that it’s never a good idea to mix money with friendship. The experts at MissMoneyBee.com recommend asking yourself a series of questions before lending money to friends.
Does your financial situation allow you to loan money?
When a friend asks you for money, think about your financial situation before digging into your pockets. Ask yourself if your savings will keep you afloat for six months in case you lose your job or have an emergency. If you have enough savings, then lending money to a friend won’t be a problem as long as your friend is able to pay you back.
What should you expect from your friend?
If your friend doesn’t have a job or owes debts, loaning money could put you at risk. In this situation, you should explain to your friend that you can’t afford to lend them the money. The other option is you giving them the money as a gift.
How do you get your money back?
Setting a timeline or a schedule can prevent arguments and awkward moments. If you decide to loan money, plan a repayment schedule showing how and when you will be repaid. Start by determining a payment amount that’s affordable for your friend and convenient for you. For example, a $10 payment per month will never pay off a $1,000 loan. Then, set a repayment date. If all your bills are due on the first day of the month, tell your friend to pay you on the last week of the month to ensure you have the money when it’s time to pay the bills.
What do you do if your friend doesn’t pay you back?
Once you loan money, you need to be ready for the worst. In this economy, people get laid off, lose their house and run out of savings quickly. Perhaps your friend was willing to pay you back, but an unexpected situation took place, and now they can’t make any payments. In this situation, you need to have a conversation with your friend to reestablish repayment options. Your friend may be able to pay you back in smaller amounts or delay the payment process for a couple of months. Regardless of the solution you choose, have an honest conversation with your friend to avoid misunderstandings.
Even though helping friends and family is important, never put your finances at risk. Financial problems can jeopardize your house, savings, and ruin your friendship. If you have friends who need financial help, tell them to contact a professional counseling service such as ConsolidatedCredit.org.