Have you ever borrowed money from friends or family? Has any of your friends or family asked you for money? Growing up, we had to ask people for money and I absolutely hated it. Borrowing from others has the potential to create a host of problems and I strongly oppose borrowing or loaning money. Don’t go down the rabbit hole.
My policy is just say no. If you do not borrow or loan money it will make life easier in some ways. First, it will make you even more accountable when controlling your personal finances and force you to live within your means. Second, if you create the policy of saying no to loaning money to friends or family members, it will reduce the chances of producing conflict. For example, let’s say you loan money to a friend and when it comes time to pay you back they don’t have the money. A week or so later you noticed that they went to a concert, but remember that they did not have the money to pay you back. Do you see the problem here? Just say no.
Instead, you should help friends or family members by offering them financial advice. Now you have to be careful, you do not want to come off like you are lecturing them. However, you can show them how you track your spending and provide them with a list of resources that can help. Remember the old saying about give a man a fish and you will feed him for a day; teach the man to fish and you will feed him for a lifetime. If you truly want to help them, start by addressing the underlying reason of having to borrow the money in the first place.
If you don’t want to say no or educate them, I would at least get it in writing about the terms of the personal loan. Documentation is really good for both parties involved. Spell out the details of how much the loan is for, how much the payments will be, and what the interest will be, if any. By having the terms in writing, it protects you if the person somehow forgets the details of the arrangement.
Another option is to just gift the loan if you feel that you are in a position to do so. If you just give your friend or family member the money they need, it takes away the potential tension of not paying it back. Now, I’m not saying you should gift them a lot of money or do this a lot. You have to be careful going down this road. Just use your best judgement when it comes to this situation.
In the end, I go back to that grand notion of just say no. My friends and family members know not to even ask me. I’m always willing to help guide them and show them ways to penny pinch, but I have to draw the line when it comes to loaning my hard earned money. I strongly believe in breaking those methaphorical chains of poverty and I contend that starts with education. You have be to willing to learn and seek help. Okay, I will get off my soapbox for now. So, do you borrow or loan money to others? What’s your opinion of this subject?