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Lending Rules: Money, Family and
Friends
Have you been asked to
loan a family member or friend money? This can easily turn into a no-win
situation for everyone involved. Lending money to friends or relatives can put
a strain on your relationships and even ruin them if for some reason the loan
is not repaid.
We all need to set boundaries and guidelines when
dealing with family, friends, and money. Make a decision regarding your
personal money rules and lending philosophy. If you haven't already, you need
to develop these immediately. Be prepared.
Examples of "lending money
rules."
- Identify the
problem. Determine what caused the financial crisis. Could it have been
avoided, was it irresponsible spending? Discuss possible solutions and
strategize how to avoid a repeat of that crisis. There are multiple solutions
to every problem. In this case, they may have only pursued one solution --
asking you for money. Help them find other solutions. Predetermine your
philosophy in the case of irresponsibility. If your rule is not to lend money
here, discuss your reasons and help them find solutions to spend more
responsibly.
- Adopt the
philosophy of not loaning money at all. Some people decide that when it
comes to friends and family, they never loan money. They consider it a "gift"
and never expect repayment. In this case, you should have a dollar amount
that's already determined by your money rules and that won't cause you regret.
You must be able to give and not look back; don't hold bitterness or
resentment, and don't judge what it's spent. If you can do all of these things,
then giving can be a wonderful and fulfilling way of handling the issue; and
you will avoid future conflict and continue to have a positive relationship. If
this is your philosophy, you must also decide if there is a limit as to how
many times you're willing to gift to the same people. And how will you handle
it when you're no longer willing to gift those people.
- Help solve the
problem versus giving the money. If the situation is such that you know
money is not the real solution, then giving money will not solve the problem.
Look for other creative ways to help. Sometimes buying groceries, paying a bill
or other such solution helps more than handing them money.
- Gifting as a
short-term solution. If you know that loaning money is only going to be the
short term answer, and next month the problem will be there again; then no
amount of money will help. Instead offer financial counseling or help in
creating a family budget. Explore other options for them to learn how to be
financially responsible, coaching, or creating their own money rules to use in
the future. Better yet take a money management course together. You might learn
something too! Perhaps offer to pay for an accountant to help them get on
track.
- Just say NO! If
you are not financially secure yourself, don't lend money that you don't have.
The quickest way to destroy a relationship is to put yourself, or your family,
in financial peril.
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