Lending Money to Friends and Family

Don’t do it! Money and relationship experts agree you’re walking into dangerous territory any time you enter a financial agreement with a friend or loved one. Money is a funny subject. You may think you know someone, but when it comes to money, you’re entering into unknown territory. It’s not just what’s in someone’s checkbook. It’s what’s in someone’s head. It isn’t the money that causes the problem, it’s the fact that the loan changes the nature of the personal relationship. After the financial transaction, you begin a debtor-creditor relationship, in addition to any other relationships such as parent-child, or friend to friend.

The problem with lending or borrowing with family is that there are always emotional strings attached,” says Dr. Kathy Marshack, an Oregon-based psychologist and business consultant. “It is never a simple business transaction.”

So if someone close to you asks you for a ‘loan’, don’t be afraid to say no if you’re uncomfortable with the thought of making that type of transaction. If you decide you don’t want to lend money to a relative or a friend, saying no can be hard. But being honest may be the best way to go. If you don’t have the cash to lend, that’s easy. Simply tell the truth. Even if you do have the money, explain that you value the relationship you have and you fear that a loan could complicate matters negatively. If you’ve loaned people money before and you had a bad experience, tell the person who wants to borrow what happened. Explain that it’s not a matter of trusting that you’ll be paid back. It’s just that you’re not interested in a business arrangement that could cloud an otherwise solid relationship.

However, if you are comfortable with ‘lending’ money to someone, try to think of it as a gift and not a loan. That way, if you don’t get it back you won’t be disappointed, bitter, or angry. The consequences of an unpaid loan can linger for years and ruin what were once strong relationships. You need to mentally prepare for not getting the money back, as your peace of mind is worth much more than holding anger at a family member or friend. Think of it like this- if the money gets paid back, it’s a pleasant surprise. If not, no one feels bitter or guilty.

On the flip side, if you owe money to a relative or friend and you’re having trouble repaying, don’t avoid the topic. Talk to the person from whom you borrowed, restate your intention and your respect for the loan, and offer a clear, even slow, written contract for repayment.

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Black History Trivia

Tuesday’s answer: Gwendolyn Brooks, 1950, won the Pulitzer Prize in poetry. Click here to read more famous firsts by African-Americans. Their ambitions and triumphs should never be forgotten.

It’s still black history month. And our magnificent history is the foundation for our future successes. Continue to reflect as you walk forward.