Money Matters: Lending Money

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I don’t like borrowing money for any reason.   I’m sitting on a mountain of student loan debt which I feel like I am slowing chipping away at and as a result, I HATE borrowing money.  In the investing world, borrowing money is a common thing.  In fact, many experts will tell tell you there’s such a thing as “good debt”.  It’s an investment that can be written off for tax purposes.

I understand the concept.  I just don’t agree.  I’m more of a David Ramsey gal looking to get to the snowball avalanche on my student loans.  But still chipping away at that.

But there’s also borrowing money on smaller, personal level, like between friends and family.  I know I’ve done it once or twice and dreaded having to do it.  More often than not, I’ve had people borrow money from me.  And I’m sure I’ve said it before and probably even posted it before, but I’m going to say it again:

IF YOU CANNOT AFFORD TO LOSE IT, YOU CANNOT AFFORD TO LEND IT.

What do I mean by that?  If your closest friend or a relative asks to borrow money and you have it, but you would need them to pay you back right away, then you probably can’t afford to lend them the money in the first place.  The sad thing about borrowing between family and friends is that is can ruin relationships…if you let it.  Till this day, my Nana swears up and down that she doesn’t talk to my uncle, her own son, because he still owes her like $700 on a truck my uncle bought from her husband.  It’s ridiculous.  So my golden rule is, if I’m going to lend someone money — whoever it is — I forget about it.  That money is gone and is never coming back.  Oh, well.  That way I’m not upset or resentful or angry and it didn’t damage a relationship.

However, should someone pay me back – yay — that money doesn’t go back into my checking account from which it came.  It goes to my savings instead.  I already made up my mind that the money was gone forever so when it does return to me, I treat it like an unexpected windfall and throw it right into my savings.  This is way I’m adding to my savings and I’m not spending “extra” money unnecessarily.  It helps me keep the reins on my money better so I have financial more secured future.

So, ladies.  I know we want to help out our friends and our family, but if it will cost you peace of mind, your sanity or even your relationship, it’s better to just say no.  Money isn’t just money to everybody and we can’t expect everyone to treat or respond to money the same way.  If you can’t afford to lend it, you can’t afford to lose it.

Money Matters: Mixing Money and Friends

Yesterday I completed a notarization for two friends in the Larchmont Village area. One of the gentlemen found me online via Craigslist and very honestly explained that he was lending his friend $5,000 for a personal loan and wanted to have an agreement notarize should they have a falling out and not remain friends during the repayment period. It’s happened before. Probably a lot more than we realized.

But this was smart. Even among friends. Because sometimes our interactions with our friends will be transactions. In which case, a small part of the relationship will move from being personal to business. And if we’re not careful, we’ll blur the lines too much and make it hard either to be friends or ever do business with friends.

I’m not going to tell you whether or not you should ever lend friends money or ever taken a loan from a friend. You know them better than I. You know yourself better than I do. I will say be careful and be responsible. People can be funny about their money and I would hate to learn of another friendship that dissolved over money matters.

My golden rule for money and friends — even family — has always been: if I can’t afford to lose it, I can’t afford to lend it. I don’t do it often, but if I’ve lend someone money, I have to treat like a gift. Treat it like I gave them the money instead of loaned it to them. This way I’m not upset if they never pay me back. But I’m no fool either. If I lent someone money and they didn’t pay me back, I don’t lend them anymore money. I don’t want to turn myself into their ATM. I work hard for my money and I give it away to enough other people in the form of bills.

I also try not to borrow money from people. I will exhaust every option first before I ask for a loan from a friend or family member. If I gotta go pawn some sh*t first, so be it. I try to keep my friends and money separate from one another to maintain a healthy relationship with my friends and my money. I get it. Things come up all the time and we have to figure out how to deal. Yes, we know about having an emergency savings account,but not everyone has one. So they make do. I just ask you be careful if making do is mixing your friends and money together.