Lending money to friends isn’t always a bad thing. After all, we all need a little help now and then. The problem really starts when it’s been weeks or months since you lent the money and your friend is busy spending on luxuries and goods that you didn’t think they could even afford – yet, they still owe you. This can make for a rather awkward situation.
We share a few tips on how to handle finances when friends are involved:
1. Make things clear. When your closest friend asks you for money, make it clear that you are lending and not gifting the money to them. Make sure there is no confusion about the fact that you want to be paid back, at some stage. Ask your friend when they think they would be able to pay back the loan or create some sort of payment plan you can both commit to. This way, your friend has the payment plan to hold them accountable and if they miss a payment date, you won’t be wrong to ask them about it.
2. Never lend money you don’t have. If you do not have the money, do not give it to someone else. You have responsibilities, too, and you need to make sure that yours are taken care of first before anybody else’s. Your friends should understand this. Avoid, by all means, drastically sacrificing your own comfort and lifestyle to help someone else afford theirs. If anything, only lend what you are able to at the time, instead of lending the full amount that has been asked.
3. Never lend money you are not prepared to lose. This is a golden rule in lending money to anybody. If you are not prepared to lose that amount of money then do not give it out because there is always a possibility that you will not get it back. Pestering a friend about the money they owe to you is frustrating for both of you. Set yourself a limit of the amount of money that you are prepared to lose and vow not to lend more than that to anyone.
4. Say no. Alternatively, do not lend money out to friends at all. There are people who have had bad experiences when mixing money and friends – if you are one of those people and believe that there is no better way to tackle the problem, simply opt out. But do also consider that no man is an island and at some point in time, you might need a buck from your buddy, too.
