February 27, 2012
Relationships can be hard enough to manage without the added stress of the almighty dollar. So, what do you do when someone you care about owes you money? Siblings drift apart, best friends become enemies and working relationships become hostile if borrowing money isn’t handled properly. Here we examine three ways to talk to your friends, family, and even coworkers about cash in a respectful way.
Scenario: Your Little Sister Becomes a Big Freeloader
Most of us have either lent or borrowed money from a family member before. It’s natural to want to help those who are closest to us, but when does loaning money go from being helpful to harmful to your relationship? For example, there’s nothing wrong with loaning your little sister who’s in college some cash to buy books for next semester. But what happens when she’s hitting you up when she wants a new dress for homecoming, a plane ticket for spring break, or for you to pay her phone bill?
How to deal:
In situations like this, loaning out money is actually harmful…to your sister. Instead of learning to manage her funds wisely--which is part of becoming a responsible adult--little sis’ is being careless with her money and expecting you to foot the bill. It’s best to have a frank conversation that goes something like, “I love you and I don’t mind helping you with the occasional school expense. However, I want you to be independent and learn how to manage your money responsibly. Why don’t we sit down next week and create a budget that works for you?”
This lets her know that you care about her and want to help, but that you are drawing boundaries in your relationship. She’ll thank you for it in the long run and you eliminate an unhealthy pattern of co-dependence that can lead to resentment in the future.
Scenario: Your B.F.F. thinks you are a B.A.N.K.
It’s easy to lose track of money with friends in a social setting. Spotting someone at the movies and picking up the tab at dinner are part of reciprocally altruistic relationships. But what happens when you always pay for dinner, buy the concert tickets, and loan cash without ever being paid back? How do you approach the situation without coming off as a penny pinching miser?
How to deal:
I’ve found one of the best ways to deal with this situation is to establish boundaries in a fun way. One option is to take turns treating each other when you go out. That way there’s no awkward conversation about who owes who money. So the next time your mooching friend asks you to pick up the tab, try saying, “Sure. This one’s on me. Next time, it’s your treat.” If you keep it light and smile, you’ll establish a boundary without embarrassing your friend, who might not even realize she’s taking you for granted.
Scenario: Mixing Business with Money
The same approach can also work well in a professional situation as well. However, it’s best to avoid borrowing and lending cash to co-workers altogether. You don’t want to go from being best buddies with Becky in accounting to thinking, “B*&%! better have my money!” every time you pass her desk. If you can’t afford to give it without them paying you back, then you really can’t afford to help.
“Bank of You” User Agreement
When someone hits you up for some cash, it’s best to talk about it, set boundaries, and avoid large sums. My experience has taught me that it’s best to avoid lending money altogether, but if you must here are a few tips I recommend to keep your relationship intact:
1. Make sure you can afford it! If you can give the loan from extra money you have saved up, that would be best. The last thing you want to do is go into debt trying to help someone else.
2. Evaluate the relationship. Make sure that you—and your relationship with this person—will be just fine if you are never repaid one penny.
3. Make it legal. For only $8, you can download a promissory note from Nolo.com and have your friend or relative agree to sign a simple loan document. It should detail the amount borrowed, when repayment will start, and the interest you will be paid.
True friends will understand and respect your financial boundaries. If not, then they probably are not great friends to begin with. #LoanDenied