How many friendships have you lost (or almost lost) because of money? If money matters are a touchy subject to begin with, then how are we expected to navigate the murky waters of borrowing from friends?
We’ve all been there (on either side of the spectrum) before: A buddy asks you to spot them $20, but never seems to have the cash available to pay you back, or they continue to forget when they see you. And when, months later, they buy their fourth round of beer in front of you without handing over the $20 that has been slowly eroding away at your sanity, you pop. Your buddy has probably forgotten that they even owed you anything and immediately hands you the cash, but the damage has been done. Your friendship now faces trust and communication issues that may or may not be overcome.
Now, $20 is a fairly easy loan amount to forgive or forget about. But what if that $20 is $200, or even $2,000 or beyond? What tension will exist in the friendship as a result of an outstanding loan?
Borrowing from friends can bring to light a number of issues that, without the loan, would be relatively innocuous:
Is it possible to effect loans between friends without compromising the friendship? Here are a few questions for each party to ask to help determine if the loan proposal is a mine field or a walk in the park:
One of the reasons more friendships are killed by loans than is necessary is because it is easier to say “yes” than “no” to a friend. Your instinct may be telling you that this friend isn’t reliable with money, but since they are a friend and wouldn’t (intentionally) rip you off, you trust that it will all wash out in the end and save yourself the grief and stress of saying no to the loan request.
However, it is ultimately easier to face the temporary discomfort of saying no to an initial loan request than it is to have some of the tough conversations that ensue after things get hairy if you proceed with the loan. Most friends will understand a “no”, even if they’re initially unhappy with it.
And if you are the friend in question who needs money and has few options other than friends, you could stand to save a lot of grief by simply not asking your friends for money. Even if you are disciplined with your money and making payments, the scope of the friendship will likely change as a result of a loan coming between you. In the same way that we don’t like to have a friend cover the tab all the time when we go out (even if they are better off), invisible lines can be drawn in the sand that have a subtle yet profound effect on your relationship.
Have you lost a friendship because of money or a lending horror story? Conversely, have you had good experiences lending between friends – and if so, what did you do to navigate the pitfalls?
Good post. NEVER, EVER borrow money from or lend money to family or friends. About 75% of all life's problems could be avoided if people would follow this advice.
And if someone is holding a grudge about $20.00 they lent to a friend way back when, they need to get over it. Twenty dollars or less should just be considered a gift, even if you don't let the borrower know it. Life's too short.
But, again, no problems to begin with if you NEVER, EVER borrow/lend money. Just don't do it.
I agree but I think it's much more simple: If you're "loaning" someone money DON'T expect to ever see it again. Just consider it a one time gift.
I've been on both sides of that coin several times earlier in life when I was more trusting. Neither is a good place to be, whether you're the one who owes or the one owed.
This is one of those areas in life where learning to say no politely, forcefully and EARLY can keep you and your friends out of some tense circumstances.
There was a line from Shakespeare on that, "do not a lender nor a borrower be"--good advice especially with friends.
I have a friend slush fund. There are a group of 5 of us who have all borrowed from and loaned to each other. This has worked for us for about 10 years because we set time limits and write a promise letter to document the transaction. For example, a few years back I borrowed money from my friend Julien. In my letter I promised that he'd be paid back in 90 days or he could sue me on the Judge Judy show. We try and make the consequences embarrassing and public so we're incentivized to keep our word. Typically our loans are for situations like: "I need an additional $3000 to repair the plumbing in my house that just went south and I won't get my bonus check until July 16th." They are short term loans to solve specific problems. Obviously this system only works for people who are generally responsible friends and responsible with money.
I've always liked the old saying: "If you lend someone $20, and then never hear from them again, it was probably worth it."
Loaning money can be horrible, and every real friend who has asked has understood when I told them my no-loaning policy. But if they need money for food, I invite them for dinner, or if they need money for car repairs, I offer them a ride to the store. I'm not stingy about service.
My rule of thumb is that I'll loan money once, but never more than than I'm willing to lose. If they don't pay me back, I write it off as a gift to them, and though I still consider them friends (unless they took the $20 and ran, or did something really stupid), I won't ever lend them money again. If they do, then I'll trust them enough to loan them money again.
When we had friends wanting to borrow money from us, both my husband and myself have to agree to loan out the money. In addition, when we give a loan, we usually don't expect a pay back. If we can afford to give that money out for loan, we treat it as gift instead. We rarely loan money out (twice in the past 10 years & in both cases, it was for our best friends' medical expenses and help out to put food on the table for their young children). Instead of loaning money out, we ask if they can provide a service for us. For instance, when a friend recently needed money, I asked her to babysit & I paid for her service. This way, she did not need to worry about paying me back and I did not feel like I need to chase her to get my money back.
A friend once offered to lend me money once when I was in a very tight spot. I paid her back as soon as humanly possible. I was very grateful, but I can't deny that is has changed the dynamic between us.
I would end a friendship over $20. Paying someone back should not be difficult. Paying someone back should be a priority. But I'm also the type of person where it bugs the hell out of me if a friend floats me a few bucks for whatever reason. I never forget and can't wait until I see them again so I can pay them back. It bothers me when I owe someone even a $1.
I've only lent money to a friend once. I didn't have a choice because we were roommates. He didn't pay ~$700 of rent + utils for one month and it took him 7 months to eventually pay me back. I didn't need the money but the entire time I was stressed out because I was saving for a house. It caused several arguments and after we moved out I stopped talking to them for a year. I eventually realized it was pointless to hold a grudge because they did pay me back so all is fine now.
The other alternative is to give the money AS a gift, and make it clear you don't expect to see it again. I've done this a couple of times, and always got repaid in full, but i wasn't expecting to.
I think it's the expectation that can kill the friendship.
Very intelligent comment, I agree.
And I want to add
If you don't want to pay large amounts as a gift, only as a loan, make sure it's a very good friend, a friend who can ensure you he or she will pay the money back to you.
So either you accept to give it as a gift, or if you really don't want to loose any money (if you want to give it as a loan) make sure it's a very good friend. And then, still there might be a chance you will never get it back. Yeah, life is full of risks.
Thanks for the comments, everybody - and I agree that a good way to view a loan to a friend is as a gift, so that the potential for disappointment is better managed.
I also like @M Wong (#4)'s system with friends of developing a slush fund, and it is truly a function of being a well-organized and trustworthy bunch of people to begin with - which helps.
I really like @kazari (#11)'s point about expectation being what kills a friendship. I would add that expectation + lack of communication is the nail in the coffin.
"Neither a borrower nor a lender be..."
That's me.
Approximately 20 years ago, I loaned a "friend" money. She had a small child and I assumed she needed it for a baby emergency. Later I found out she used it to get her nails done.
Needless to say, I never got my money back. It was worth it to find out the kind of person she was.
My philosophy: If I don't have it to give, I don't have it to loan.
The one time I loaned money, I learned that a person who can't manage his or her own money certainly can't manage mine enough to responsibly pay back a loan.
A few years ago, an acquaintance I'd known less than six months had the gall to ask me to borrow money, citing an emergency need to pay her auto insurance.
LOL
I told her I'd think about it. I never called her back, never answered another of her phone calls, and deleted every message she left.
It took her a while but she finally got it.
*shaking my head*
It's best not to lend in the small amount range of $100-$1,000. Anything under $100, it's fine, you're not going to go broke if you don't get paid back. But mentally, you will just boil, and that's just horrible.
However, if you are going to lend, feel free to lend be a larger amount i.e. $1,000+. The amount will be so large, you are likely doing them a big favor, and it is such a big amount your friend will have no choice but to pay you back. Only great friends borrow that much, and that's the irony.
The most I lent was $35,000. It was a bridge loan until his funds were released due to a divorce. It was fine.
Financial Samurai
A wise person once said:
If you loan money to friends, you'll lose your money, or your friends, or both.
Evolutionary psychologists have a fascinating take on this and similar topics: it has to do with the inherent conflict between our innate, rather primitive economic sense and the more sophisticated economic rules that modern societies live by. Steven Pinker's How The Mind Works (a great book) has an excellent explanation.
6 years ago I helped a friend start an Australian side of their software business (they already had a Canadian side running fine). After much pressure from them I brought $4000 worth of stock. I wasn't expecting to make any money from it, just be able to pull my money back out in a few months time once they were on their feet. At the time they printed me out a stock certificate and everything. Soon after I brought the stock, my friend's marriage fell apart and she moved back to Canada without letting me know (when I spoke to her she said it was just a break, but she never came back). I waited a year or so and decided I wanted to buy a house. Asked her if I could take my money out and she said that I didn't read the fine print and my money was tied up for 5 years. I accepted it as my dumb fault for not reading the fine print, but then asked if she could send something letting me know how my money was going. I didn't get any response from her. 3 years ago I got really pissed and I spammed every address I could find on their companies' website, letting her dad know what was going on (it was her dad's company). She gave me 1000$ from her own account, and said the rest would come the month later. Now all my emails are ignored and when I call up she's always out. It makes me angry because it's not a small company they are running. Their website is still operating, they are still trading. But because I am in Australia and they are in Canada legally I've been advised it's not worth the effort to chase them up. I'll never lend again no matter what the cause.
Whats the web site? We could all send her a msg. If she got 40 of them she might fork over the money. and if not, it wouldnt look good on facebook.
I am getting ready to ask for money back from my daughter and her husband, I need the money. I have been trying to find a nice way to say it, but I dont think there is one:(
We help our friends as we can. It's hardly ever money. It's more like, "I got this great deal on peanut butter at Sharp Shopper (our local bump and dent place) do you want some?" They never ask for help either. It's unofficial reciprocal keeping an eyeball out for each other. That makes it quite fun.
However one particular family member is the toughie. She's a poor mananger and every so often calls everyone for bail outs (gifts, not loans). When we say "no", she wonders why we don't just put our own needs on a credit card or something.
I've never had to deal with amounts more than $20, but here's my take on this:
Almost all of my "loans" to and from friends has been over coffee or dinner out--usually because one of us will say, "Hey, let's go for coffee" and the other won't have any cash on hand that day. Since we usually go to cheap places, it's never too much. And what happens is that one of us will end up buying the other's coffee/meal to "cancel out" a previously acquired debt. If it doesn't come out to the exact amount borrowed, it's just not a big deal, as long as it's close. A friendship that can end over a few bucks here and there is a friendship that should never have started to begin with.
I borrowed £5k from my brother back in January this year to start a new business after being made redundant and you know what comes next...The business didn't work out, I can't pay him back and now he has lost his job as well meaning that it has caused a massive rift between us. I feel dreadful and can't even look him in the eye because he needs the money as much as I do now. Wish I could turn the clock back.
I'm going through this right now. A friend of mine whom I knew was having financial problems wanted to buy a product that is produced by the company I work for. I get it at a discount, so I purchased it for her with the understanding she'd pay me back. The check's been "in the mail" for the last month.
It's not a huge amount of money ($100), but I'm more irritated by the fact that she's lying about having mailed me the reimbursement than just having the cojones to tell me she doesn't have the money. Of course I'm primarily slapping myself because I knew she was lousy with money and never should have agreed to buy it for her.
this is the thing that puts me at the most awkward position with people. it is very hard for a guy to sum up the courage to ask for money. it is particularly awkward for the loaner if the person is asking for the cash for recreational purposes and then defaults on the payment. and then when you need that cash you have to go and ask for it. this is a nice post but i think that is easier said than done. Let me illustrate. A chick that you kinda like just calls you out of nowhere and asks you for certain amount of money that you have at your disposal. Do you think that as a red blooded male, you will be able to start going through each of the questions above before deciding? i am willing to bet you any thing that the answer will be yes and after you are out that cash, you start kicking yourself in the head. this reasonable post is when you are dealing with a good friend in a situation that you can think objectively. thats my piece
I went through this. Two people who I considered my best friends took me for about $1000 within the space of a few months. Prior to this experience, I had always been willing to cover dinner or coffee if my friends didn't have the cash on hand with the understanding that they would pay me back. I had a lot of positive experiences with lending to my other friends, and the loan thing was not a big deal for me.
It is my fault for not cutting them off after the first few hundred, though I did attempt to cut them off after the first 3 weeks of them mooching off of me.
Obviously, it tore our friendship apart. One of them I don't speak to at all; last week, he had the gall to ask me to buy him a ticket to a concert after not speaking to me since February (by my choice). I said an unequivocal no.
Now I like to pay for myself and the only flexibility I have in going out with friends is the tip. It makes me feel anxious to have someone else spot me, although boys just seem to like to do it. I always cancel it out by buying them lunch later on.
i think it would be really cool to get the other side of the story
i mean people could anon say what went through there mind after they borrowed large sums of money and ignored the lender and so forth
i am talking more then just not having the money to pay bck
i am talking about the Chutzpah aspec where they just dont really care
fortunatly i dont have a lot of experience but i know of a case where a friend kept on borrowing from another friend and promising "tomorrow" and never ever happend just stoped answering phones it was a bad situation
I had a friend ask to borrow money, and after pretty much begging my husband he agreed to the loan. But I was upfront with my friend - this money was coming from our adoption fund and thus we really needed it back. She made lots of promises and thanked us.
To date we've only seen a small fraction of that money back. I really don't think we'll see any more of it.
My new policy - never loan money. To anyone. Period.
A friend approached me, and asked for help buying her books for university. Her student loan was delayed, and was due in any day now. I've been there, and managed anyway, so I agreed. Well, a few months went by and my partner's dad had another bad heart attack, and somehow my partner needed to get back to see him.
Not only had the friend never intended to repay me, she had been denied student loans because she owns her own house. And because I asked to be paid back, and wasn't as popular as she was (likely because I didn't give parties, being one of a pair living on one person's student loans), I was very quickly ostracized from my only social group.
Having nowhere to go, having nobody to talk to, having stress from my partner's father's poor health, it's not really a surprise that I was soon diagnosed with major depression and consequent to my depression, debarred from university.
That was a very expensive $500. I'm not sure I can ever forgive any of them, the friend who lied to me or all those who turned their backs on me.
I lend friends money, but only as much as I can survive without, and I never expect it to come back. I've been pleasantly surprised, but never again so badly disappointed.
This is so true, and I like the tips on navigating how on how to handle it. I wrote the same thing on my blog back in May after someone I knew went through the same thing. Luckily, that person got collateral for that loan, and will get something back.
Neither a lender nor a borrower be;
For borrowing dulls the edge of husbandry,
And loan often loses both itself and friend.
- Polonius, from Shakespeare's Hamlet.
Bizarrely, my very frugal (by necessity) partner is the go-to in his family for loans. His policy is fairly simple: make the loan if he can afford it, turn the request down if it's too much, assume it'll never be repaid, and don't lend again to the same person until or unless they repay on time. It's worked fairly well so far.
I've had good luck lending to friends, and i've been very lucky in the past, when I was in tremendous need, to have friends who gave without asking for anything in return - not money but practical help, a place to stay, job referrals, stuff like that.
The one ex friend of mine who would say our friendship was ruined by money - it wasn't, it was ruined by her behavior, she just chose to believe I cared more about money than friendship. I can afford to lose some money (though in the end, she paid me back) - I can't affort to be blamed and lied to when someone is afraid to take responsiblity for herself.
My boss has a terrible habit of borrowing small amounts of money (e.g. "Can you grab lunch for me? I'll give you some money when you get back."), and then never, ever paying it back. She's done this to everyone in the office at one time or another, and she seems to cycle through different people each week so that she hits each person once a year or so. We all know that she makes much more money than the rest of us, but she also supports several family members and is terrible at managing her money. It is conceivable that she's low on cash given that situation.
Since she pulled her "get me lunch" scheme on me today, I've decided never to fall for it again. The problem is, how do I say no to her next time? She is my boss after all.
Say this: "Oh, sorry, I'm totally out of cash. Actually, I was going to ask you if I could borrow ten bucks for lunch. Would you mind?"
I guarantee that this boss will never ask for a loan again for fear of being asked to reciprocate.
But I don't have a problem with it. When my husband lost his job his best friend saw us through the summer and we are paying him back slowly. But in their youth my husband's best friend lived rent free in my husband's apartment for months on end. It kind of seemed even to both of them. Likewise I have a friend who just went back to school. When I was in school and he worked full time he'd insist on paying. When he went back to school I insisted on paying. It's worked so far. Whatever I have extra I'm willing to lend and not see ever again but I think eventually one good deed gives big karma points--you get it back in many ways.
Margaret Garcia-Couoh
But I don't have a problem with it. When my husband lost his job his best friend saw us through the summer and we are paying him back slowly. But in their youth my husband's best friend lived rent free in my husband's apartment for months on end. It kind of seemed even to both of them. Likewise I have a friend who just went back to school. When I was in school and he worked full time he'd insist on paying. When he went back to school I insisted on paying. It's worked so far. Whatever I have extra I'm willing to lend and not see ever again but I think eventually one good deed gives big karma points--you get it back in many ways.
Margaret Garcia-Couoh
Friends/Family + Money + Lending = Tension
It's amazing the power money can have over people. Take any given situation, throw money into it and things change dramatically!
Lending money to friends and family can end friendships and change relationships forever. I agree it's better to give as a gift, but when there's expectation to be paid back things can get ugly. I've seen countless people bite the bullet after co-signing for friends and family so add co-signing to the list of financial no no's!
@Anon #29 - That's a tough predicament if your boss is the one asking for a loan! Yikes. I don't know if I could say no in such a situation either. I can only surmise that eventually her lack of positive giving-back karma towards her co-workers will come around on her at some time.
While I find regular lending and borrowing distasteful in acquaintances and friends, this is the real world where life without money is near impossible particularly for people with children. Moreover, occasionally destiny throws some really nasty hits our way. The fact is, sometimes when a friend is in truly desperate straits, to not lend or give money is simply morally WRONG.
If a person never asks for money, and then the time arises after several years of friendship the person asks to borrow either to start a business or because they are in dire straits, call the "friend" who refuses to lend them money, not cautious, but what they truly are: CHEAP.
My experience is the fear isn't over losing the friend, the fear is never getting the money back. And if you're so concerned about friendship, then think on this: a true friend is ultimately more concerned with not what they get out of the friend and the "friendship", but the well-being of the human being they call "friend" in the first place. If you need to make it a gift, do that. But a true friend, especially long term who is a friend only up to the point where their wallet is involved is not really a friend. They are somebody who you have shot the **** with for many years on a "friendly" basis.
I have a friend who earns $300K a year, and after several years of friendship, I hit a point of real desperation. I never ask for money, but the time came where it was necessary. Suddenly my calls weren't being returned and I got this weird message on my voice mail from my friend about how uncomfortable he was lending money. I asked for $1K. He knew I was desperate, and he knew that my mother was an older woman who lives on social security. I had known him a decade and shared many good times with him and considered him one of my closest friends. Gift or lending, he should have done it. In fact, he should have offered before I asked. It was the right thing to do. But then there is this stupid saying.
He did lose a friend that day. This is idiotic, and the lending and giving of money under certain circumstances is very much the right thing to do, particularly when you have a lot of it, and particularly when your friend is in serious desperate straits. The issue of losing the friend is should really be secondary under certain very real life circumstances.
I find this old maxim not so much entirely flawed, but morally wrong under many real life circumstances. It's entirely self-serving: if I lend money, I lose it, but if I lend it, I also lose the person I like to joke around with, especially if I want it back, and especially if ultimately, parting with the littlest sum of money freaks me out. So basically: everything is about the lender. The circumstances of the borrower are totally irrelevant. How very altruistic.
The maxim should clearly come with caveats, but it doesn't. You know why? Because the maxim was written by those with the money. When one is hungry and about to go homeless, it's not sensible to think about Calvinistic aphorisms, one thinks sensibly about FOOD.
@Jack - Thank you very much for your thoughtful reply and viewpoint. I believe there is lots of validity to what you say. But you attack the lender as being the cheapskate for not lending to a friend with whom they have history, and the excess money to do it - as was the case with your friend.
What about the borrower though? I know whenever I have been indebted to a friend, I have become very paranoid about my outstanding debt to them, guilty about it, and nervous that they are holding it against me (even if they aren't). None of these are issues of morality, if the borrower is putting themself through angst for having to borrow from a friend. Don't kid yourself - lines are drawn in the sand when one friend in need has to rely on another friend with excess. The friendship changes like it or not; sometimes though the changes are imperceptible for the initial strength and solid foundation of the friendship.
I had this experience like this before, it would hard to get the money back from my friend, she even wanted to ask me. She ignored me. I found these circumstances happened to me so many times. I totally wanted to give up with her. On other hand, if I had to pay her any money,she will keep ask me to pay her. I felt so ashamed about having a friend like her.
@ Jack:
Dude, you're an entitled piece of crap. It's not your friend's job to fund your life. Get a loan like a responsible person. Oh, the bank won't give you a loan? That's because you're a bad bet. Why should your friend lose ANY money just for the privilege of being your friend? You know what people who expect money for spending time with people are called? Hookers.
I'm going through this same thing right now, I have a girlfriend who is married to a miser husband, she is a stay at home mom, he only pays the mortgage and cable, every month she relying on friends and family to keep the utilities and food in the house, I have loan money to cover the mortgage, pay gas, light and water, she's has borrowed 200.00 to 400.00. recently she borrowed 200.00 and is dodging paying me back, I'm a single mother with 5 children, I'm so angry right now I'm spitting nails, this friendship is done, I'm tired of feeling financially obligated while her deadbeat husband, treats her and their children like crap, I'm tired of getting angry, when she finally gets around to paying me back, I'm kicking her to the curb, I'm also tired of spending hrs listening to how her husband verbally and physically abuse her, I have been so drained in this friendship that I'm just exhausted of having my energy drained with her toxic, negative, dysfunctional life. I really need to figure out why I keep attracting these broke ass loser female friends who constantly want to borrow money to make ends meet argh!!!
I think that goverments around the world should make it mandatory that lenders offer a service to disadvantaged customers, say a one off loan (capped at a reasonable amount) over 12-18 months at the minimum acceptable level of interest (to the lender anyway)
Similar to credit unions but make sure that loans cannot overlap and that in a 3 year period, you are only allowed one loan. If you allow people to keep renewing the loan after 12-18 months then it just becomes another rollover product which is how people get into debt most of the time.
If governments did more to help, then people wouldn't have to ask friends or family every time they needed a helping hand.
