When Should You Say No to Those Who Want to Borrow Money from You?
I think most of us have been asked to lend money to someone we know. No matter how close you are with the potential borrower, there are certain situations when you just have to say no. Here are some of the times I think you should absolutely keep your money for the sake of your relationship with the other person and the well being of both parties.
1. The money is enabling an addiction - If you know full well that someone has a drug habit or gambling problem, you should not give them money. The best thing you can do is to get them real help such as rehab because otherwise the money will be spent on their habit. If you become an enabler by giving them money they may hurt themselves even further.
2. Your boss is asking you for money - I wrote about this in an article about crazy bosses . A manager really should not use his or her authority to secure a loan. It is highly unethical and you should not be afraid to report such behavior to the higher ups or even the authorities. If your boss is really your friend he or she should not take adverse action against you even if you refuse to give them money. However, if a manager targets you in a threatening manner because you refused to lend money you know that they should be reported.
3. Good money is going towards irreconcilably bad debt - I read a story somewhere about a very responsible man who had extremely irresponsible in-laws who took out multiple cash out loans on their mortgage and ended up in near foreclosure. They were asking their son in-law for help to cover their mortgage which is now twice their income. I think in cases like this when you know the borrower cannot manage the money you give them you should not let them squander what you earned and saved. What would really help is to teach them to manage money responsibly, otherwise, continually paying off a chronic debtor's debt for them is no different from enabling a drug habit.
4. Repeat borrowers or leeches - In some families there is just that one person who has a track record of hitting up everyone for cash. If they are perfectly able to work and generate income and choose not to do anything but borrow money then you should refuse to be taken advantage of. Once again, what would really help these people is to teach them to become financially savvy, and that can be done with coaching and perhaps employment opportunities.
In all of these cases, you should think of alternatives to money to help those you do care about. Ask them what the situation is, and look for ways to improve their lives without giving away a bundle of cash. In most of the stories I have heard, relationships actually get worse if money exchanges hands because more often than not the borrower does not pay the lender back. If someone is worth helping you should dig deep and find the root of their problem and help them eliminate it, and if someone is just an opportunistic jerk perhaps it is better to sever that relationship and improve your life. Either way, you must be strong and say no when they ask you for money, even if they promise they will pay you back.