There’s a lot of financial advice out there, most of which is incredibly useful. Through reading other blogs and online articles, I’ve been slowly but surely improving my financial health. But when it comes to loaning money to loved ones, I never (and still haven’t) found any solid advice on what to do when someone I love and care about asks me to borrow money. It’s a topic I think of often, and one that has drastically impacted the way I interact with people who are close to me. If anyone out there is considering loaning money to a friend or family member, this financial confession may be for you.
I’m not a secret millionaire blogger, but I do have a comfortable financial situation. I have a great job in marketing and a salary that allows me to live in a beautiful apartment, travel often, and even shop at Whole Foods if I want to. I work very hard for my paychecks and I budget well enough to save approximately 20% of each one. I had to build up to that, of course, and I go through phases of overspending like a madwoman. In October 2017, I spent 161% of my paycheck. In December 2017, it was 155%. But for the last six months, I have spent an average of 73% of my paycheck. I’ve honestly never been prouder, and I hope to build up my budgeting skills to save even more. Maybe one day I can say I only spend 50% of my paycheck!
I’ve always been fiscally responsible, so those around me tend to ask me for financial advice, budget tips, and ideas for side hustles. And, on a rare occasion, loved ones ask me for money. It’s only happened a few times, but if any of you have loaned money to a friend or family member, you know how intense it can be. When I was 23, I lent $1,000 to one of my two sisters. I later decided that I wanted her to keep it instead of paying it back. It was partly because I was stressed about the process of keeping a family member on a “payment plan,” and partly because I didn’t think she’d ever be able to pay it back. It wasn’t worth it (literally) to have her struggle so much just to pay back some money I wasn’t using anyway. It’s not a very healthy way of looking at it, but I needed that $1,000 to be out of my bank account forever. I needed to stop thinking about it.
Later that same year, my other sister told me how much she was struggling. I don’t remember the circumstances clearly, but I do remember telling her that I’d be glad to lend her money to help out a little. It’s been six years, and she still hasn’t paid me back. She’s adamant that she wants to. I’ve offered multiple times to just forget about it and let that last $250 be a gift to her. I’ve tried it on birthdays and holidays. But no, she wants to pay me back. And I cannot fault her for wanting to get through this awkward situation with her integrity and dignity intact. I respect her a lot, but I don’t know if I’d ever be able to explain to her why it would make me feel better — more settled and more comfortable — if we just moved on.
Here’s the very boiled-down explanation of why lending money comes with some major strings attached: I will always remember that I lent the money, and my sisters will always remember that they received it. But it’s actually way more complicated than that. From my perspective, I had to spend thousands of my own hard-earned dollars on an unexpected purchase that in no way improves my day-to-day. Yes, my sisters got to pay a bill or buy groceries. And that’s very important to me — just as important as if I was paying that bill or buying those groceries for myself. But financial decisions are a big deal for me. I will sit and read Amazon reviews for 45 minutes just to buy a $10.00 FitBit band. And clicking “Place your order” still gives me a scary feeling in the pit of my stomach.
Perhaps because I have seen family members struggle, I know that my financial situation could change at any moment. I could lose my job, get in an accident, or become a caretaker for a relative. Or, on a positive note, I could decide to go on a nice, expensive, relaxing vacation and spend a little chunk of my savings. So I feel a lot of pressure to save up every dollar, regardless of whether it’s a healthy mindset or not.
From their perspective, my sisters are likely tormented as well. As for my older sister, I’m sure it didn’t feel good to ask her younger sister for a large sum of money. For my younger sister, I sense that she’d do anything to feel like she could be out in the world, surviving on her own and without the assistance of her not-that-much-older sister. None of us would choose this dynamic. I would want my sisters to have the means to pay for everything they need and want. And they would likely choose for me to hold onto my money to improve my own life, not theirs. The decision to loan money was emotionally tormenting — I love my sisters and I want them to be stable, but I don’t feel like I should be responsible for helping them with daily expenses. I feel equal parts happy to help and devastated that they need help. In other words, there is nothing good about loaning money. Nothing at all.
Maybe I shouldn’t have lent that money in the first place. Thankfully, in the six years since I agreed to give or lend money, I have not gone into debt and I haven’t needed the extra money. But that isn’t the point. The point is that the last six years of being a sister have been difficult and strained. I live in fear that my siblings will ask for money, and also that they won’t. And the thought of my sisters being unable to make ends meet is enough to keep me up at night.
Let’s get to the important part: the advice. Everyone has a different take on lending money to loved ones. For some, the decision is far less emotional than mine. For others, it’s the cause of estrangement. I suggest taking the decision very seriously. If someone asks, give yourself a few hours to a few days and really think about whether you can afford to write that check. If you know of a family member who could really use the money, think for a little while before you offer to step in to help.
I also suggest lending or giving money for a specific purpose. Buy their groceries, gas, or diapers for a month. Buy their next plane ticket to a family holiday. Offer to cover their next credit card bill. That way, the awkward transaction is over after a set amount of time, and you can carry on knowing that you were helpful in a specific and reasonable way. And if you have to write a check blindly, trusting that the person receiving it will use it wisely, protect yourself by having a frank conversation about the realities of lending and borrowing money from family. I promise, that conversation can’t possibly be as awkward as the feeling of having someone struggle to pay you back for six years.
Above all else, do what you can to protect the relationship between yourself and whoever you are loaning money to. Don’t kid yourself — it’s going to add a troublesome element to your rapport, one that is unique to money-related dealings. Talk about it openly, be kind to each other (and yourself), and be honest when something doesn’t feel right.
Has anyone else struggled with the decision to loan money to a family member? I would love to read your perspective — comment below!
Elizabeth prefers to write under a pen name.
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