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Hey girl, hey!
So there you are minding your business, when you get that knock on the door or phone call from that one person (for some of you… two, three or more people). You check your calendar and notice it’s that time of the month when bills are due and you already know exactly why this person is contacting you… MONEY! Money… that you probably do not have to give. Money… that you need to make your own household ends meet. Money… that you probably could and should be saving. But then the guilt sets in and for whatever reason you loan the money anyway, knowing that doing so could potentially put you and your family in a bad financial situation. Yet, so many people find themselves loaning out money to other grown folks which in turn, causes you (and that person) to stay in a financial bind. When anyone asks my opinion about lending money to a friend or family member, my answer is usually one word: DON'T! Here's why:
1. Most People are NOT in the Position to Loan Money.
Please do not misunderstand me... If you are someone who is financially responsible with your money and can afford to give money as a gift only ... then by all means, do so! However, if you happen to be someone who generously and freely lends money to other people, knowing that you need this money to pay your own bills and feed your own family (or just yourself), then girlfriend... we have a problem!
Do you really want to allow someone else to take from your household for their own personal gain? Do you know exactly what this person is doing with your hard earned money that you just handed over to them? Probably not. And I guarantee you, if you could be a fly on the wall to see if this person did with your money what they said they were going to do… you would be pissed! In many cases, the reason you gave the money in the first place is usually not what the person uses it for… I’ve seen it with my own eyes and I’m sure you have too.
2. Personal Loans Typically Have NO Guidelines and NO Set Time Frame.
When loaning out money to friends or family members, there are typically no initial rules set as one would have with a bank or credit union. These establishments make money by lending to an individual at an agreed upon interest rate and pay-back frequency. By setting these guidelines up front, both the borrower and the lender understand the terms under which the money is to be paid back.
It’s easy for a person borrowing from you to say, “I’ll pay you back when I get my next check” or “I got you when my income taxes come in” (major eye roll). How many times have we heard these lines before, girlfriends? First off, if a person has zero money management skills, how can you realistically expect them to pay you back in a timely manner (or at all for that matter) because chances are there other folks they owe besides just you. Secondly, if a person has failed to keep their word about paying you back in the past, they have proven to you that they cannot be trusted with your money. Don’t be foolish ladies… keep those coins in your wallet.
3. Continuously Loaning Money Enables Poor Money Management Skills in Others.
You know that saying "teach a (wo)man to fish...", the same concept applies here. Here’s a challenge for you… The next time that familiar person comes calling your phone or knocking on your door needing to borrow money from you, ask them if they need assistance managing their finances. If the answer is no… then you know they have no intention on becoming financially responsible and have absolutely no issues leeching off of you (and whoever else). But if the answer is yes… send them to Girlfriend’s, Budget and I’ll take it from there (wink).
4. Loaning Money Can Cause Broken Relationships.
As a Financial Coach and as an avid Judge Judy watcher (I love her!), I cannot tell you how many times I have seen close friends, family members, or ex-lovers fall out and/or sue each other over money owed. One thing that is not to be played with is your money, hunty, so protect those coins. Then ask yourself, if the roles were ever switched, would that same person be there for you if you’re down on your luck and need some financial help. More than likely… the answer will be no (the truth hurts).
5. Do NOT Let Anyone Guilt You Into Loaning Them Money.
Last, but certainly not least, we all have a story… and many folks who consistently need to borrow money usually have some sob story to use on you knowing they can pull on your heart strings in order to get what they want. Stay strong girlfriends and DO NOT allow anyone to guilt you into giving them money that you go to work for every day. You earned those coins… you keep them!
Until Next Time,