Cash Tip 1 from Cam: Don’t Loan to Friends

January 28, 2007

For lack of something philosophical to write, I am going to take several ideas from a Dave Ramsey book (The Total Money Makeover) I was given for Christmas (thanks Lorilee), and use them to springboard blog discussions, since I haven’t had a really good discussion on my blog for a really long time. So here it goes:

Myth: If I loan money to friends or relatives, I am helping them.

Fact: If I loan money to a friend or relative, the relationship will either become strained or even destroyed. The only relationship that would be enhanced is the kind resulting from one party’s being a master over the other party.

I have had two experiences loaning money to friends. The first was my sophmore year in academy. One of the guys in the dorm needed new shoes or something along those lines immediately and the mail was too slow (he had the money en-route from his parents). The amount he needed was $100. We weren’t close friends and at the time I did have $100 saved that I could live without for a week or two. After refusing initially, I agreed only after he agreed to sign a note saying he owed the money to me. My roommate was around, I think, and if I remember the three of us signed it.

I didn’t really think too much about it over the next week, but about a week and a half later, he showed up with an envelope with 5 crisp $20 bills and handed it to me to satisfy the debt payment. I was happy. The debt got paid and I wasn’t out $100.

The other experience in loaning money to friends has happened more times than I’d like to admit, and it usually involves smaller amounts than what I loaned my friend in academy. Some cases involved loaning money for gas, for food, for movies. A few times I was paid back, but most I wasn’t, and it often strained the relationship from my end when I see the person spending/buying optional things with money they could have paid me back with.

Solution in my mind: Give money instead of loaning it, or buy something of theirs that would equal about the amount that is being loaned. That way the master servant dynamic is removed and in the latter case, there is a clear item that has changed hands (which keeps one side from conveniently “forgetting” or thinking they have already repaid the debt).


One comment

  1. Bub, just wanted to drop a line and say thanks for spreading the word about Dave Ramsey and staying out of debt. You hit the nail on the head; giving dough is one thing, but getting involved with loans will always make the front page of Bad News, in my book. Way to go, baby! http://www.debtective.com

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