Family, Money, and Loans

What I have to say applies to close friends as well as family, but it’s a theme that I’ve had a lot of experience with over the years, and posted about the latest not too long ago on my own blog. Here, I’m thinking it over with most of the emotion stripped out.

I was just mulling over the struggle we experience when relationships with family and friends intersect with money. We see some of this all the time: the subtle dynamics of ” my sibling the rich one” vs. “my cousin the poor one,” the profligate vs. the saver, the haves vs. the have-nots. Generational money (or lack of it) adds another layer of complexity to the picture, as does the responsibility factor: who should or must step up when times get tough? And how?

Today, more than any other time in my almost four years of blogging, this question carries an urgency thanks to the economy we’re facing. With an all-time unemployment high, stringent credit throughout the market, and businesses still staggering under the pressure, it’s no wonder that people will need a helping hand from time to time. Things happen, life happens.

It’s critical that as a possible resource, you make sure that your finances are in order. It’s a mistake to lend money that you cannot afford to lose. In this case, learn to say no. It can be tough.

If you can afford to lose it, and decide that you are at ease with the idea of losing it, if you choose to give a family or friend a loan, seriously consider making it a gift. I’m not encouraging giving the recipient a free ride, whether or not you choose to tell the person in question that it’s a gift is up to you: every situation is different and perhaps the person is a younger sibling or a friend or a child who needs the opportunity to take responsibility. That’s fine, but for the sake of your sanity, make it a gift on your part.

Early on, that suggestion didn’t make sense to me, but it’s starting to now. After many years of quietly resenting that the sibling loans I made, and after giving myself countless nights of heartburn when the money never materialized, it dawned on me that I honestly couldn’t afford to give that money away in the first place. The loan wasn’t a permanent solution, and beyond that, it was causing me more harm than good.

Even when I could afford to let go of the money, the unfulfilled expectations were driving me Crazy. Thus, in our most recent debacle, the verbal message to my father was: pay me back. In my heart though, I just let it go, and on my desk, my budget was reworked. Adios, money!

It’s still irritating to be out that money, but it’s not keeping me up nights fussing about what else he spent the money on or why he failed to repay the loan. It’s less personal, in a way. And in the grand scheme of things, a good night’s sleep is more important than $500 that won’t put me in the poorhouse.

[Hi! My name is Revanche, and I normally write at my own PF blog: A Gai Shan Life.]

About Revanche

Revanche writes the personal finance blog A Gai Shan Life.