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The first rule when you lend money to relatives is to imagine that they will never return it and accept it. The first rule when you borrow money from relatives is to always pay your bills. If everyone followed these simple guidelines, this article would be full of photos of happy families smiling carelessly and having no idea what financial conflicts are. But, as you can see, it is not.
Family therapist Megan McCoy explains that borrowing shifts the “center of power” in a relationship. The one who gives money feels strength and power, because he is more responsible. This makes the borrower feel inferior. This is how rejection and rejection is born.
The situation develops as follows. Someone in the family asks you to borrow money. You do not want to give them and, perhaps, even condemn a relative for how much he has launched his financial situation. But you still agree. And then be patiently silent every time a loved one comes to you in new shoes and with a huge latte from the nearest coffee shop. At the same time, the relative feels embarrassed and angry at you for “making” him feel this way. At some point, you realize that months have passed, the debt has not yet been returned to you, and the debtor hopes that you have long forgotten everything. As a result, everyone is unhappy, and a crack appears in the relationship.
Megan McCoy adds that in our society, money is a taboo topic, we really don’t like to talk about it. However, unresolved financial conflict quickly becomes a symbol of power and control and destroys relationships. Expert recommendations on how to correctly lend money to loved ones will help save them.
What to do if you are asked for a loan
think carefully
You do not have to immediately say yes when a relative asks for a loan, no matter how difficult his situation may be. Financial planner Brittney Castro advises responding something like this: “I would really like to help you. Give me time to think if I can do it without hurting my finances.”
Even a few minutes of reflection will help formulate the right questions. Financial planner Hilary Hendershott recommends turning on “detective mode.” That is, to find out how much money you need, why, what kind of financial situation the relative has now and how it can change in the future, and also to understand whether he will be able to repay the debt and when. After you get answers to all questions, you should think for another two or three days and only then report your decision.
Discuss the situation with a partner
If you are married, it is important to consult with your husband or wife during these two or three days of reflection. Especially when a relative asks for a large amount.
As in any other situation, openness is the main thing in such a conversation. Psychotherapist Megan McCoy advises taking the time to talk about the attitude towards money in general and how it has developed. This will help to understand the point of view of the partner, especially if he is overreacting to spending and financial issues.
If the husband or wife is against borrowing money, it is better to abandon this idea. Experts remind that marriage is also a financial partnership. This means that if the budget is general, those who do not want to give money have the right to veto.
trust your intuition
Both family therapist Megan McCoy and financial planner Hilary Hendershott point out that lending money is almost always a bad idea. And they advise to refuse every time when there is such an opportunity. Even if a relative repays the debt, you will open a door that can no longer be closed. You will be perceived as a kind of “bank”.
Experts unanimously identify two situations in which you need to politely but firmly refuse: if you cannot afford such a change in your personal budget, and if your relative is known for never repaying debts.
You have to be prepared for the fact that after the rejection you will feel pretty lousy. Don’t push your feelings away and don’t be afraid to share them. Experts recommend telling a relative about your feelings at the next meeting. For example, in this form: “Now this is the best solution for me. I need to take care of myself too, I hope you understand.”
Check your finances
Such a step seems very logical and even obvious. But when loving parents who have done so much for you ask for a favor, you may never think of turning them down. You immediately take a credit card and run to help.
It’s hard, but experts advise saying no if you can’t afford to lend the amount you’re being asked for. Budgeting is your responsibility and yours alone. If you don’t take care of your finances, no one will.
Offer assistance
Whether you lend money or not, it is important to pay attention to the causes of the financial problems of a loved one and help solve them. Experts recommend looking for resources, such as books or free online courses, that motivate a relative to start planning expenses and managing money wisely.
Remember the expression “If you want to feed a person once, give him a fish. If you want to feed him for life, teach him how to fish.” This is exactly how it should work.
Family therapist Amanda McCoy notes that finding the causes of financial problems and their solutions will benefit not only the relative, but also you. That way you make sure he doesn’t knock on your door in a few months with another request for money. Both your relationship and your bank account will be safe if you help a relative find a part-time job or download a financial tracking app.
Treat debt like a gift
When you give money to someone, even the closest relative, whom you absolutely trust, you must immediately assume that he will never repay the debt. And come to terms with it.
Imagine that this is your gift. Then you will not feel embarrassed and hate to look at a relative at family gatherings. For mental health, it will be much better if you continue to live on without holding a grudge.
Consider a way to get your money back
Even if you consider money a gift, it doesn’t mean that your family member should feel the same way. When you ask someone for a certain amount, setting a date for repaying the debt is showing respect.
If a relative is not going to specify when he will repay the debt, experts advise to deal with this on their own. And before you cut your finances, talk about how long a loved one plans to return the amount you borrowed and how he will receive it.
Conditions can be fixed on paper. This way you will feel calmer. Draw up a kind of contract or download a sample receipt for receiving money. Include your names, amount, and due date. Make two copies and sign the “document”. This will help you treat the situation as a business deal rather than a personal favor.
Don’t judge
This is especially difficult, and for both sides. The one who lends money does not automatically get the right to criticize the spending of the one who borrows. Yes, maybe after you gave the money, your sister bought lipstick and your parents started planning a vacation. But do not hope that relatives will so quickly change the financial habits that have been formed over the years.
Let family members manage their money however they see fit, and don’t judge them. If you catch yourself feeling like this, experts advise reminding yourself that money is a gift, not a loan. Even when your gift is not spent as promised.
Borrowers usually face a different problem. Often they subconsciously believe that if a relative earns more, then they are entitled to a part of this income. Or they have the right not to repay the debt: “Well, what, it won’t decrease from him, and in general we are a family.” If you have such thoughts, try to get rid of them. Paying back means showing respect to the person who helped you in a difficult situation.
What to do if you borrow
In this case, the main thing is to treat money as a loan, make a plan for repaying the debt and follow it. And if it doesn’t work out, think of another way out of the situation.
Experts note that if you have to get into credit card debt to pay off a personal debt, this is a sign of serious problems with the budget. In this case, it is worth discussing new conditions with a loved one. And if that’s not enough, find a part-time job, sell things you don’t need, or ask for a raise. When we know that we are doing our best to repay the debt, it makes us feel more comfortable.
