Comments on: Applying the Golden Rule to Tough Personal Finance Situations

By: Lou

Lou — Tue, 10 May 2011 22:49:52 +0000

I gave money to a family member for a medical emergency. I don’t regret it. What I do regret is that i took the $ out of my retirement savings & wrote the check to the family member. I had to pay income tax on the withdrawal.

If I had written the check directly to the medical facility, I understand, I could have taken the medical deduction & saved several thousand dollars of tax.

By: Borealis

Borealis — Tue, 10 May 2011 11:08:31 +0000

Mark Gavagan does have the Utopian solution. If you can do that, then that is what you should do. But if you can do that, you probably aren’t reading personal finance blogs.

A lot of people might be able to just give money to help out in a crisis or invest in a child. But very few can just give money for a get-rich investment and not have feelings about whether it is paid back.

Just be sure your feelings are settled before you undertake the loan as a gift.

By: Mary

Mary — Mon, 09 May 2011 18:57:51 +0000

Mark Gavagan has the idea.

By: Mary

Mary — Mon, 09 May 2011 18:56:50 +0000

In my college financial class, I was taught, what I think was, a good rule of thumb for dealing with loans to family or friends. When asked for a loan from family or friends, give it as a financial gift with the assumption that you will never get that money back. Cash gifts endear a person to you (most times) where loans can cause tension between you and/or the loanee.

By: Mark Gavagan

Mark Gavagan — Mon, 09 May 2011 10:35:58 +0000

Depending upon your own finances, the relationship, the amount and the reason for borrowing money, you can also just give the person part or all of what they were seeking and say it’s a gift, it never has to be paid back, and it’s the only time you’ll give or lend them money so part of the deal is that they never ask again, and that you or they agree to never talk about this money again, to each other or anyone else. If they insist they want to pay you back someday, tell them they can if they want to, but you consider the money a gift and they don’t ever have to think about it again, because you won’t.

By: deRuiter

deRuiter — Mon, 09 May 2011 09:38:40 +0000

I’m with Carl, if the bank won’t lend them money, don’t you dare lend them money and NEVER, NEVER, NEVER cosign for anyone else’s loans. If you lend money it won’t be repaid and they will hate you for asking for what is owed. If you cosign, they will renege on payments and you will be forced to pay off their loan. Someone forgot his wallet at a dinner out or is $5. short is different. Make a mental note of whewther you get back the money or not in these latter cases, and know how to act next time. If a bank won’t lend them money, it’s because the bank knows they won’t pay it back! I am so tired of thrifty, well meaning people being victims and running around after the fact moaning that they are not being repaid money they lent to friends and family. If the bank won’t lend, THERE IS A REASON! It is our government’s policy to fleece the rich to support the non productive and lazy, don’t follow the same path.

By: Mel

Mel — Mon, 09 May 2011 06:17:56 +0000

To be honest, I don’t really understand the hard-line “never lend to or borrow from friends and family”. Sure, if you have friends you don’t trust, I can understand that. I can also understand not wanting to lend to financially-irresponsible family who you feel are just taking advantage.

But, I see a different possibility as well. I was in a position where the ‘right’ choice was to take out a loan in my current country to pay off a student loan in my home country immediately. We decided on a bank loan and when my husband’s friend found out, he said we should have asked him. He had the same amount, sitting doing nothing but earning minimal interest. We could have borrowed it from him and paid him more interest than he got from the bank and much less than we were paying the bank. In the end, we would’ve also avoided a lot of early-payment fees! (We had to – and were able to – pay it off immediately to qualify for a mortgage)

We’re now in a similar position again – we need more money than we have, in a short time. This time I believe we will go to this friend instead of (or as well as) the bank.

(For those thinking “they must be irresponsible to need to always borrow money”: my husband had a surprise career opportunity for which he had to quit his current job. We will be on only my small for a short time so want to keep savings, but he needs a significant amount to buy out his stock options in his former company. At the same time, our wedding was 1 week ago and we’re currently in the process of renovating a house. Sometimes life just happens like that)

By: Borealis

Borealis — Sun, 08 May 2011 17:30:58 +0000

If you are going to loan friends or family money, then PUT IT IN WRITING. You still might not get your money and might end up ruining your relationship with the borrower, but the borrower can’t go around lying to other friends or family about the loan (which they will do) and ruin other relationships.

Just don’t expect that to be legally enforceable unless you know what you are doing.

The best advice is for you to consider any loan to be a gift and not care if you are paid back. That works well for lunch money or “forgot wallet” matters, but is hard to do for substantial amounts of money.

By: lurker carl

lurker carl — Sun, 08 May 2011 16:27:34 +0000

Friends and family ask for “loans” because they can not afford or obtain money from commercial sources. If those in the business of lending don’t think they will get their money back, why would I expect a different result if I lend the money? Same with co-signing a loan. Forgetting your wallet is a different scenario, common sense must prevail.

By: Eboo

Eboo — Sun, 08 May 2011 15:19:53 +0000

I’m learning to say ‘No’ now to family who have borrowed in the past, and it has led to having some hard feelings, not that I’ve told them how I feel about it. It’s almost an annual request now. They need money for something big, and know I have more than that amount.I’m practicing for this year’s answer to be an absolute no, I will not lend them money. It’s going to be hard. I know it would never be reciprocated, even if they had it. Thanks for the insight on this issue.

By: Jules

Jules — Sun, 08 May 2011 15:13:43 +0000

Honestly, like the post about selling to/buying from friends, sending out a pre-emptive message about not loaning or taking loans just seems weird. Not to mention rude. And honestly, if you’re short a dollar or two for dinner, or if your normally-reliable pal lost his wallet while on a night out, are you seriously going to not give/take money? I can understand being leary of giving/taking a larger amount of money, but sending out such a message before any of it happens just seems like you’re asking for trouble.