Can lending money ruin friendships?

friendships moneyDO WHAT MAKE MAKES SENSE TO YOU

 

Friendships consist of mutual likes or dislikes or even complete opposites because one person will bring something out of the other.

Either way you look at it friends are different from family but can still be just as close.

There’s that old saying “You can choose your friends not your family” and for some unfortunate people out there that can be true.

Differing views on how each individual runs their lives or what they consider to be important changes from person to person.

 

 

Family

 

I’m sure there’s been times that my parents have had to bite their tongue when it comes to our family and their money situations. Although Mr. CBB is stable with his finances, it doesn’t hold true for my siblings.

I somehow was much more aware when my parents taught us about money from a young age. You remember the money-box I spoke about just recently. This is where more financial lessons come into play. I carried those money lessons right up to University and into purchasing my first home at a young age.

My parents have had to lend out money more than a few times to them when they should have known better to save something because that’s the way we were taught. I don’t ask the reasons why, but my parents do get the money back. They have helped with down payments on a mortgage, cars and even to pay bills.

This borrowing of money from my parents isn’t a normal everyday occurrence, just when the going gets tough. This is just another reason you want to have that emergency savings because you may not have friendships or parents to rely on when your money runs dry.

I certainly don’t hold it against my siblings or parents as they always get paid back. Plus, parents still have that instinct to look after their children even if they are all grown up and responsible. They have helped me out before, but usually with favours in the form of getting things done rather than asking for money.

Things would certainly be different if the money loaned out wasn’t getting paid back, then it might be time to step in and say “Whoa, that’s enough”. There’s usually valid reasons to borrow money, but to just keep taking and never paying it back is completely different.

Then again, there are some cultures where they wouldn’t even dream of wanting the money back because they work to help each other out. I know some people in Canada that I have become friends with who regularly send money home to their family just to help them live. They stick together as a team and nothing is expected back in return but love.

There’s nothing wrong with that either because that’s the way they want to handle lending money. There are no right and wrong ways it’s up to you to decide whether it’s worth lending money out to family or whether friendships will be ruined because you do expect the money back.

 

Friendships

 

If borrowing money from your parents or siblings is not an option then you could borrow money from friends. That is, if they trust you enough to pay them back.

Friends who borrow money may have perfectly legitimate reasons for wanting the loan. Being behind on bills would probably be the more common reason. It’s not like you’re going to lend your friend $30,000 for a new in-ground pool because that would be something they would go to the bank and get a loan or line of credit for.

The problem with lending money to your friends is that because they aren’t family you can’t pressurize them the same way to retrieve the money later on down the road. If you don’t mind losing the money completely then lending money to a friend won’t have the disappointing crush afterwards when they can’t pay you anything back at all.

Some friends are hard-core savers and when they do lend money to their friends you can bet they will add in the interest they would have made had the money been sitting in a high-interest savings account.

I don’t have many friendships that have open door lending policy on the relationship and to be honest I don’t know if they would lend me money since I don’t talk about finances with my friends. They know we budget our money but they don’t know how much money we earn and how much we our worth.

Sometimes it’s better for people to not know what you have than to tell them how well-off or debt-free you are. My reasoning is that it simply eliminates them wanting to ask for something they think you don’t have so they don’t bother.

The trouble with never seeing the money get paid back can lead to an awkward strained relationship and even ending a friendship. Since we aren’t fans of lending money to anyone it just saves our friendships and hopefully they can work on making better decisions for their finances so they don’t have to resort to asking friends and family to lend them cash.

 

Buying friendships

 

Finding yourself constantly forking out for lunches, coffee or even beer because your so-called best mate forgot his wallet may be a sign that you are unwittingly buying your friends. Remember Mr. Moneybags, don’t be him/her because eventually money means nothing. I’d rather have 4 true friends than 50 friends who are only there when they need something.

Do you find that the same person has absolutely no intention of sharing their money (when they have any) with you? It’s amazing that someone can change from “Sorry, haven’t got the cash right now” to “WooHoo…..just bought a hot tub” within a few short weeks.

You don’t have to know where they got the money just the fact that now they have some they should have paid you back or treated you rather than spending it all on something for themselves, again. I don’t know about you but I’m not one to ask for money back, although my wife is different.

She has no problem because she knows they need to be responsible for the money they were paid. If they were still struggling I’m sure she would hang tight. It’s just difficult when friendships can go from “needing” money to “forgetting” about you when they have new cash flow.

Sure, they may have forgotten and yes we’d both give them the benefit of the doubt but for us it’s best to just not lend money at all and save ourselves the stress and potential loss of a friendship. Selfish friendships like these are one way, they only benefit the person who keeps you hanging on because you are the mobile bank.

A much broader version of what I’m trying to say which encapsulates it nicely is what fellow blogger Bahiyah from Fabulous and Money Savvy says, Don’t become a reliable source of income for anyone“. You don’t have to buy friendships. You can have perfectly healthy relationships with your friends by drawing boundaries.

Don’t splash the cash all the time. Make them pay for half. If they keep insisting that you pay then maybe you should think about ending the friendship.

It doesn’t have to be limited to friends. Co-workers who pay into a coffee pool at work can be just as evasive when it comes to chipping in the cash. They will be happy to take a coffee every time a round is bought but come up with an excuse when the pot needs to be re-filled with money.

People have to pay their own way in this world so why should you bail them out just because you watch your finances. We all work hard for our money so you decide how you want to spend it and save it but don’t be the last one standing with nothing in your pockets.

Friendships and money in my opinion are never a good thing unless you don’t expect the money back in return. In that case you may not have any issues with lending money to family and friends. We have a long way to go to fund our retirement and other family affairs and don’t think that we will become Mr. and Mrs. CBB Mobile Bank anytime soon.

 

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Mr. CBB
I’m from the UK and now a recent permanent resident in Canada. I bought my first house at the age of 21 after University then my second at the age of 24. I’ve always been fascinated with personal finance, savings, learning to make money and watch it grow while combating debts along the way. Canadian Budget Binder is a place where I get to share my experiences with personal finance and learn about yours along the way. I hope you stick around and check me out on Twitter, Facebook and Pinterest where I am active on all social media sites. Cheers, Mr.CBB
Mr. CBB
Mr. CBB

Comments

  1. Does it ever bother you that your siblings aren’t as financially fit as you are? For me, I thought it was cool at first that I was killing it financially and pulling ahead of my older siblings. However, now it’s a tad depressing because my ‘competitors’ aren’t very challenging..

    Subscribed. :)
    @WilliamLipovsky, First Quarter Finance recently posted…How I Live in the Country Club Neighborhood… For FreeMy Profile

    • I guess to some degree yes because they are my family and I want only the best for them. I’m certainly in no competition with them but I want to know they are going to be ok. It’s always difficult if you have family members that struggle financially. Thanks mate! Mr.CBB

  2. Borrowing money from family or friend is super tricky. We borrowed money from my husband’s grandparents to help with the renovations on our home, and even though it is an interest-free loan, it is still our priority as far as debt repayment. I really, really do not want money to come between us! Fingers crossed, we will have it repaid by Christmas!
    Retired by 40 recently posted…I Joined the Yakezie Challenge!My Profile

    • As long as you both have communication lines open about the debt and are paying them back as you discussed then all should be well. You can easily see how friendships can be ruined if someone just shrugs the loan off as if it’s no big deal.

  3. Isabelle says:

    I would lend money to SOME family members and SOME friends but with an understanding that they will pay me back. They know that if they don’t pay me back, the relationship will be ruined. Clear and simple. And if I won the lottery, I wouldn’t give money to friends and family (except my mother) because I would be annoyed if they went to the casino and wasted ‘my’ money instead of making what I consider to be good decisions. So I would pay them things instead. Like paying someone’s mortgage, or paying someone’s education, that kind of thing. I work too hard for my money. I want it back if I loan it. And if I give it, I want it used for something good! Like we say in French: les bons comptes font les bons amis. (Good accounting makes good friends?)

    • A fan on my Facebook page mentioned that the post is not about “gifting” it’s about “lending” when it was mentioned to give with the realization you won’t get it back. If we all did that we’d be broke. There is no reason we shouldn’t expect money that we worked hard for back but for some people they simply don’t mind.

  4. I’m not a big fan of loaning money to family and I’ve learned through bad experiences that it’s easier to say no to a friendly loan than it is to end a friendship over petty fights over money owed. Even when it comes to family, there has to be a good reason before I’ll lend. It’s not that I don’t care about them, but loans cause way too may arguments.
    Josh @ CNA recently posted…Being Nice Bites! My First Rental Income Fail!My Profile

    • I agree with you Josh sometimes it’s not worth the hassle and it’s better for some to learn that money doesn’t grow on trees and just like us we had to live a frugal life and save no matter how much money we had coming in. Even $5 saved a month is better than nothing… there’s always a way to save.

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