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Lending Money to Friends & Family - Good Idea or Total Disaster?
218 Plays10 months ago
In today's episode, we're diving into a topic that's as old as money itself: Lending Money to Friends and Family. Is it a generous gesture or a recipe for disaster? 🤔💸
👥 Highlights of this episode:
Pros of Loaning Money: We talk about when it's a good idea to lend money, the benefits it can have on relationships, and how it can sometimes be a lifeline for loved ones.
Cons of Loaning Money: The pitfalls! We discuss the risks, the potential strain on relationships, and the awkwardness that money matters can bring.
Guidelines for Lending: Whether you're the lender or the borrower, we share some must-follow rules to keep things smooth and maintain healthy relationships.
Real-Life Stories: Hear some of our personal experiences and lessons learned from lending money to friends and family. 🔍 Should you ever loan money to those close to you?
This episode doesn't just scratch the surface; it dives deep into the heart of the matter.
📝 Essential Takeaways: Lend with caution. Communicate clearly. Understand the emotional implications.
💬 Join the Discussion! Comment below to share your thoughts and experiences. Have you ever lent money to friends or family? How did it go? Let's chat about it! 👉 Don't forget to like, share, and subscribe for more insightful discussions on money matters.
🔔 Turn on notifications to stay updated with our latest episodes!
Hashtags: #MoneyMatters #FriendshipAndFinance #LoanWisdom #FinancialIndependence #ForgetAboutMoneyPodcast #FamilyFinance #MoneyTalks
👥 Connect with Us: Follow us on Social Media! @forgetaboutmoney on YouTube @ForgetAboutMoneyPodcast
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Transcript
Emotional and Financial Risks of Lending to Loved Ones
00:00:00
Speaker
Today we discuss the emotional and financial risks of loaning money to friends and family. Here we go. Welcome to Forget About Money, where we encourage you to take action today so you can focus on what matters most to you. And with me today, I have David Boyer and Mindy Jensen, and we're going to talk a little bit about lending money to friends and family. How are you guys feeling about that?
00:00:30
Speaker
This is a pretty good topic. Is anyone worried that their family might be listening right now? I know David's brother's going to be listening to this. Hey, David's brother, don't call me for money. Call David. His phone number is. And he's going to say no.
00:00:46
Speaker
because he always says no. But you know, that's an interesting point that I wanted to discuss is David's brother, Steven, wouldn't call him for money because he doesn't need to borrow money. And that's the kind of person that you want to lend money to. In general, I don't lend money to people who need it. And what I mean by that is people who are
00:01:12
Speaker
poorly managing their own money, doing things that, I'm going to be frank, if you know me, you know I'm kind of judgy. And if you are not spending your money in a way that I think is appropriate, like you have a new car and a new phone and very flashy clothes, and you need to help paying your rent. I'm not giving you money to help pay your rent.
00:01:38
Speaker
You blew your money on dumb stuff that you shouldn't have. You should take care of your necessities first.
Rules and Approaches to Lending Money
00:01:44
Speaker
On the other hand, if you have a small child that is going to go hungry, I'll probably buy you groceries. But no, I don't lend money to people who need it because then it becomes a really uncomfortable situation of are they going to pay you back.
00:02:00
Speaker
Uh, here's a look at the my crystal ball. No, they're not going to pay you back. They didn't have the money to begin with. They're not going to suddenly be able to pay all of their bills and a little bit extra towards you every month. So, um, that's a good rule of thumb is if somebody is asking you for money, do they really need it?
00:02:19
Speaker
So I'll kind of look at it from two sides. There's the you wanting to be a good person or what we think to be good people. And then there's the other person. And yes, whatever habits they had, it's usually probably a habits thing, whether they don't save enough money or prioritize savings, but you still want to help because
00:02:35
Speaker
you want them to know that you care about them and maybe you'll feel bad if you think that they don't think you care about them in some kind of level of guilt. I think that's probably a big motivator why people loan or give money to family and friends because if you didn't know this person, if it was somebody that came up to you on the street, which I lived in downtown San Diego for 14 months, that happened all the time. People just kept on asking for money.
00:03:01
Speaker
And sometimes I did give money, but this is not exactly the same situation. And if they ask you for money, are they coming to you because they know you have it? Or are they coming to you because they know that you have the personality or giving a generous personality that they can take advantage of? It's just very kind of a messy thing. So I wonder if you look at it, two different things. It's not just an agreement between two adults or a contract between two adults, even if it's just a verbal contract, there's more to it than that.
00:03:30
Speaker
Which is why i after many many times of getting burned for me doing what i think is the right thing i have to either reframe it of just gifting it and just saying loose like just keep the lines clear it's just a gift i don't care if you ever put me back even though if you say that i think you kinda always still do care if they don't pay back because it's still something between two people.
00:03:52
Speaker
that's kind of weighted. But it's very interesting how to manage all of those things, whether the guilt, whether it's the formality of it, whether it's the tension in the relationship afterwards, and how you deal with all of that as you go through. So that's kind of why, at least at this point in my life now, I'm just kind of at a blanket no, no to loaning money, or gifting money to people who ask.
00:04:14
Speaker
I know that makes me sound, I think that when I say it out loud, I think it makes me sound like a cold person. But at the same time, I've seen, I think the downsides of it have far outweighed their positive sides of getting the money to start with.
00:04:27
Speaker
Absolutely. It is really, really uncomfortable to be in a relationship with somebody, family or friends or whatever your relationship is. And you lend them money and then they don't pay you back. The first few weeks you get this, Oh, I'll get it to you next week. I'll get it to you next week. And then they stop saying that and you don't want to bring it up because you feel like they should bring it up.
00:04:54
Speaker
And then it's either this, but you know, your resentment is building just like the interest on the loan is building. And they either do pay you back on time, which is never the case, or they pay like, let's say you lent them a thousand dollars.
Impact of Unpaid Loans on Relationships
00:05:15
Speaker
They'll pay you a hundred dollars this month. And then the next month they might pay you like 50 and I'll get you the rest next week.
00:05:24
Speaker
and the next week never comes. And then they stop paying. So you're not getting any, you're not getting all of your money back and you start to resent this. You know, I helped you out in a situation and now you don't even have the courtesy to pay me back.
00:05:41
Speaker
It doesn't matter how much money I lent you. That was my money and you needed it and I lent it to you and you didn't pay me back. I have, I still have an outstanding loan. It's like 30 years old. Probably not going to see that money ever. Um, and it altered our relationship. I mean, I don't talk to this person anymore, so I can kind of guarantee that I'm never going to get that money back. But you know, it, I, I'm not at a blanket. No, like David is because
00:06:11
Speaker
because I have some friends who are doing real estate investing and they come to me for private lending to help them buy a house that they're going to, it's a very short term loan. But again, these are people who actually don't need my money. I'm not lending money to friends and family so they can pay their rent.
00:06:33
Speaker
And if they asked for that, that would be a blanket. No. If their kids needed food, that would be a blanket. Yes. I don't want to see kids go hungry.
00:06:42
Speaker
I think that there's a lot going on here. And I do wonder if there's a distinction between more of a business loan or business arrangement with friends versus lending between families. And I thought one of the things that was interesting, David, was when you said how I feel about myself. Like this reflects how I feel about myself. So am I a bad person if I don't lend money? This makes me sound like a cold person.
00:07:09
Speaker
And that's a reflection. And I wonder how we're all thinking about that. And also, as an audience, if I'm listening to this, what do I think about myself? Do I think I'm a bad person if I don't lend money to my family? And is that going into my decision? Am I still showing up as the middle child who
00:07:33
Speaker
Right? Who feels like she needs to keep the peace and fix everything and am I lending money out of guilt? Would I come to that relationship with judgment? Because since I have this family relationship, now I think that I need to give them financial advice or tell them what to do with the money that I've lent them. Or I'm going to have some resentment because they see that they are handling things differently than I would have. And family dynamics are
00:07:58
Speaker
a whole different ball game and then friendships can also be different and some people can separate the two some people can treat something like a business transaction some people read so much more into it. So i do wonder if some of those conversations could be had before you gave the law in order to decide i'm i'm a yes or no.
00:08:22
Speaker
The blanket note does seem to make it easier, but I don't know if it's easier if that's reflecting on how you feel about yourself or making you question. Mindy, you mentioned that it doesn't necessarily matter the amount of the loan, but sometimes these loans can be significant, like in the thousands of dollars. And in my experience, they have been, and especially with family. And at some point I just tell them, forget about it because I don't want to deal with it mentally anymore.
00:08:52
Speaker
And I don't want them to have to deal with the mental anymore. And if we ever get to the Thanksgiving or Christmases, or I don't want it to be this dark cloud over. So in the past, that's kind of what I've done. And then rarely do they ever say, no, I'm not going to pay you back and thank you. They usually just say, I'm going to pay you back and then just never, or rarely, send any kind of money to pay it back. But the nutballs in their court, and they're the one that has chosen to keep this thing dragging on, maybe because of how they feel about themselves,
00:09:19
Speaker
which is another reason why blanket nose are just a very good, for me, a point of departure.
Managing Lending Expectations and Agreements
00:09:26
Speaker
You said it didn't care, Mindy, going back to what you said, you didn't care about the amount of the money, or maybe you do, but not as much as maybe them disrespecting you by not either addressing it or at least being in constant communication about the repayment. So I'm not lending so much money that I am having
00:09:47
Speaker
difficulty paying my own bills. I'm not going to lend somebody money that I can't afford to lose. Just outright like David, I'm going to lend you $500,000. Well, not if that's my entire net worth. I'm not.
00:10:03
Speaker
If I can't afford to just wipe away the entire amount, then I'm not going to lend it because first and foremost, I am responsible for myself and my own situation. But what we get into is I've lent you $1,000 to pay your rent and then I see you not paying me back
00:10:25
Speaker
and then showing me your brand new iPhone a million or whatever. This isn't an iPhone at all. I see you showing me these new things that you've bought. And that's where Dusty said resentment. There can be a lot of resentment because not only are you not paying me back, but the money that you still owe me, even if I said, you know, and that's where it gets like, can you really let it go? If I said, no, you don't owe this to me anymore, let's just wipe it away.
00:10:54
Speaker
You should still feel obligated to pay me back. I mean, I helped you out in a time of your need, not my need. I didn't just have all this money sitting around and, oh, I got to get rid of this somehow. Please take it from me. It's you asked me for money. You should be a responsible adult and pay me back.
00:11:11
Speaker
Even if there's no interest, I gave you $1,000, you should give me $1,000 back. So there's resentment over you not paying. And there's resentment over whatever it is you're doing with your money. And that actually is a real life scenario. You lend somebody money to pay their rent and then they pay their rent with your money and then they take their money and they go do something fun.
00:11:34
Speaker
Do you ever find yourself in a position where you've been asked for money and you decide not to do it, but you want to help in some way? And what are some other ways you can help other than just outright giving a lump sum of cash, do you think?
00:11:49
Speaker
Um, you can do things like buy groceries. I know you're going to need to eat. So I am going to go to the grocery store. I'm going to get, cause you can't return groceries. I'm going to get you groceries that I know you're going to eat and I'm going to bring them to your house. Then you aren't spending money on that. You can take the money that you would have spent on that and put it towards something else.
00:12:10
Speaker
You can get them a gas card. Do they have gift cards to gas stations? You could fill up their car with gas. There's lots of ways to help people without actually handing over money to them. You could even give them a gift card to the grocery store. I don't think you can cash those in.
00:12:31
Speaker
I'm not too familiar with it, but one thing I would maybe look into if I wanted to help but not give cash, maybe there's an organization that would help, whether it's a church organization or whether it's other kind of financial organizations that help people in time of need. Maybe that's where they have to prove some kind of or at least show some kind of need. And then they have other maybe financial counselors as part of that group to help them, educate them. Maybe that's one way.
00:13:00
Speaker
That's a really great that's a really great point because if they do the work up front hey you can go in our city it's called the hour center. Hey you could go to the hour center dusty and they can help you with your mortgage payment or your rent payment or whatever and dusty says i don't want to do that.
00:13:21
Speaker
Well, then don't come to me for money. If you're not willing to help yourself, I'm not willing to help yourself either. Or if they really truly are in need, they might go. They just might not know where to even start looking. The only reason I know is because I got a newsletter this morning and I was reading it. Do you think if you do decide to lend money, it should be in writing?
00:13:44
Speaker
I understand when it's talking about gift, there's two things. Gifting, that's just giving somebody money and done. But when you're loaning money to family and friends, what are some things that we can do while we, if we've agreed to do it, what are some things that we can do to hopefully make that as smooth and less tenuous as possible? Do you go through and put it in writing? Is it a verbal agreement?
00:14:07
Speaker
in writing and signed by both parties, because that is admissible in court. And you can say to them, look, I am taking this seriously. If I just give you a thousand bucks, maybe it's no big deal to me. Maybe it's a frivolous thing. Maybe I'm just like, oh yeah, here you go, whatever. But if I'm taking the time to put it in writing, I lent David $1,000 on this date,
00:14:32
Speaker
To pay his rent, he said he's going to pay me $100 a month every month for the next 10 months. The entire amount will be paid in full by this and such date signed David and signed Mindy. And then we each get a copy of it.
00:14:47
Speaker
and paid in full at the bottom with two blank spaces for you to both sign off when the loan has been paid in full. And that I think is a trigger to the person borrowing the money. Oh, this is actually a serious thing. Hopefully. So you would include loan amount, repayment terms, the interest rate, if any. What about consequences of default?
00:15:11
Speaker
Yes, absolutely. When you sign a loan with a credit union or a bank or some financial institution, it comes with terms. And ultimately, this should be a win for everyone. This is great that they can come to you and you have the financial means in order to lend the money.
00:15:30
Speaker
It should also be great for you that your money is doing something for them and now you're going to get repaid with interest. And there should be terms, there should be the conversation of what happens if this doesn't go well. Because maybe they'll decide that they don't want to borrow money from you and they would rather go and seek out different assistance programs.
00:15:50
Speaker
that they would rather go and seek financial counseling or go to a financial institution. And I think you're giving them that option and you're also changing the dynamic of the arrangement so that there's not resentment. There's not all of this emotion around it. It really is more of this, Hey, no, we're going to treat this like an actual loan. And let's talk about this. Let's talk about what it can, what can happen, what could go wrong. I think that that actually diffuses the situation.
00:16:20
Speaker
And it's set some parameters instead of i think a lot of times and you might relate cuz she's from the midwest and. When was really great at being very passive and not saying things like we just don't put it out there.
00:16:35
Speaker
Well, just pretend it's not happening and then we won't have to have this difficult conversation and we can be passive aggressive because when things blow up, then it's, oh, well, I thought you meant this or I thought it was this. If you put it all in writing and you have that conversation ahead of time, it feels better. It changes the way that you both approach it and it sets a great dynamic. That is my thought.
00:16:57
Speaker
So in the financial independence community, there's some things that float. There's some things that float around like crypto or speculation investments. Like if you don't have $500,000, and I'm not sure what the exact rules of thumbs are, Mindy, you probably can help with this. Like up to a certain amount, you don't do certain things. Like you don't put 100% of your investments into crypto.
00:17:19
Speaker
or real estate or whatever pieces of the 100% pie goes to what that usually depend on your total net worth. So if you have 500 grand, you lose $5,000 or $50,000, it's not going to derail your plan. But if you only have $50,000 and you lose $10,000 or $5,000, that's more significant of a loss for your long-term growth.
00:17:41
Speaker
If, is there a point at which you, where's the point in your own net worth that you have enough money to start lending to people? Or would you advise just not do it up to a certain amount of net worth? Like say, if I've only got $50,000, I just don't lend. Or would that go into like the speculation part of the pie? Because you're really not sure if you're ever going to see that money again.
00:18:02
Speaker
My rule of thumb for lending money is don't lend anything that you're not willing to walk away from. And then it takes the net worth equation out. So your net worth is $50,000 and you're not willing to walk away from 500, then don't lend more than 500 or don't lend 500.
00:18:24
Speaker
if you can afford to walk away from $1,000 with a $20,000 net worth because you know that you'll just make more later, then lend the $1,000. I just think that you need to be comfortable with what you are lending. So I have a friend, you might know him as Mr. Wonderful,
00:18:46
Speaker
We're kind of best friends. Kevin O'Leary from Shark Tank, we've spoken once, and he said when somebody asks him to borrow money, someone in his friends and family network, he says, I'm not going to lend you money.
00:19:02
Speaker
I'm just going to give you this money with the caveat that you never, ever, ever ask me for money again. And I think that's an interesting distinction. I'll give you the money, David. Don't ever ask me for money again. This is the only time I'm giving you money. There you go. And you paid you back already. No more.
00:19:25
Speaker
But you don't have to pay him back. He's like, look, I will give you this money. You're asking to borrow a thousand dollars. I'll give it to you. Don't ever ask me for money again. And I think that that really sets an important distinction for the person who's borrowing. Oh, he's serious. And I think.
00:19:44
Speaker
one of the, and I'm not, I'm not saying this to you, David, specifically, but one of the things that can get kind of lost in the, the lending to friends and family is the not taking it seriously, not setting the lending parameters and not, you know, setting out this specific repayment. It can be uncomfortable to have these conversations, but if you want your money to be paid back, you need to,
00:20:14
Speaker
Set expectations upfront. That doesn't mean they're going to follow them. I mean, you know, look at the people that you've lent money to. Did you, looking back now, did you really think they were going to pay you back or did you kind of know in the back of your mind that they weren't going to pay you back? I mean, when I was making that loan for $500 30 years ago, I knew they weren't going to pay me back. If I go deep down, I hoped, I thought it would be really nice if I could just bail my friend out and they would then repay me and everything would be great.
00:20:43
Speaker
That's not how it worked. That's interesting because you said it was 30 years ago and when you said 500, the first thing that jumped into my mind is only 500. But 30 years ago, 500 probably was a much larger portion of your net worth. 30 years ago, yeah, that was probably a lot of what was in my bank account at that time. I was 21. I was a waitress at a bar. It wasn't a real big
00:21:10
Speaker
Pinch because I was a waitress at a bar. I could just go work a couple of nights and make that right back. You know, you can always pick up a shift as a waitress. There's always somebody who wants to leave early. There's always somebody who doesn't want to work on Friday or Saturday night. You can make a lot of money as a waitress at a bar.
00:21:27
Speaker
But here we are now 30 years later talking about this one thing that was only $500, and I'm saying only because only $500 is a lot of money to a lot of people. And I don't want it to be interpreted that it's not. And I'm saying that because now at our current net worth, it's only $500. But when you're a waitress or when you're just starting out in your 20s and you don't have a lot of money, that's a lot of money.
00:21:51
Speaker
Dan. It's still a lot of money now, David. I don't want to give you 500 bucks and not have it be paid back. Right. And then you talk about me in a podcast in 30 years. So I guess the point I'm trying to make is if you don't have money, and I think probably a lot of people who would listen to this are listening because they want to take care of their money and they want to do the right thing.
00:22:14
Speaker
and they want to be good people, but they may not have the actual means to do so. So if my cousin's asking me for money to, and this is a hypothetical, this is not a real, if my friend is asking me for money so that they can move into a rental unit that they probably can't afford or else they would have already had the money, I don't feel that I would be doing them a service really other than continuing to get them into a tough situation that they're going to
00:22:43
Speaker
continue to have to dig themselves out of. But at what point do I worry about that part rather than just the relationship part? So that's three different things that you gotta worry about. Maybe, if you choose to worry about those things. Or just give them the money like Kevin Leary says. Kevin Leary says and says, just don't ask me for money again and call it good. So that might be one step in from my current default of just saying no. Say no with a caveat that I'm just never gonna loan you money again.
00:23:11
Speaker
But also, can we go back for a second and pause on something that you said? If you are not in a position financially to lend money, give yourself permission to say no. That does not make you a bad person. It does not come with any emotional guilt or perception. I think it's okay to give yourself permission to say no.
00:23:35
Speaker
And to have that difficult conversation with someone and to offer assistance in other ways and your family may think that you are well off because you've started this journey because you're excited about money because. You're starting to have these conversations and it feels like you're more in control of your financial situation and it's okay to say no.
00:23:54
Speaker
I think you have to give yourself permission because a lot of us can beat ourselves up and and think that it makes us colder makes us a bad person or makes it seem like we don't care and i think this goes back to something you said at the beginning about carrying the cloning money is not. I care about your i don't care about you maybe there are other ways that you can show up for that person.
00:24:17
Speaker
maybe you can help them find assistance, maybe you can bring them dinner, maybe you can help them talk through their financial situation or connect them to someone that could help them talk through their financial situation. Whether that's a financial counselor or coach, I think you can show that you care in other ways and I think that you can give yourself permission to say no when maybe it's not that easy.
00:24:42
Speaker
Yeah, something I've spoken with people about is especially younger people who are either just starting or not quite that far along their financial independence journey is, think about how much you will be able to help later if you focus on your own finances now.
Financial Independence and Family Support
00:24:56
Speaker
It's okay for it to be all about you right now and your finances.
00:24:59
Speaker
because later if you do the right things when you're young, you'll be able to have so much more to help out, whether it's to help out friends or family or whether to help out causes through philanthropic endeavors. But especially if you're in the very early stages of wealth accumulation, it's going to be tough. I mean, it's going to be tough to weather that storm because then you had plans for your money,
00:25:24
Speaker
and then that changes because you gave a portion of it away and then that might slow down especially early on it can add years probably to your working career or at least months and thousands and thousands of dollars of net worth later on due to compounding or the lack of compounding on the money that you no longer have.
00:25:43
Speaker
And on the flip side, I think if you're a parent, sometimes that comes with this sense of responsibility that you always have to take care of your children. And what happens when you're gone? Like who's going to take care of that child that's always asking for money, always asking you to bail them out?
00:26:00
Speaker
then where does that responsibility fall? And I've had this conversation with my parents several times because my siblings both ask for help repeatedly. And what happens if something happens to my parents, then where are they going to go? How are they going to learn these skills? Who is going to be there to bail them out? And I mean, I don't want to sound selfish or cold and I worry about that sometimes too, but
00:26:26
Speaker
I don't have the means to take care of my brother and his son and my sister and her four children and their children. So, you know, at some point people have to learn these skills and they have to be able to seek out the answers for themselves. So maybe you're actually helping them more by saying no and helping them learn about things or learn about different resources. And then you can learn in the process as well.
00:26:53
Speaker
It's definitely a sensitive topic, especially when you're talking about family. And what about parents? I mean, what if the parents ask you for money? I know that's a growing concern and I'm not sure of all the statistics on where the boomers are financially and then the next generation, the next generations, but I know that the higher ages are growing quicker in population.
00:27:17
Speaker
And that's probably going to add some stress to the older generation to pay their bills and social security is not going to cover everything and statistics after statistics show that people just don't plan for retirement appropriately. So that's a growing concern for kids who see their parents getting older.
00:27:34
Speaker
And so is it just a, hey, my parents gave me money when I needed it. Now I give money to my parents when they need it, when they're older. I'm not sure exactly how that works out, but it's definitely a sensitive topic and requires empathy, understanding, and planning at all stages.
00:27:50
Speaker
Now there's an interesting word, planning. Now is the time to start talking to your parents about their financial situation for retirement, especially if your personal financial situation
00:28:06
Speaker
for now and for retirement isn't completely solid. You know, we are all in the financial independence retire early community and our financial situations aren't the same as most Americans.
00:28:24
Speaker
But if you are a paycheck to paycheck only child and your parent comes to you and says, hey, I can no longer work and I also have no money for retirement. Can you help me out? What are you going to do? You can't afford your own situation. How are you going to take on another mouth to feed?
00:28:46
Speaker
There are lots of things for you to consider. And if your parent is expecting you to take care of them in their retirement, this is something you should know now. I hope that you're not listening to this show being paycheck to paycheck only tiled with your mom knocking on your door saying, Hey, can I live with you now?
00:29:04
Speaker
But there are lots of things that you can do now to prepare yourself for the time when you need to take on some of the financial responsibilities of taking care of your parents. But the longer timeline that you have to plan for that,
00:29:21
Speaker
the more information you have with regards to your parents' financial situation, the better you can be prepared for that. There is a really great book by Cameron Huddleston that walks you through that process about how to have those conversations with your parents, and it's, I think, called Mom and Dad We Need to Talk.
00:29:39
Speaker
That's a great book. Yeah, it gives you the step by step. And then you can have the conversations while your parents still have all of their senses and nothing has happened, you know, hopefully, because I think those conversations are much harder if your parents start to succumb to dementia or one of these other things. And in the case of where you're not the only child,
00:30:04
Speaker
That's an even bigger conversation to have. Now you and your siblings need to talk about who is going to be supporting how you can kind of spread out the support load if there's support that's necessary. Where is
00:30:21
Speaker
mom and dad gonna live? Where are mom and dad gonna live? Especially if you're in different parts of the world. I know that David and his brother live on literally opposite sides of the country. So if their parents needed to live with them, who would they choose? Or how would they? I think Stephen is being volunteered for
00:30:45
Speaker
Steven is being voluntold. Steven is being voluntold. I'll write a check. That's when I will gift money. Steven, thanks man. Thanks for taking that one.
00:30:55
Speaker
But, you know, there's all sorts of conversations to have and there's, you know, there's, families are complicated. There's layers of complication. It's not just like one complicated little thing. It's like, ooh, so many layers of complications. Yeah. Have those conversations early so you can understand what's to expect. You know, maybe David's going to have to go back to work to keep giving money. That's what I'll just ask you for money, Amanda.
00:31:23
Speaker
Sure. How do you spell your last name? One large sum, because I know I'll never get it again. B-O-Y-E-R. So does it make a difference, do you think, if you're loaning money to family or friends? Do y'all put lines there? Would you be more likely to loan money to a family member because they're a family member or not, or to a friend because they're just a friend or not?
00:31:46
Speaker
Well, it doesn't make any difference to you, does it? The answer's still no. Well, I don't know. You've convinced me a little bit otherwise, so we'll see what the future holds. Let's see. I'm thinking of family members. Honestly, I think it would be more apt to lend to friends because your family is always your family. What about you, Dusty?
00:32:11
Speaker
I think it's an interesting question, especially as my nephews are getting old enough that they are going to start making house purchases and having some of these bigger things come to play where I would consider lending money to them potentially in the current status. I would say I'd be more apt to lend money to friends and to be more of an above. Like Mindy has done a funder in there.
00:32:40
Speaker
endeavors. So whether that's real estate or business or something like that, I would be more apt to lend to friends. What about you? Yeah, I think probably friends because you can't get rid of family members, but you can just disassociate from your friends. As sad as that sounds, you could probably just draw a line and be like, okay, well, we're no longer friends because I gave you a thousand bucks and you didn't pay me back and you're not talking about it ever and you think everything's just fine. So we're going to go our other separate ways.
00:33:08
Speaker
And now that might be, again, cold, but when compared to family members, which will, the attention will always be there. You could disassociate from somebody who's not your family member. I guess you could disassociate from your family member too, but probably definitely be more challenging and maybe not desired by either party. It's very politically correct answer. I think we could have a whole conversation or whole podcast on kind of
00:33:34
Speaker
family and friends and how some friends really become more like family. Yeah, I do think that if you, if you loan, I'm sorry, Mandy, go ahead. Friends are the family you choose. I wonder if you could go backwards. The other way is family. You said family are the friends you choose or friends are the family you choose. Friends are the family you choose. You don't get to choose your family.
Borrowing Money: Transparency and Planning
00:33:53
Speaker
Yeah, you just get put right into that genetic lottery. Yeah.
00:33:58
Speaker
So if you were wanting to ask somebody for money coming from the other side, if you were, if you found yourself in a tough spot, how do you think you would go about asking someone for money? David, can I have some money please? I promise I'll pay you back.
00:34:13
Speaker
No, I think you should present to present your argument why you need the money. Um, I would be far more swayed if I knew why you didn't have the money that you needed. Like what are you going to use the money for David? I am short for my mortgage payment this month. And the reason is I had some unexpected medical bills. If that's actually the case,
00:34:43
Speaker
I am far more interested in helping you out, especially somebody who I know is normally good with money and just had this one little hiccup, as opposed to I am always asking you for money. I never have money. I am always buying dumb stuff and doing stupid things with my money.
00:35:04
Speaker
David, I am short on my mortgage payment this month. I've had some unexpected medical bills. I should be back on track in two months and I can pay you back by the end of January in full. Can I borrow $36,000 please? I live in a really nice house.
00:35:26
Speaker
And then, you know, I've, I've told you what I need it for. I've told you why I don't have money right now. And I've given you an outline for when I will be able to pay you back. And I think the next stage is where it sort of can get uncomfortable. Cause then I would ask, well, how are you, how did you, yes, you had medical expenses. Are you not saving an emergency fund? Are you, how much money do you make? I know you went on vacation last, last month.
00:35:53
Speaker
Well, I went on vacation. I stepped on a jellyfish. It took all of my emergency fund and still more. It took my emergency fund and my mortgage payment. So now I need a little help, David. It's not my fault that you didn't point out that jellyfish as we were walking along the beach. Actually, it's your fault. Could I please borrow $36,000? I have a really nice house.
00:36:16
Speaker
And then as these interactions move forward, tension is going to grow a little bit, I think. And I think that's what makes people uncomfortable for talking about money or whether you're asking or being asked.
00:36:27
Speaker
the tension I think will, the tension starts to go away when I am making regular payments to you. And that's, I know that in my situation I would pay it back, but I also don't need to borrow it in the first place. So perhaps what could be done is, you know, Hey, I know that I'm going to get paid in three weeks and that will be enough to cover
00:36:53
Speaker
half of what I borrowed. So here is a check post dated. Here is a check for half of what I borrowed. And I will get paid on Thursday. So this is dated on Friday to give my paycheck an opportunity to get squared away with the bank. And then you can cash this on Friday. You already have this check. Or maybe I give you both checks post dated. This one you can cash on Friday and this one you can cash in a month on Friday or whatever.
00:37:21
Speaker
Um, that's another way to help your lender understand that you are serious about paying them back. It's, it's the, you know, when you're the one who's borrowing, when you're asking to borrow money, you're the one asking for a favor. Do everything you can to make it easy for the person you're asking the lender to say yes.
00:37:46
Speaker
Show that you're a good risk. Show that you are serious about paying them back and show them that you have a plan to pay them back. Well, I don't think I would have this much to think about at the end of this conversation. But both of you have done a really good job of expanding that conversation for me. So I appreciate that. What else can we change your mind about, David?
00:38:08
Speaker
I do, I do think it's interesting how there's so much judgment around it. And if you're asking for a loan, then you're probably worried that someone is judging your spending habits, your inability to make ends meet, how you're going to be spending in the future. And on the flip side, you really are judging, right? So if you're lending someone money, you are probably being judging. And I think it's a,
00:38:37
Speaker
kind of a fun conversation to have with the person so that you guys just can acknowledge upfront, this is uncomfortable. And I probably am going to judge how you're spending money. And you might be feeling some shame or some guilt or some emotions around having to ask me for this loan. So maybe we should just air it out before we do this to make sure that we're on the same page. And if you don't want to air it out, that's okay. There are lots of other people you can borrow money from.
00:39:06
Speaker
wouldn't recommend a payday lender, but that's always an option too. I just think that to me that's really interesting. I don't think we talk about that enough or we think about that enough because as much as what we're judging them for how they've spent money and that they have to come to us for a loan,
00:39:22
Speaker
they probably feel some shame and some guilt and they're like, oh, gotta ask this person. This is like my last resort. Or maybe on the flip side, they're coming to you because they do think that you're empathetic and they do think you're going to be understanding and they don't feel judged, which would be amazing. I think that with family, that's probably not the case 90% of the time. But if you do have that kind of relationship with your family, I think that's incredible and I need some tips.
00:39:49
Speaker
Yeah, I think it could be very uncomfortable for both sides. And one phrase I'd like to say, and whether it's definitely not appropriate in every situation, but it kind of does help me reframe things like this where, and the saying is, it's process not personal. So if somebody comes to you and asks for money, then you need to think now it's a process. And okay, now what is this process? Well, we don't have to recreate the will.
00:40:15
Speaker
There are banks that loan money. What is their process? They do credit checks. They do find out whether you're a good risk or not. And among other things, they do formalize the agreement. They do make legal contracts. They do sign agreements. And why should you be any different or they should be any different in exactly the same kind of transaction between two people who are just more friendly with each other than you and the bank teller?
00:40:39
Speaker
So I think that might be a healthy way to, if somebody does ask you for money or you're going to ask somebody for money to focus on, well, what would that process look like if I wasn't asking a friend or family for money or if a friend or family was asking me for money? It would be a bank. What's their process? How can I mimic that to the best of my ability with also being humane about it and not necessarily so black and white, depending on own circumstances, but
00:41:06
Speaker
That way, you can maybe separate yourself from the emotional burden of it all while you're trying to work towards a shared outcome. And on that note, I think we should wrap up this podcast. Thank you for listening to the Forget About Money podcast. He is... David. She is... Dusty. And I'm Mindy saying, see you soon.