Do you have family asking you for money? Are you struggling with the decision, should I loan money to a family member? I just went through this a few days ago. In today’s post I’ll walk through the process and the things I considered when making this decision. Hopefully, this will help you decide whether or not to loan money to family.
I was sitting in the family office space a few nights ago and was browsing the latest posts on Facebook. So yes, I was just wasting some time. I was sent an instant message from a family member that said “hey”. Glad to hear from him we started chatting back and forth. Then the conversation changed. He dropped the money bomb…. He said he had gotten himself into a pinch and needed to borrow some money. Concerned, I asked to make sure everything was okay other than the money. I was assured that everything was okay. He had just had some unexpected expenses come up. I chatted with him a little further and told him I’d talk to my wife about it and get back with him.
The Steps I Took In Making This Decision
Now this is a tough situation for me for a couple of reasons. One, I have a difficult time saying no, especially if it’s a family member. Two, I don ‘t like confrontations and I try to avoid them. My fear being that if I say no there may be a confrontation. Uhggg….
Following are the steps I went through to make this decision. This seems all nice and tidy, but this is a list I created after the decision was made. Trust me, it wasn’t this tidy while in the trenches. I struggled with this.
- Talked to my wife about the request.
- My mistake.
- Am I enabling a problem?
- Consider my own circumstances and my family’s needs.
- Call a trusted advisor to get some badly needed advice for a difficult decision.
- The ultimate, overarching question.
The Decision – Should I Loan Money To A Family Member?
First and foremost, I talked to my wife about the request I had gotten. When loaning money, you and your spouse definitely need to be on the same page and fully aware of the situation. Ultimately, she left the decision up to me since it was my family. My initial reaction was that it was family and I wanted to help. When family asks me for help I am typically quick to say yes. Part of this is sympathy and part of this is my desire to avoid conflict. Within just a few minutes I had decided that we would loan the money. Everybody was happy, Not…..
I didn’t sleep very well that night. I struggled with whether or not I had made the right decision. My wife always supports me in the decisions I make, even if she doesn’t always agree. In retrospect what I should have done was responded to the request by saying, “I’ll sleep on it and get back with you tomorrow.” That would have provided plenty of time for my wife and I to discuss it thoroughly and evaluate our situation and his. My mistake was responding too quickly.
Things to Consider
Should I loan money to a family member? That question was nagging at me… The next day we discussed the request further. I had not fully thought it through the previous evening. The things we considered were our own circumstances. If you’ve read my previous post you’ll know that I’m actually laid off this week. So we need to minimize our spending. That’s only logical. It’s just a week so it’s not a tragedy, but it does have an impact on the family finances. My daughter also has a trip coming up with her dance team that we need to pay for and my wife will be going with her. We need to set aside money in our budget to cover that expense.
With all of these considerations I still needed some advice. I called my trusted advisor… 🙂 This is actually an uncle that I have leaned on over the years for career and life advice in general. Well, I explained to him the situation and asked for some advice on how to handle it. In the back of my mind I’m still struggling with saying no, even after considering my own circumstances. In that discussion my uncle told me that this family member had already, just recently, borrowed money from him also. Okay, that shed some light on the situation.
Don’t get me wrong, I am all for helping those in need whether it’s a family member or not. With the new information I am asking myself, am I enabling bad money management to continue? I truly want to help others, but at the same time I want to avoid enabling negative behavior if possible.
The Ultimate Overarching Question
Before we ended the conversation I got one last piece of advice, don’t loan the money unless you are okay not getting the money back. If you loan money to a family member and you don’t get paid back this can cause a strain in the relationship. This wedge is going to be there until the money is paid back. There can be resentment. So if I was going to loan money to a family member I needed to be okay with not getting it back.
The Final Decision
All of the considerations were on the table. I’m still asking myself, should I loan money to a family member? Ultimately, I decided not to loan the money. This was a tough decision for me. Then I had to contact my family member and and tell him I had changed my mind. I was honest and explained why. This was not very much fun, but after the decision was made I felt a sense of relief. Sometimes you just have to tell people no….
Are you struggling with a decision on whether or not to loan money to family? What’s the toughest part of the decision for you? Is there something in your decision making process that’s different than mine? Let me know in the comments below.
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photo credit: Chris Potter