Your Money_ The Missing Manual - J. D. Roth [152]
Discuss other options. Is there any other way you could help your friend? Sometimes people think money is the only way to deal with problems when there are actually other solutions.
Only lend money you can afford to lose. You may never see the money again, so don't put your own financial well-being on the line just because you feel sorry for your cousin Joe. Make sure you're taken care of before you lend money.
Be clear about your expectations. Draw up a payment schedule and discuss what happens if something goes wrong.
Tip
Use this loan calculator at Bankrate to create a payment schedule: http://tinyurl.com/BR-loancalc.
Get it in writing. Don't just hand over the money without some sort of record. At LawDepot.com, you can fill out a web form, and for 12 bucks you get a completed promissory note: http://tinyurl.com/LD-pnote. There's also a free sample template at Expert Law: http://tinyurl.com/EL-pnote.
Deal with problems right away. You may feel like a nice guy by not reminding the borrower that they're 30 days past due, but you're just setting yourself up for trouble. Keep the lines of communication open.
If you can afford it (and it doesn't seem weird), consider giving the money instead. That way there's no ickiness on either side. If your friend pays you back, great; if not, you can feel good about helping her out. And remember: It's always okay to politely refuse.
At some point, you may be the one borrowing money from a friend or family member. (You should do this only if you can't boost your income or tap an emergency fund.) When you borrow, explain exactly why you need the money, put the deal in writing, and then stick to your word.
Keeping your word is the most important part. That means repaying the loan as promised—or sooner, if possible. Take this as seriously as you would any other financial obligation; in fact, take it more seriously. If you don't pay the bank back, you'll damage your credit score. But if you don't pay back a friend, you'll damage that friendship and your reputation.
Don't make promises you can't keep: If you say you're going to pay back an extra $200 when you get your Christmas bonus, do it. And use the borrowed money for the stated purpose. If you need cash to buy a car because yours was just totaled, then buy a car; don't go out and use the money to buy a new plasma TV. If your friend comes over and sees you have a new car and a new TV but you haven't been making your payments, it's going to make his blood boil.
Love and Money
Money management can be difficult even when you're on your own. But throw a life partner into the mix and things get much more complicated. Financial conflicts can cause major problems in relationships—including divorce.
Your Money And Your Life: Spreading the Word
Making positive changes to your financial life gives you an awesome sense of power and control. Like any new believer, you want to share what you've learned. That's a good thing—but you need to be careful.
If you try to share your newfound wisdom with others, you may find they're not as excited as you thought they'd be; in fact, some will be insulted. Though you may have friends and family who could profit from what you've learned, if they're not ready to listen, you risk doing more harm than good by offering advice. (Parents, especially, aren't always thrilled about being corrected by their own children.)
Fortunately, there are some subtle ways you can help those who are struggling:
Lead by example. Suggest cutting back on family gift exchanges this year. When you go out to dinner, lobby for cheaper alternatives. Start walking to the grocery store instead of driving. Bring home books, CDs, and DVDs from the library. Don't make a big deal out of these things—just do them. Rather than goading your friends and family into saving, simply be an example of what can happen through smart choices.
Be willing to answer questions. When your friends who struggle with money see that you've got things under control, they're going to have questions. They'll want