If a work friend is asking for money, no matter what you say lending can be uncomfortable. If you say no to letting them borrow money, you feel like you’ve let them down. Or, they may think you don’t believe in them. Or trust them.
But if you say yes to loaning money to a friend, what if they don’t pay you back? Especially a work friend. That can get really uncomfortable. And messy. I’ve had that happen twice. Yup. It took me a while to learn how to say no. But also, when and how to say yes.
My messy experiences loaning money to friends
Story #1: Wife of work friend is asking for money
I once worked with a man who was very supportive and often helped me out when we had tight deadlines. After a while, his wife and I also became friends. She and I met at work gatherings and found we had a lot in common.
One day she asked me to meet her for lunch, and poured her heart out. They needed money desperately, as they were already two months behind on their condo payments. She said they might lose their home.
So, thinking of them as the good people I knew them to be, I decided to loan her a few thousand. Yup, I was going to save the day. And she begged me not to tell him. I didn’t ask questions or set conditions, although I should have. I simply trusted they would act as I would. You may have guessed the ending. I never got paid back.
Turns out HE had a bad spending habit, and she was always trying to protect him. And there was nothing she could do to keep him from continuing to pull them under financially. I finally had to let the friendship AND the money go.
Story #2: Former boss and friend is asking for money
Not having learned my lesson yet, I once again felt compelled to jump to the rescue when a former boss came to me for financial help. This was someone I greatly respected for her work abilities. And as a person who truly cared about her staff. Also, I knew that she made a lot of money. So why wouldn’t I trust her when she said she just needed a short-term loan?
Again, I loaned a friend a few thousand. And she promised to pay me back when she got her tax refund. (I didn’t know then that’s something a lot of people say when they want to borrow money. Especially people who don’t repay loans and have deep financial problems.)
And also again, I didn’t get my money back. While she did repay part of it, her spending habits were so out of control that she was quickly back in debt. So she had to apologize and ask for extra time — more than once. I finally let that loan and friendship go also.
So what did I learn about lending money to work friends?
- Well, first I learned that I had a bad habit of wanting to rush to people’s rescue. Not that the instinct to help is bad. But my results show I had a lot to learn about myself, as well as the best ways to help.
- Next, I realized that there is a good chance that people who get themselves to a place where they have to borrow (meaning they used up their credit cards, bank credit, etc.) are NOT likely to be able to repay their debt to you. Even if they sincerely want to.
- I also learned that waiting for friends to pay you back, as you watch then continue to spend, is not fun. In fact it is VERY uncomfortable. And terrible for the friendship.
- And, I found that even people who in all other ways are good and trustworthy might have a big weakness — their ability to manage money well. Including their ability to manage your hard-earned and carefully-saved money!
- Finally, I learned that I wasn’t really helping my friends in the way I handled things. Just delaying the inevitable, since they weren’t changing any of the behaviors that got them to that point of needing help in the first place. And it sure wasn’t a good way to handle friendship.
My basic takeaway when a friend is asking for money
My biggest takeaway — even more than knowing the people who are asking for help — is making sure you know yourself. Why are you really doing this if you decide to say “yes”? And how will this effect you if they don’t live up to your expectations?
For me, this is not a casual decision. And I decided that if I ever loaned a friend money again (and I did), that I would:
- Be prepared to never see it again.
- Make sure we discuss all the details, including how they got here and how likely they are to really be able to pay me back. And when.
- Have a contract in place — even with a friend.
Does that last one surprise you? I realized that it’s useful to both the lender and lendee to treat this like a business arrangement. Since, in effect, it is.
Doesn’t a contract with a friend feel weird?
Actually, no. Rather than feeling odd to be so business-like, it removed lots of the unknowns. The contract took care of things you might not have mentioned — or have been too shy to bring up — if done informally.
Yes, I knew I could still lose the money. I didn’t, btw. But, hopefully this increased the chances of keeping a friend, since they too took it on as a serious commitment that they were proud to honor.
Story #3: Loaning money to a friend with a formal contract
If you want to know more about this story here’s the article on my other (financial) site. It also shows a sample of the contract we created. Hope it helps you decide what to do if a friend is asking for money:
And what if you do want to say “no”?
If you’ve thought about it carefully, and your gut says “don’t do it,” best to err on the side of caution when a friend is asking for money. A real friend would understand. And if this ends your work friendship, then your friendship may not have lasted anyway. You’ll get over the awkwardness eventually.
Of course, if this is a work friend, then you want to show compassion for what they are going through. And, where you can, offer to help in other ways that do feel comfortable. But don’t let feeling embarrassed or pressured or plain old guilt keep you from doing what’s right for you!
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