They won’t pay you back

Yes, you want to help the people you love and there’s nothing wrong with that.   Just don’t loan them money.  You don’t know when you’re going to get it back, if you ever get it back at all.

Often, people who need to borrow are mismanaging their money.  If they need to borrow from you to cover their rent, lights, car, etc. what makes you think they’re going to be able to pay you back?  They’re barely making it as it is.  No matter what they say, what windfalls they think they’re getting, chances are they are not going to be able to repay you.

Are you prepared to act like a bank?

Banks go through a rigorous approval process before approving someone for a loan.  They also have strict processes in place for collecting on defaulted loans, like hiring collection agencies and suing for the money that’s owed to them.  Are you prepared to go this far when someone wants to borrow money from you and doesn’t repay you?

“Give a man a fish…”

Teaching your loved ones about better money management is a much better gift than a $100 loan.  If they learn to budget their money and control their spending, they may never have to borrow from you or anyone else ever again.

If you don’t know about money management yourself, don’t try to give any words of wisdom.  Instead, take a trip to your local library and check out a few books on budgeting and personal finance.

It’s ok to help, just don’t loan

I’m not suggesting you leave your loved ones hungry and homeless.  When it comes to loaning money, my motto is Don’t loan what you can’t afford to give.  Help them out, within reason, but don’t put yourself in an financial bind.  If they repay you, good.  If they don’t, good.  Lowering your expectation of repayment will save your relationships and keep you from stressing about making your own ends meet.