Let’s be honest upfront – it’s almost impossible to be completely objective when dealing with family and money. We love them and want to help them out if we can. The problem for some, myself included, is making sure that you’re actually helping them and not enabling them.
This post is mainly for those situations where you’re unsure if loaning or gifting them money is the right solution. For me personally, if my loved one is in a situation that they couldn’t really avoid, I’d help them out as best as I can.
From my personal experience, I’ve had relatives hit with emergencies more than the typical person and have received calls asking for immediate help. One of the best places to start is with asking some questions and then paying attention to their response. You’re not trying to intimidate them or make them feel guilty, you’re trying to get to the truth of the matter.
- What exactly happened? Start at the beginning and ask then when and how they
- How do they need and why? If they can’t give you an exact number and explanation, you may want them to call you back when they do. You want to encourage them to see if they can find a frugal solution out of this.
- What’s the plan to pay me back? I know, it’s tough to ask that, but it’s necessary. Why should you do all the heavy lifting? Instead have them take ownership of their problems.
If you feel bad about asking so many questions, just remember that if they went to a bank to get a loan, they would get a lot more questions and they would probably more financially invasive.
Now it’s time to ask yourself a few questions to help you decide what the next step should be for you.
- Can you really afford to help them? Be honest with yourself. Do you have the money to help them without hurting yourself? You may have some savings tucked away, but can you afford never seeing that money again?
- Do you feel like you’re being pressured and/or guilted into loaning money? The request for a rapid response has thrown me off before, but now I ask them to let me review my finances first before committing to anything. I need time to look at the situation and then I can decide what I’d feel comfortable doing.
- If you’re married, how does your spouse feel? If you’re a parent, how will this affect them? You have to balance your responsibilities with this request.
The final decision is up to you and having as much information as possible can help you be more objective.
Thoughts on Loaning to Loved Ones
I hope these guidelines can help you balance taking care of family and friends without putting your own finances at risk. Don’t stress if you still feel bad and loan out the money. I break my own rules at times. The main point is that you don’t hurt yourself while helping others.