Interpersonal finance
None of this is expert advice. It's what people worked out for themselves, usually the hard way — what actually helped, and what they'd tell someone standing where you are. Take what fits and leave the rest.
If you only read a few
Give money to friends or family as an obligation-free gift with no expectation of repayment.
This negates awkwardness and resentment later.
- Only do this if you can afford to give it.
6 people, independently
- Treat any money you lend as a gift in your own mind before giving it.7
- Frame loans to friends as gifts that you are willing to lose, rather than expecting repayment.5
Use small amounts of money as a test to gauge a friend's reliability before lending larger sums.
If they don't repay the small amount, it was worth the price to learn their character.
3 people, independently
Refrain from lending or borrowing money, since these exchanges create social obligations and counterparty risks that can damage both the financial asset and the relationship.
Such transactions set a social contract involving counterparty risk; often, one loses both the loan and the friend.
4 people, independently
Do not lend additional money to anyone who has unpaid debts to you.
It is a sign they are using you for money.
2 people, independently
Use a signed contract or formalized promissory note to create legal proof of the debt.
It prevents borrowers from claiming they do not owe the money.
one person who lived it
Do not rely solely on text messages as a record of a loan.
Texts scroll away and become easy to deny.
one person who lived it
Ask borrowers either/or questions about specific calendar dates for repayment to prompt commitment.
It forces them to think in terms of paying on a specific date.
one person who lived it
Propose a lawyer-drawn contract to gauge the borrower's seriousness; if they agree, consider it a sign not to deal with them.
Their reaction to this condition reveals their intent.
one person who lived it
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Repay borrowed money before the lender asks for it.
It demonstrates character and integrity, and improves your standing in the lender's eyes.
5 people, independently
Work out whether lending will set a pattern where the person expects ongoing financial support because they know you will say yes.
Consider if this will be an ongoing thing or if the person consistently lives beyond their means.
one person who lived it
Consider the lender's financial position before accepting a gift or loan.
Determine if they are well off or struggling and if the amount is something they can spare.
one person who lived it
Secure time off from work before accepting a friend's offer to pay for travel.
It is difficult for employers when employees make prior plans without confirming the day off first.
one person who lived it
Stop lending anything to people who have broken your trust regarding previous loans.
Their behavior has revealed their character.
one person who lived it
Consider the cost of lending as the price to never see or hear from a toxic person again.
one person who lived it
- View losing a small amount of money to a non-repaying acquaintance as a worthwhile cost for identifying a toxic person.1
Keep quiet about friends who have not repaid you and avoid boasting about lending money.
It didn't change our dynamic as friends at all because I rarely mentioned it
one person who lived it
communicate with the lender if you anticipate being late on repayment.
Friends usually won't mind if you are a day or two late, provided you inform them in advance.
one person who lived it
Establish clear and specific payment arrangements before handing over any money.
Vague promises like 'pay me back soon' lead to problems.
one person who lived it
Say no to requests for money without providing an explanation or expressing remorse.
It can be liberating.
one person who lived it
Avoid asking friends and family for money to prevent mutual discomfort.
Putting friends on the spot to borrow money is uncomfortable for everyone involved.
one person who lived it
Say 'no' firmly without providing detailed explanations.
Providing details gives the borrower opportunities to propose solutions to overcome your reasons for refusing.
one person who lived it
Never disclose insurance payouts or windfalls to friends and family to avoid solicitation.
Disclosing such information often leads to shameless requests for money or investments from loved ones.
one person who lived it
Focus on regulated financial services over informal loans during hardship, as courts rarely adjust terms for poverty.
Regulated services have protections and reasons for their oversight that informal lenders lack.
one person who lived it
Refuse to lend money if doing so requires liquidating investments or causing significant personal financial strain.
one person who lived it