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Friends, Family, and Money Don't Mix - YouTube
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hello and welcome to your money 2.0
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I'm Thomas Fox community outreach
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director at Cambridge credit counseling
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when you want a tough spot financially
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you may consider asking friends and
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family members for assistance
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nine times out of ten their first
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inclination is to help you out but many
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people learn the hard way that
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relationships and money are a poor mix
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whether you're considering asking or
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making a loan to a friend or loved one
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there are a few things you can do to
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save yourself a lot of stress and strain
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relationships if you've been approached
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to lend money there are a few things you
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should consider first adopt the casino
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mindset only lend money you can afford
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to lose to be honest people don't intend
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to renege on their obligation to you but
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they're borrowing money for a reason
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perhaps that poor financial managers or they're
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simply unaware of the magnitude of what
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the impact of their request might be on
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your finances
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although it wouldn't be their intent you
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may never see your money again could you
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live with that loss if you are able to
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lend a hand but are concerned about
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repayment you may want to make some
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stipulations one approach would be to
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encourage the borrower to talk to a
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financial counselor or participate in
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a money management class
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upon completion you can lend the money
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they requested if the person is somewhat
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frivolous you could agree to only pay
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certain bills for them such as groceries
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or utilities you can request that they
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show you a monthly budget to see where
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the money is gone
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giving you the information you need to
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decide if you want to continue with the
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loan arrangement or not we would also
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recommend that you draw up a contract
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this will help ensure that the
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relationship remains professional and
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allow you to establish some reasonable
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expectations the contract would indicate
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how much we borrowed the repayment term
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and whether any interest will be charged
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to mention interest because if the loan
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is in excess of $10,000 a lender is
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required to charge interest even if they
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don't want to if there is no interest in
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something called the original issue
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discount would effectively reduce the
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amount of the loan and required a lender
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to pick up a portion of the payment as
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interesting come bottom line check with
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the tax attorney for larger amount loans
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this brings us to a rather uncomfortable
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clothes you may wish to consider what
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happens if the loan is repaid you may
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want to include language that describes
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the consequences for failing to meet
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obligations such as taking the borrower
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to court or sending the accountable to a
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collection agency
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sure it sounds hard but it also shows
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that you're a good steward of your own
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money
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I hope those of you who are looking for
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a loan and pay attention borrowing is
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serious business and you have to respect
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your lender especially when that lender
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is a friend or loved one here are some
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tips to help you along the way first
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know precisely how much you need
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you should have a clear plan of what you
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require and why the loan is important your
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plan should also include how the funds
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will be repaid here we suggest that you
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under promise and over deliver for
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instance if you can easily make a
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hundred dollar payment each month over
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75 make the hundred-dollar payment when
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you can and default you agreed upon
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amount if you encounter unexpected
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problems also be careful about the
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people you approach for a loan to some
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family comes before all else and they may
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bend over backwards to help even if you
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put some in a bad position
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obviously when you're looking for help
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it should never be at the expense of
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others try to get a sense of your
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perspective lenders financial decision
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before approaching them for money further
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more try and borrow from someone who
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may be sympathetic to your situation for
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example you may have a successful family
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member who could easily solve your
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financial troubles but they may be
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unbearable to deal with throughout the
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repayment term your situation is
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stressful enough and there's no need to
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overburden yourself with someone who
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constantly offer reminders about how they've
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helped finally it goes without saying
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that if you're struggling to repay the loan
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your relationship could suffer unless
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you follow a few key steps first specify
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the penalties or other consequences for
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defaulting your contract as i mentioned
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earlier second just as you should when you
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borrow from a regular bank as soon as
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you realize you're going to miss a
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payment communicate immediately about
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the difficulty you're having if you
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don't you jeopardize your relationship
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and while you might be right in thinking
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that blood is thicker than water the
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respect they have for you could be lost in
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the process
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that's a price you shouldn't be willing to
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pay will be careful until next time I'm
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Thomas Fox for Cambridge credit
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counseling
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