It can be an incredibly awkward situation when a friend or family member asks for money. And with more and more people losing their jobs, the frequency of these personal loans is on the rise.
So, what do you do? You love these people and want to help them, but chances are that you need every penny in your savings account.
What do you do when you’re worried about your own finances? Are there ways to help without actually loaning them the money?
Why You Shouldn’t Loan Money
Ask any financial expert and they’ll all say the same thing when it comes to loaning money to people you know: Don’t Do It. In most cases you lose both ways because you never see the money again and this, in turn, can ruin the relationship.
Now, this is incredibly tricky because, like we said above, you love these people! If they come to you for help, how can you turn your back?
Well, there are other ways you can help without forking over a hefty check you might never see again.
Tip 1: Hire Them
Giving someone a loan can be hard to stomach, especially when we’re all trying to save money right now. But, exchanging work for money can be a win-win.
Instead of giving someone a lump sum of, say, $1,000, why not have them work it off? You could “hire” them to:
- Paint some rooms in your home
- Do yard work
- Babysit your kids
- Run errands
- Clean your home
Make their compensation generous for the work they do, and then both of you will be happy with the arrangement. And if your friend or family member balks at the idea of “working it off”, then maybe they don’t need the money so bad to begin with.
Tip 2: Teach Them To Fish
Well, not literally. You know the proverb “Give someone a fish and they’ll eat for a day; teach them to fish, and they’ll eat for a lifetime”?
That’s what we’re talking about here.
Instead of loaning money, why not sit down with them and help them organize their finances? Brainstorm ways they could trim their current bills, and research ways they could make money, either by finding a part-time job or starting an inexpensive business. Could they consign some of their furniture or clothing? Do they have any antiques or collectibles they could put up for auction?
This is a great option because you can be there for them emotionally, show your support, and help them take positive steps towards the future.
Tip 3: Hit the Grocery Store
Loaning money to someone can be hard because you never know how they’re going to spend it. After all, what happens if you shell out some of your savings to help a family member, and then they blow on a shopping trip to “make themselves feel better” or buy lotto tickets?
You can laugh, but it’s happened before.
If your friend is really in need, then why not help them out and buy their groceries for a few weeks? Yes, you’re still technically “loaning” money for this tip, but at least you know where the money is going. And, this can be more gratifying than just handing someone a check.
Tip 4: Use Your Contacts
If your friend or family member has recently lost their job, is there anything you can do to help them find another one? Do you have any contacts you could call to put in a good word? Will you be attending any networking events you can take them to?
Tip 5: Put Together A “Care Package”
This could involve anything you can imagine. Making a “care package” for a family member who’s in dire straights can not only help them out with food and essentials, but it also really shows you care, which can do them even more good.
If you find food on sale at the grocery store, buy double. Head to Costco and buy personal care items in bulk. Give them a check that will cover next month’s electric bill.
If they’re having a hard time paying their heating bill, why not get them a space heater or electric blanket? Could you bake them some cookies or breads for a sweet pick-me-up?
You’re really only limited by your imagination here.
With our economy in a downward spiral right now, many of us are going to be faced with this situation eventually. It’s important to think about what you’ll do if, or when, this situation comes up in your own life.
While many people have no problem loaning money to friends and family, it’s important that you carefully look at your situation. Don’t put yourself into a risky situation by loaning money when you really can’t afford it. There are other ways to offer support and show that you care.
If any of you have other tips on how you’ve dealt with this situation in your life, I’d love to hear them. Did you loan the money? Did you ever get it back? Did you offer support in other ways?
Thanks, as always, for reading!
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