Welcome to Taking Stock, a space where we can take a deep breath and try to figure out what the COVID-19 economy really means for our finances. Every month, personal finance expert Paco de Leon will answer your most difficult, emotionally charged questions about money. This year has forced many of us to reprioritize our finances, and there’s no clear road map for getting through the pandemic yet — but Taking Stock is here to help us figure it out together.
Last time, we talked about why it's so nerve-wracking to ask a friend to pay you back. This week, we asked Refinery29 readers about how they approach the conversation about borrowing or paying back money — and what their personal rule is on lending money to loved ones.
Madison, 29, Pennsylvania
Madison's policy is to never lend people money, whether it's friends or family. "I already have uncomfortable feelings toward money, and mixing it with friendship makes me even more uncomfortable," she says. "However, I'm always open to picking up a tab or bill if needed, especially if that friend is struggling."
Past experiences have impacted her attitude about involving money in her interpersonal relationships. "A close coworker's dog bit me when I agreed to walk her dogs while she was out of town. It ended up not being a big deal injury-wise, but I had gone to the ER to get it checked out," says Madison. "The first bill that came was cheap, $40 or something. She paid it. But then the second bill came to the tune of about $800. I felt awful, but gave it to her and she said she'd put it on a payment plan — then her dog got sick. I was empathetic because she spent a lot of money trying to save her dog before he had to be put down. I gave some time for her to grieve, but then all of a sudden she was moving out of the country. I did bring it up, and she said she was going through stuff, but she'd get back on paying for it."
"The bill remained unpaid for years," says Madison. "I eventually just paid it off in full, but it ended our friendship completely — which ended up being good because she was toxic. She still messages me and comments on Instagram, but I don't answer. The whole thing left a sour taste in my mouth."
Daniela, 29, Georgia
"I don’t lend money to friends anymore, but the largest amount I ever loaned a friend was $1,800," Daniela says.
When she used to lend money, she was firm on needing to be paid back — it was always money she needed. "I let them borrow on the condition that I would be paid back on a certain date," she says. "The convo starts the day the money is due."
"[A friend and I] went on a Euro trip together after college, and she did everything humanly possible to sabotage our trip, missing two flights and leaving the U.S. with almost no money — less than $200 — for a 12-day trip to four countries," Daniela says. "To avoid having a crappy trip by limiting myself to only free activities and barely eating, I agreed to pick up the tab and she would pay me back a month later. We went to museums in Paris, clubbing in Berlin, and did bits in London."
"We were also supposed to go to Italy, but fun fact: If you are stone cold drunk in Germany, you can’t get in a taxi, so we missed our flights to Italy," she says. "I had to pay for new flights. A month after coming home, it was crickets and a sob story about how she isn’t ready to work right now so she won’t have the $1,800 she owed me. We went back and forth for about three months before I realized she prioritized being lazy over paying me back."
"Long story extremely short, we aren’t friends anymore and she went as far as to lie to her parents to excuse her debt to me. If I have to excuse a debt, are we really friends?" Daniela wonders.
"I don’t lend any money at all anymore — just advice on how they can make the amount of money they need," says Daniela. "I no longer give cash, because I want to make sure the money will be used for what you said it will be. I’ve been burned before that way, too. Not lending money has drastically changed my financial outlook, because I’m naturally a fixer and would always give if I had it. I believe some people can smell that and take advantage."
Daniela never borrows from friends either. "I don’t like owing anyone but AmEx," she says.
Paula, 74, British Columbia
"I've never lent money to a friend, but I have to my daughter — and never got it back," says Paula. "Never lend money to family or friends if you ever want it back, even if they say they will pay you back. The only other way is to take them to small claims court."
Paula says she waited three months before approaching her daughter about the debt. "I had to write off the loan and close all contact with her," she says. "I forgave the debt, but not the daughter."
"I've never borrowed money from family or friends, and never will. It will always ruin a relationship," says Paula.
Rose, 28, Illinois
"I'm the one a friend has lent money to, and I feel horrible that it has taken me over three years to pay her back," says Rose. "I am terrible with money and always spend it on myself. My friend lent me $2,400 for a car repair and now I'm down to owing her $1,700."
"My friend has been patient with me and does reach out to me about the money. I start to pay her, but then I fall off the payments. I mostly spend money on going out and clothes, and I have nothing saved," she says. "My credit cards are nearly maxed out and I have to use payday loans. I am not proud of myself, and I'm one step away from being in a bad financial situation, as I live paycheck to paycheck. I do need help, but it's on me to have the willpower to budget and save."
"My friend hasn't forgiven my debt, she's just being patient with me," she says. "We aren't as close as we used to be, but that's because of unrelated issues that we had prior to her loaning me money, so the debt just makes things even more uncomfortable. Honestly, after I finish paying her back we will probably not speak to each other anymore. Although, I am the godmother to her daughter."
"I have another friend from whom I borrow small amounts of money, and I pay her back every time I get paid. I need to budget and learn to get myself together," she says.
Rose notes that based on her own "terrible repayment plan and lack of savings" — she probably wouldn't lend any of her friends money.
Chelsea, 45, Colorado
"I have lent money to several friends over the years ranging from $500 to $1,000, and none of them ever paid me back," says Chelsea. "I let it go eventually, and we're still friends."
In another instance, though, Chelsea lent her then-boyfriend almost $7,000 — with the understanding that he'd repay her in two weeks. "This loan was to help him get his house out of foreclosure," she says. "I started asking pretty frequently once two weeks passed. Then I brought it up monthly for probably the first six months. After that, I just assumed he didn't have it and I was willing to give him more time to pay me back, but he never brought up the subject."
"A year went by, and my boyfriend still hadn't paid me back. I told him I wanted my money back, or else I was going to put a lien on his home," says Chelsea. "He said he didn't have the money, so I took him to small claims court, got a judgment and attached a lien to his house. A real estate investor reached out to me shortly afterward saying he was buying my boyfriend's home, and a few weeks later I got my $7,000 plus court costs and 8% interest! I dumped the boyfriend and never heard from him again."
"I have forgiven amounts owed from a couple girlfriends — about $1,000 from one and $500 from the other," Chelsea adds. "I've known them since we were kids and our relationship is the same as it's always been. I didn't give them anything formal letting them know it was forgiven."
"Due to being burned many times in the past, I refuse to lend or give money to friends or boyfriends ever again," she says.
Hazel, 70, Kansas
"My friend paid back $640 of the $1,000 she borrowed, but ran into expensive health issues, and I felt I just couldn't press her for the rest," says Hazel. "I silently forgave the rest. We've remained good friends."
She says that $1,000 is about the max she'd lend to friends now. "That's what I feel comfortable being able to gift, or to lose in case they can't pay me back," Hazel says. "For years, I didn't have much to spare. But now that I'm retired, I'm in more comfortable circumstances. It's a joy being able to help others."
Paige, 40, UK
The largest amount of money Paige has ever let a friend borrow is $2,000. "The payback date is set before the money is transferred. There should be a plan," she says.
"When I was a teenager, my dad told me two wise things. One: Don’t lend money if you need it back (not want, NEED)," says Paige. "Two: If your friend doesn’t pay you back when they said they would, or when you’ve asked them, don’t get angry or emotional about it — you just know to never let them borrow money again. End of story."
"Some people have good intentions but real financial — or other — issues! Not repaying is something that’s wrong with them, not you," she continues. "But... you’d be a fool to give that person more money. Almost as foolish as having a fight over money you don’t need. Not worth the energy."
There have been friends who've failed to pay back money before, but Paige says it's all fuzzy now. "I can hardly remember any of the details — not the amount or anything, because I’ve really forgiven them," she says. "That being said, I do know friends who are terrible with money. I don’t forget that. But I still love them! Doesn’t make them terrible people, and honestly, I’m sure they’ve forgiven something about me and my personality."
Paige hasn't set a limit on how much she would lend a friend. "It will always depend on my circumstances, and theirs. Also, any loans that go out to anyone are a discussion that my husband and I have together before a final number is decided," she says. They would discuss beforehand whether or not to give the money as well. "And could we just buy them the thing instead of giving cash? Especially if we know it’s someone who isn’t financially responsible."
She's borrowed money from friends plenty of times in the past. "I was so poor for a lot of my life. No idea how many times people have helped me out," says Paige. "But that’s how I learned to set a payback date and a plan. I remember this one specific time I borrowed money, I was so broke on payback day. I called [my friend] and assumed she would just give me an additional paycheck [to pay it back] — she was wealthy — but she didn’t. I was shocked. She just told me that we all have to make sacrifices, but it’s more important that we keep our word. So I paid her back and lived on, like, $10 for two weeks."
Paige doesn't resent her friend for this, and in fact is thankful to her for the "tough lesson." "Tough love is still friendship," she says. "It was one of those lessons I didn’t even know I needed to learn because people were always giving me breaks. This reminds me — I need to give her a call."
Tia, 38, Washington D.C.
"One of my closest friends was drowning in debt — a combo of student loans, medical bills, and some poor choices," says Tia. "She was doing everything she could do to get ahead of the debt, but just couldn't keep her head above water. She was about to take out a high-interest credit card loan to address $3,500 in new medical debit, which would have put her in an even worse position."
"I was in a position to lend her the money, but I only had two conditions: She couldn't pay me back until she was in a better financial position — pay down the debt and put aside some savings — and two, we would never talk about it again," Tia continues. "I didn't want it to be an issue in our friendship. I didn't want her to feel bad about needing the money, feel judged when she spent money on herself, or create some sort of strange power dynamic in our friendship."
"I honestly never expected her to pay me back," she says. "My grandfather always said never loan anybody money under the assumption it will be repaid. Well, a decade later, she called to tell her how much it meant to her and she was ready and proud to be in a financial position to give the money back, plus interest. She had been able to pay off undergrad and grad loans, help her family, and put aside savings. I am so proud of her, and humbled that I was able to help in a small way. Instead of interest, she promised to take me out to a fun dinner to celebrate!"
*Names have been changed to protect identity