Lending more than you can afford
Another no-no of giving money away is giving more than you can afford to lose, says David Meltzer, CEO of East Insurance Group. You might want to help put a friend or family member in need but not at the expense of your own financial well-being. It’s ok to be sympathetic but refrain from being too generous with money you can’t really afford to part with, reiterates Meltzer.
Make sure you also take a look at these 13 Important Things That Will Become More Expensive in 2021.
Criticizing their spending habits during repayment
Speaking of habits, at some point, the borrower might miss or skip a payment. You need to take this option into consideration and prepare for that possible moment. “When payments are missed, the lender starts to become very judgmental about how the borrower is spending money thinking — they can’t pay me back, but they can go out to dinner?”, says Michael Hess, a wealth management adviser with WestPac Wealth Partners.
Resentment might creep in and things start to escalate from there on. You need to understand that lending money to people you know is complicated. People who borrow money from friends or family don’t usually treat the matter as seriously as they would if the money came from a bank. You have to factor in the possibility of slow repayments.
