Even small bills can cause a lot of stress, especially at the end of the month when due dates seem to come faster than paychecks. When money is tight, many people choose to ask their friends and family for short-term help.
It's common for people to lend money to friends, and even though they usually mean well, it can sometimes get them into trouble. A recent study by IPSOS and PayPal found that 71 percent of Americans have given money to friends and family.
Helping a friend make a car payment or a coworker going through a divorce who just needs "a little help" may seem harmless. But a short-term problem isn't always short-term, and if the lender has to ask for the money back, it can quickly become a bad situation. As easy as it is to lend money to someone you know well, it can be just as hard to get them to pay you back.
Kim Izzo and Ceri Marsh, co-authors of "The Fabulous Girl's Guide to Decorum" and "The Fabulous Girl's Guide to Grace under Pressure," say that it's hard for friends and family to talk about money because it's an emotional topic for everyone.
In fact, 57 percent of Americans have seen a relationship end because one person owed the other money, according to the survey. Izzo and Marsh say that everyone wants to be a good friend, but no one likes to feel like their kindness is being used against them.
"But there are good ways to lend money," says Izzo. "When thinking about lending money, it's a good idea to set some simple ground rules. With these ground rules, lending money to friends and family can be less stressful and even a good time."
Marsh and Izzo give a number of tips on how to do business with friends and family when it comes to money:
If you're able to do so, think about giving the money to the person you're lending it to instead of lending it to them. If not, be clear that you want your money back.
You could use a service called PayPal to make collecting a debt easier and more convenient. This makes it possible for online payments to be sent and received. With PayPal, you can send the borrower an email to remind them. The money can then be sent back right away by email to the lender.
Don't co-sign a loan or credit card application for someone else unless there are clear, written rules, and always act like a business.
Don't lend more than you can pay back. Don't lend money that you need back right away if you don't want to hurt your credit score or your relationship with the person you're lending to.
Marsh says, "It's possible to help a friend or family member in a way that won't hurt your relationship and won't leave you with nothing." "Be fair to the borrower and to your own bank account, and keep your word. This will help keep your relationship together and your money in your pocket."
