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You're listening to Life Kit from NPR.
Hey, what's up everybody?
Andrew Limbong here in For Mario Saguera.
Okay, Life Kit is no stranger to tough, uncomfortable conversations that you maybe want
to put off for as long as possible, especially when it comes to money and when it comes to
relationships.
And when it comes to mixing money and relationships.
But today, we're going to cover a conversation that can outright end friendships.
So much of financial decisions involve emotions.
And if you want to ruin a relationship, bless somebody, somebody.
Lending money.
And we're not talking about picking up the tab at dinner or spotting someone from movie
tickets.
We're talking about covering someone's rent or car payment.
A significant dollar amount for you, whatever that may be.
And listen, if you're in a position to help out your friend or family, that's great.
They can strengthen the relationship and be beneficial for everyone involved.
When we engage in these communal activities, it reinforces our social bonds.
And so I think there's so much beauty in that.
And ultimately, I think there's beauty in knowing that the person that you love is not
suffering anymore.
That you gave them peace of mind for some period of time.
But how do you know if you are in a position to help?
Or if you just straight up can't, that's a conversation that can involve a lot of guilt
and shame.
Is embarrassed the right word?
What's the feeling I'm looking for?
It's hard to not look like a not seen selfish or not.
Your strooge, my duck.
Yeah.
Right?
Yeah.
You don't want to seem like your strooge.
Or bring up cultural baggage.
On sort of American side of things, there's a part of me that's like, hey, no.
I'm an individualistic.
Pull up your own bootstraps.
Like I'm not going to let me, or the sort of collectivist culture part of my brain is
like we should sacrifice.
You should run screaming with all the money that you have when somebody needs help.
Today on LifeGate, we'll tackle all of these aspects of lending money.
Went to say yes, how to say no, and how to make sure your relationship doesn't change
through it all.
That's ahead.
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I really felt like the cloud in my brain kind of dissipated.
Once I started realizing what a difference these little breaks were making, there's no
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When it comes to learning money, there can be a lot of what's called situational variances,
what's your relationship to this person, what's your history together, what do they've
got going on in their lives, that sort of thing.
And our experts touched on different corners of this complicated problem, but across the
board.
They agreed on two things.
The first thing is that this episode shouldn't even be called lending money.
It should be called gifting money, and that's takeaway one.
We are not in as individuals in the business of lending money.
We don't know how to do it.
We do it with a lot of feelings and emotions involved.
And that's why it should be left up to financial institutions.
And I recommend to people, if someone's coming to you in need and you have the money, just
give it to them.
That's Washington Post, Personal Finance, columnist Michelle Singletary.
She and her husband used to lend money to people with the expectation of being paid back.
But there was one incident with a couple of friends of theirs.
We attended a private, they hadn't paid us back when they said they would, and we attended
a party at their house, and we noticed this big screen TV, which was like an access
of what we had given them.
And we're sitting there thinking, so you can buy a $1500 TV, but you can't give us that
money back.
And we felt some kind of way about that.
And it taught us a lesson, because we didn't want to feel that way about them.
They didn't like what lending money was turning them into, you know, constantly pocket watching
their friends.
So we decided, my husband and I at that point, that we would never do that again.
We would only give money that we didn't need to get back so that we wouldn't have this
feeling of monitoring how people spent money before they paid us back.
Gifting money is a way of letting that money go, which means you can't be lording it over
your friends as some sort of shit.
For financial educated Bernan-Anne, a loan implies a sort of contractual obligation between
friends and family that honestly, she just doesn't want to get into.
I just avoid the whole like rigmarole of like, baby, we write up a contract, maybe we
have terms.
I'm like, I personally, I'm not vergo enough for all that.
I'm not interested in the administration of a friendship or, you know, family relations.
If I'm lending money, I'm assuming it's a gift.
I'm assuming it's not going to get paid back.
And so then, from my end, I have to know that that's money I'm willing to lose.
Which brings us to take away too.
Make this decision based on your own finances, your own budget.
Don't let guilt be the main driver here.
Which means, well, first off, you should have a budget.
No, it's coming in.
What's going out?
No, what's in your emergency fund.
And then says Michelle, have a little miscellaneous life happens fund.
That's where you pull from.
You do not give someone your rent.
You do not give them your car payment money.
You don't give them your tax money.
You make sure that money is there for what it needs.
And then you give extra.
Because you don't want to put yourself in the position that, like, say, you've given
somebody half or all of your rent money.
Now, I'm good for it.
I'm going to give it right back.
And they don't.
Now, you are in the position of jeopardizing your housing.
Wendy De La Rosa is an assistant professor at the Wharton School of Business.
And she says that your own budget has to be a hard line.
But for the person asking, and for you yourself, as a gut check to ask, am I really in a position
to be gifting money right now?
If you are not saving, if you don't have an emergency savings fund, you can't actually
help anybody else.
Like I think that's just like a very hard and fast rule that sometimes people feel uncomfortable
with.
And this is a uncomfortable conversation that I often have with some of my family members
where there's sort of this culture where I have to give, I have to give, whether it's
to religious institutions or to friends or to others, is this what helping means?
Because that can't be it, right?
Like that, that's not altruism, that's self hate.
Listen, if you come from an immigrant family, like Wendy, often part of the deal is sending
money to family back home.
If you've been able to climb into a higher tax bracket than the one you grew up in, you
probably had some help along the way and might feel some responsibility to pay it back somehow.
Wendy says you shouldn't exhaust your own funds to help everyone though.
I would encourage people to draw a circle of saying who are the people that I, that
man, like I really care about.
And then that's my circle, that's my immediate circle.
However you decide that circle is obviously up to you.
Maybe it's direct family only or just your close crew of friends.
But outside that circle is your broader community, which you should obviously help with small
dollar donations or volunteering, that sort of thing.
But when you're giving out big portions of money, it's important to have your boundary
set.
And if you have a partner, that's something to talk about.
When my husband and I got married, because we had very different definitions of what
it meant to help his community, right?
I was born into a military public.
Most of people sacrificed to bring us here and my husband grew up in Texas.
So we had very different definitions of what that looked like.
And we had to be very clear when we got married saying what's our circle?
But even for people within that circle, if you don't got it, you don't got it, right?
So you've checked your own finances and decided you're not in any position to be giving
anyone money.
How do you say no?
Or maybe it's more like how do you say no, but I still care about you.
The second way three is if the answer is no, offer other ways to help.
All right.
There's no sugar coating that this is going to suck.
If someone is coming to you asking for money, it is probably not their first option.
They're probably in a bad situation and don't see any other way out.
They're vulnerable.
And you turning them down is going to hurt.
Wendy De La Rosa had to have a no conversation with an extended family member.
And it was painful.
I'm not going to lie and say that everything was hunky-dory the next day, like they're
in a tough financial situation.
But I gave them my time.
She helped them map out their debts, set up spreadsheets, and figure out an action plan
to get out of the hole.
And I think they saw that I was in there with them and they really appreciated that.
And so that's why it's a difficult conversation.
The nose, the full sentence, and it's a full stop.
Your responsibility as a friend doesn't stop there.
Your responsibility as a loved one doesn't stop there is to say I understand that you're
in a tough financial spot.
So let me try to do everything that I can that's still within the boundaries that I can
to help you.
But it's difficult and I'm not going to lie.
It's difficult.
Yeah.
So the hat, like, being lucky enough to have what I can derisively, like jokingly call,
like an email job, where I spend a lot of time from the computer.
And having family members who have very physical jobs, it's hard to not be as embarrassed the
right word.
What's the feeling I'm looking for?
It's hard to not look like not seeing selfish or not optically in front of your people.
Your scrooge, my duck.
Right?
You don't want to seem like your scrooge.
Yeah, I think that's a perception that everybody has.
And I think if we take it one step further, right, when we think about immigrant communities
too, that's a perception that like you're in America, like you're in the land of milk
and honey.
How could you not part with your money this way?
And this is what people don't see, right?
Like they don't see your environment, they don't see your mortgage payment, they don't
see your student loans if you have any.
They actually don't see that.
And that's why I think being very transparent is saying no, because if I do, I'm going
to negatively impact my financial security, right?
Or I'm saying no because as a household, this is a boundary that we said.
And I don't want to go against my marriage.
Like or I don't want to go against the rules that I have set up for my households and
how I want to live, right?
I think relying on these boundaries and your values is important to say, right?
It's not because I want to be mean.
And I think you don't look like Scrooge because Scrooge would say no, go away, right?
You're saying no, but let's figure something out.
Like let me see what else I can do.
It's not a no leave me alone, it's a no, but let's walk together.
I mean, even Scrooge McDuck took in his nephews.
That's not an insult.
It's not an insignificant amount of money that you know, that's three kids you've got to
take care of that.
Three college tuition.
Yeah, quick fact check, Huey, Joey and Louis are actually Scrooge McDuck's grand nephews.
But barring in, taking in three kids, there are other things you can do.
Here's Bernard and I.
I don't have the thing that you're looking for, but here's what I do have.
Or I don't have $500, but I do have 100 and I'm happy to give that to you now.
I don't have $500, but I do have two hours next week to sit down and like talk about
any kind of financial questions that you have or help you write out a budget or help you
pay like a debt payment plan.
I don't have $500, but I do have time to watch your kid for two weekends.
Like, what is it that you can offer?
What is the yes you can offer so that again, that person still understands like, I care
about you.
I just can't care about you with dollars right now.
But if you are in a position to help financially, it doesn't mean the uncomfortable conversations
are over.
Take away four.
If you can give money, be proactive.
Okay, so you've got your own budget squared away and you've got your circle of people you're
willing to give money to.
Chances are if someone is in your circle, you have a general idea of what's going on
and they're alive, right?
Check in when they've got something big going on.
Here's one to deliver Rose again.
Anytime your friends or family members are going through an important life change, they're
probably also struggling financially.
A divorce, maybe they were in an accident or suffered a severe health crisis, it doesn't
even necessarily need to be a bad life change.
If someone goes to college, if someone decides to get married, if someone has a kid, like
all of these life events that we celebrate, that we talk about very openly, also come
with very severe financial challenges.
And just to reiterate, no one wants to ask for help.
In fact, Michelle Singletari says, people will put off asking until they're in an even deeper
hole.
Lots of people will, they'll have their car taken away, they'll be evicted before they
mention it to anybody.
And that has happened to us as well.
And I was actually pretty angry with the person.
I was like, why didn't you tell me you needed help?
Although I knew the answer, they were embarrassed.
Being proactive with your friends in need can help you catch them before the late fees
or the high interest rates do.
You can also help both parties set up a strategy for the long term, because if we're being
real here, if someone is in this position, it is unlikely that $1,500 check is going
to fix everything.
Michelle had a family friend lose her job during the great recession and was having a hard
time finding another one.
So Michelle and her husband decided to pay that friend's car payment for a year.
But we have built that into our budget, right?
We looked it out budget and we said, okay, if we cut some things over here, we can help
her do this because she needed her car to go for job hunting.
And so that was a multiple request.
She didn't ask for it.
She didn't say can you pay my car note for a year?
But we looked at her budget and they thought she's just not going to have it.
And Michelle's family would never have come to that conclusion if not for takeaway five,
which is ask for details.
If someone comes to you asking for money, it is time to look under the hood of their finances.
The first thing is like, what happened?
What's going on?
Why do you need the money?
And that's a perfectly legitimate question.
Some people bristle at that like, how could you ask them?
What if you go to a bank, they go ask you what you need the money for.
They want to see financially, they want to see your tax return.
And so it's okay to say, what happened here?
Do you have any savings?
This doesn't have to be a grilling session.
This is part of the gift holding their hands through tough truths.
But you get through that.
The next step for us.
And it's my, I'm telling you, people are going, they're going to write you or me.
We want to see a budget.
We want to see some evidence that you have handed your money in a way that this is one
off time thing.
And so I want to see some bank accounts.
Because if I go through the bank accounts for the last six months and I see that you're
eating out a lot that you went to some beyond state concert and now you're asking me to help
you with your rent.
I'm going to have some problem with that.
Maybe the questions you're asking don't even have to do with frivolous spending.
It could mean asking even deeper questions.
Is this the right place for you?
Is this the right industry for you?
Is this the right city for you?
Or like the man should we talk about downsizing?
Like these are really painful conversations that people inherently know, but it's so
tough to have make those decisions when you're by yourself.
And that's why a friend is really useful.
Yeah.
Well, a friend like you, because the thing is like, let's say we had a mutual friend that
was borrowing $500, right?
And Wendy from Wharton was like, listen, we got to fix that.
That'd be like, okay.
If that friend borrowed somebody for Andrew and then Andrew, who doesn't have a great track
record, just ordered some pants that were too expensive, was like, bro, we got to get
your money right.
It's a hard, it's a hard, it's a hard sell, you know what I mean?
You know, the thing is I, no one is doing rocket science here.
You see what your rent is, you see what your fixed expenses are, you see what your income
is.
Like we kind of all do that, right?
The math is not that hard, but you can say like this math is not mathing, right?
Like the numbers are just not adding up.
I think what separates, you know, friends in this way is because we feel like we're
crossing a boundary that we shouldn't cross.
This is where I go back to love is not ignoring, right?
The opposite of love is indifference and not calling it out and not doing it, having
those uncomfortable situations like, that's the opposite of love, right?
And so I think you can have that uncomfortable conversation, Andrew.
You can say, I've been right there with you.
I overspend on this pants.
You're nice pants, I'm good with that.
It's like I understand exactly what you're talking about, but because I love you and I
care about you, I want us to get out of this together.
Like let's go through this together.
You do not need your own perfect record of personal finance choices to have this conversation.
In fact, you can use the opportunity to turn it into a two way street's burn on that.
Coming from a place of like you do financially like unwell things, but like same, me too.
But if the two of us got together and got financially healthy at the same time, like what if we
could be accountability bodies for the situation?
What if you and I can be the person that we text when you're about to make questionable
decision and you know that I'm not going to judge you because I'm probably just about
to make a question of financial decision too.
Like what if you and I became Avengers in this?
What if we became like got having each other's backs?
Because that's what this is about, really, right?
Having each other's backs.
For most things.
Here in the episode, I told you that there were two things our experts agreed on across
the board.
The first was to make sure it is a gift.
The second is while you can and should help in other ways, you know, give a hand around
the house, help budget, etc.
The one thing you should not do is co-sign a loan.
That's take away six.
Here's Michelle Singletari with a story from when she was younger early in her career
as a journalist.
I asked my grandmother once to co-sign on a car loan and I was good for it.
I had a full time job at the Baltimore evening sun.
Full scholarship to college.
I was a good girl.
As she says to me, she says, now let me get this straight.
So the bank turned you down.
I said, yes, ma'am.
She said, so the bank, which has way more money than I do, looked at your financials and
said, you weren't good for it.
Now you want me to put my finances on the line.
When a financial institution who has way more money than I do, didn't think you were ready
for this car loan.
That was the end of the conversation.
At the time, Michelle was upset.
She thought that she didn't everything correctly.
But ultimately, Michelle realized that her grandma was right.
This is what people don't understand about co-signing.
When you co-sign, you are not a back up borrower.
You are on the hook for that loan as much as the primary borrower.
So they miss one payment.
They come in after you because they come in after the person who got some money.
So that's what people don't understand.
When you co-sign, you just bought yourself a car.
And when you're on the hook, it is on your credit profile.
So let's say you co-sign for a loan for someone.
Now you need a car.
They're going to look at it and say, well, you already got debt on here for a car.
And that could prevent you from getting a loan or it could make the loan that you now
need more expensive because it's now on your credit report.
And so I just think it's a dicey area.
So overall, gifting money is great.
If you can swing it, it can help reinforce your relationships.
If you can't right now, offer a dollar amount.
Or actually, especially if you can help your family and friends shouldn't end with a check.
Here's the final word from Berna Anat.
Money doesn't have to be the only tool you offer to people.
I really like to dig underneath and see what other types of support that person could
be asking for or truly needing.
Ensure the conversation stemming from this could be awkward and uncomfortable, but what
are friends for if not helping each other out by being uncomfortable together?
Alright, recap time.
When it comes to lending money to family and friends, takeaway one is do not think of it
as a loan at all.
It is a gift.
Do not give any money you can't part with.
This takes us to take way to give out of your extra.
Make sure your budget is straight before you even think about helping friends and family.
And you, for whatever reason, might be tempted to stretch yourself to help, right?
Because people did it for you.
Oh my gosh, so many people have sacrificed so much for me.
Why would I not sacrifice myself?
And I share it with people all the time.
Like, what was there sacrifice for if you're always going to be stuck in this loop where
you are not in a strong financial foothold?
Your budget can be a concrete thing to point to as your battery when it comes time to say
no, which will be a tough and uncomfortable conversation.
The takeaway three is if you say no, find other ways to help.
That don't hinder your own financial security.
This can mean prepping meals or running errands, but also getting into the guts of their
budget and helping them walk through tough questions.
Which is something you should be doing even if you offer to give them some money.
Because takeaway four is be proactive.
If you know your buddies going through a big life change that usually comes with a big
bill.
Check in on your friends ahead of time because asking for money involves a lot of shame
and guilt and pride and you want to catch that person before there are even more underwater
in late days like that.
Take away five.
Ask for details.
Look at their budgets.
See, they're spending habits.
If this feels intrusive, just remember that this is the sort of thing banks do.
And watch it, you be any different.
You can use this moment to use yourself as an example and hold each other accountable.
And take away six.
Do not coast on loans.
It's too risky for both your own finances and the relationship.
For more life kit, check out our other episodes.
We've got one on the rules of tipping and another on how to improve your credit score.
You can find those at mpr.org slash life kit.
And if you love life kit and want more subscribe to our newsletter at mpr.org slash life kit
newsletter.
Also, we'd love to hear from you.
If you have episode ideas or feedback you want to share, email us at life kit at mpr.org.
This episode of Life Kit was produced by Margaret Sereno.
It was edited by our supervising editor Megan Cain.
Our visuals editor is that Carlin, our digital editor is Malika Garib.
Beth Donovan is the executive producer.
Our production team also includes Andy Tagle, Claremoree Schneider and Sylvie Douglas,
engineering support, costume Ted Meabane.
I'm Andrew Limbong.
Thanks for listening.
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