Last week I had an incident with a distant cousin who wanted to borrow a substantial amount of money.
I honestly did not have the cash he wanted and I politely communicated my situation to him, that I was unable to lend him anything.
He did not get it; he thought I was only applying my philosophy of not doing any money business with a relation on him.
His guess might have been right to an extent, but indeed my coffers were empty at that particular time.
True, from experience and a couple of lessons from the past, I do not lend money to family.
Over the years, I have learnt the hard way and had to take a position to save my hard-earned money, most importantly save family relationships which matter to me.
Trust me; relatives are the most difficult people to deal with on money matters, especially if they come to you in the name of borrowing. They seldom pay back.
If they do, it is never on time, always on a very slow timeline.
The most unfortunate thing is that they are never honest when asking; they will promise to give you back and actually mention an actual date when they plan to square the debt, when in true sense, they know they are lying.
You will be planning for that money while someone knows they will never give it back to you; all they are doing is to take advantage of their blood relationship with you.
They give you false hopes every time you remind them; thus creating misunderstandings and damaging the relationship in the process.
You will agree that money issues are quite emotional.
So, I would rather have my brother, sister, aunt, uncle or whoever it may be sincerely ask for my help unconditionally when need arises, instead of borrowing.
Back to the distant cousin issue: He was very insistent, pushing me to take a screenshot of my bank balance and show him.
And his response was: “I thought you have a number of bank accounts, and I know you have the money.” Who says that to someone who is broke?
I found such intrusive conduct exasperating and, above all, a red flag that strengthened my resolve on family loans.
Clearly, I was never going to get back this money if I lent him, typical of family debtors; they have a sense of entitlement and think their lenders are obligated to cater for them anyhow.
Times are tough and money is tight on everyone; everyone is running short on income for something every time.
I am not discouraging people from coming through for each other financially when situations arise. All I am saying is there are certain things that should be considered by both the lender and the borrower before getting into such an agreement.
Lending money to friends and family requires careful planning to avoid future regrets. Know your borrower’s credit history and potential consequences.
Openly communicate about repayment expectations so that no one is left in the dark. Most importantly, do not have high expectations because chances of defaulting are usually very high.
Go into a family loan situation with the mindset that you will never see the money again.
This saves you from the heartache, that when the loan is not paid you will not be as disappointed.
On the other hand, when you are asking for a loan from a relative, beware of the potential pitfalls.
A family member who lends you money may need it before the agreed-upon time, and perhaps you might generally be struggling to pay them off.
This creates unnecessary pressure, breeds animosity and causes irreparable harm to relationships.
Do not forget your reputation is also on the line in such a situation.
May we just all normalise living within our means by balancing our incomes and expenses, separating needs and wants and also stopping the unnecessary competition with others.
In that way, you are not squeezing your coffers unnecessarily and you minimise chances of plunging into debt.