We had a wonderful traditional Thanksgiving here in Wisconsin, surrounded with family and friends talking, eating, and enjoying some fine Wisconsin polka music while playing that video game sensation, Accordion Hero. OK, it was actually Guitar Hero, an interesting video game that features a host of bad hair styles and even worse music. But I can see why people would enjoy it and I did try it for a minute or two, trying to be a good sport. But when the night was over, I was ready for polka, an musical genre whose epicenter is in Wisconsin and one that I have never been able to appreciate, until, perhaps, tonight. Accordion Hero: The Mega-Polka Edition – I almost hope that’s in my stocking this Christmas!
Speaking of family and friends, here’s a little tip that I think has really helped us over the years: It’s more blessed to give than to loan. This is a very serious financial principle. We came to that conclusion after observing the disasters spawned by many people around us who kindly loaned money to people they cared about. Big mistake! Loaning to friends and family is often a good way to damage your relationship when people can’t repay. Friends in debt to friends soon quit calling and visiting. Family members in debt to each other often quit talking. It’s a mess.
Don’t loan to people you care about. If you want to help, just GIVE them the money that you can afford to give them, and make it absolutely clear that this is NOT a loan, not to be repaid, and if they do come up with money that could repay the gift, to use it to help someone else or to invest wisely for the future, but not to repay you. It’s a GIFT. Gifts that people need rarely break up relationships, but loans often do.
A couple things almost always seem to happen when one makes a loan to family and friends, as we’ve seen from so many events among our acquaintances. First of all, because you are their friend or relative, you’re going to give the loan based on trust and a verbal agreement, rather than via a legal document with teeth. The reality, then, is that you’re going to have a hard time getting your money back if “unforeseen trouble” arises, as it usually does. Because you are a friend making a loan based on trust, there is little downside to not paying you back, unlike other obligations they may have. Even with the most honorable of people facing a multitude of debts, the loans that get paid back are the ones that have “teeth” built in – e.g., damage to their credit rating, confiscation of property, eviction, etc.
Second, the reason they are coming to you and not a bank or other official source of funds is because they might not be able to afford the terms of a regular loan or might not be able to qualify for one. They are higher risk, usually, and are very likely to have trouble paying you back, no matter how good their intentions. Don’t put them in the unpleasant situation of being in debt to you. Offer your help, if any, in the form of a gift and keep your relationship healthy.
Loans are inherently risky. Even the best people may face difficulties that make it difficult to repay as agreed. When an institution faces bad loans, they can write the loans off and move on. But you, in the other hand, might never be able to let go. Some lenders, “betrayed” by friends or relatives or fellow Church members who took their money and didn’t repay, become bitter and wounded over the loss, in addition to suffering the harm of a damaged relationship. Such loans can end up hurting the giver as well as the receiver. Avoid that risk.
One of the worst mistakes you can make is to take out a loan yourself to help a friend. There may be cases where you feel you have to, but it’s a double negative. You’ll be in debt and you’ll face real teeth when you need to repay, and they’ll be in debt and will have embarrassment and even anger toward you when they are unable to repay you, but you keep “encouraging” them to pay you back. Just gets ugly. If you feel you have to go into debt to help someone, again try to do so without giving them a loan – make it a gift and preserve that relationship.
Just a little financial tip for the day. (Please note that I’m avoiding the temptation to ramble on about food storage, the sinking dollar, the insidious threat of inflation, the wisdom of investing in commodities like energy and silver – but get it while it’s cheap.)
Happy Thanksgiving, everyone! (And remember, it’s better to give Accordion Hero than to receive.)