If You Lend Somebody Money, Should You Put Expectations On What They Will Spend it on?
My post on Prairie Eco Thrifter a few days was about how to ask for your money back when you lend some to somebody who hasn’t been forthright with it (or, just forgot).
A plethora of comments ensued, and one or two of the comments included stories about how the reader had lent money to a friend or family member, who then didn’t spend it on what they had requested it for. A friend and I discussed this same thing weeks earlier, and she had mentioned something similar. She told me she would never again lend money to somebody close to her, because the last time she did, they asked for it to pay for groceries that week. She opened her wallet willingly, thinking that her friend was struggling to feed her children. She found out later that week from her own daughter that the family that she lent the money to bought a trampoline for her kids that very same week. Talk about disappointing her expectations.
We ran over a few different scenarios:
1. Maybe it was a gift
If you lend somebody money, and they end up with a product they didn’t have previously shortly thereafter, the product could have been a gift. Unless you come out and ask them how they got it, and whether they spent your money on it (awkwarddddd…) then you won’t really know.
2. Maybe they went into debt for it
Does this make it any better? I’m unsure, but maybe the friend used the money loaned to him for the intended purpose, and bought the other thing on credit.
3. Maybe they have the money to pay you back (and buy the product) but just haven’t seen you yet
I suggested this to my friend who told me that this couldn’t be the case, because the next time she saw her friend, she didn’t pay her back. She even reminded her friend.
There are other scenarios that might work here, but regardless, do you, as the lender, feel you have the right to:
– Even ask what the money is being borrowed for If the borrower hasn’t offered the information?
– Expect that they’ll spend it on what they said they would?
– Be angry if they spend the money they borrowed from you on something frivolous (in your perception)?
At the end of the day, money is money. Perhaps in principle it’s different for you, but you’re still lending them money, and they would still be paying you back, regardless of what they spend it on.
Would you base your decision on whether or not to lend money to somebody on what they are spending it on?
That is awkward. I really don’t lend money to people, so this is out of my realm a bit. But, if this happened to me, I’m pretty sure that I’d never lend money to that person again. I’d just assume they are horrible at handling money – maybe I’d buy them a personal finance book instead the next time they asked. 😉
We don’t lend money to friends for these reasons. I have lent money to friends before, and then watched them spend it on unnecessary items like a video game. There I was lending someone $50 that meant a lot to me. It probably meant a week’s worth of groceries! TO avoid this feeling, I don’t lend money.
I guess I have a different perspective on it since we’re paying back Mr. PoP’s parents this week – a $50K loan that they lent to us 3 years ago to buy property. I can’t have imagined buying something frivolous with the money they gave us (or another random $50K we might have had laying around, yeah right!) when part of why they were so confident that we’d be able to pay them back was because of WHAT we planned to do with the money, ie a real estate investment.
So if we had gone out and bought a boat instead of a duplex, I’m pretty sure they would have had every reason to be ticked at us for putting their capital at greater risk.
Nope! I think once the money leaves your hands you have no control of what someone else does with it. I’d say set your expectations low and prepare to be disappointed lol
It’s something we have discussed as a couple at length, and I would not lend the money. Unless someone was starving or in need of a life-threating surgery, I cannot imagine asking someone else for money.
If I am foolish enough to lend the money, I suppose I would be upset if they spent it on something else (or I perceived that they did – your points above are really stellar, Daisy). I would probably have trouble dealing with that, so best not lend it in the first place.
Think you hit this one on the nose. This was actually an episode of Frasier: https://www.youtube.com/watch?feature=player_embedded&v=kloFaHSBBJA The confrontation between Frasier and Roz is a real lesson for all the lenders out there. If you’re not prepared for the person to use the money irresponsibly, you shouldn’t lend. If you’re not prepared to not get your money back for a long time or not at all, there’s a million excuses to say “no” up front that are less damaging to a friendship than an unreturned loan.
Interesting debate… I have loaned money in the past but I don’t like to do it. I feel it puts a strain on the relationship. When I do loan money,I’m clear that it’s a loan and there’s a stated date that the loan will be repaid. If it’s a larger amount, I have a written agreement and ask the person to sign.
For the most part, the person asking for the loan is a crappy money manager. I can say that because that described me in my youth. I borrowed money from my family several times when it would have been unnecessary had I been a better steward of the money I earned. Things are different now…
I don’t lend money to people. I do GIVE money only if it won’t create a problem for me. I don’t ask what the person is planning on using the money on as I’m not interested. As it’s a gift I usually will forget about it. The great thing about this process is I end up getting repaid pretty quickly and I’m always surprised because I’ve forgotten about the gift. It’s a great system. I get asked for money pretty rarely so it’s not a big deal.
I never loan money to family or friends. If I have the money, I just give it to them. If you loan friends and family money, it changes the dynamic of the relationship.
I normally wouldn’t ask why they need the loan. But if they volunteered the info and then spent it on something unnecessary, I would be ticked off. No matter what, the times that I have lended out more than $50, I did let the borrower know when I expected to be repaid. I simply said I had a bill due in 2-3 weeks that I would need it for and made sure that they agreed to pay it back by then. I didn’t have to ask again either time thankfully and was paid back in full in a week or two. But I also have only lent out “real” money twice (like $200 once and $600 once) to two very trustworthy friends. I have turned down a few requests from friends in the past since I knew they sucked with money and I’d never see it again. It’s hard to say no, but I reminded myself of how angry I would be when they never paid me back and how that would actually hurt the friendship more than politely saying no.