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Lend money to this friend -- again?

When helping someone out becomes enabling, you owe it to yourself to stop bailing them out.

By MSN Money Partner Sep 19, 2011 9:46AM

This post comes from Donna Freedman at partner blog Get Rich Slowly.


Last January I loaned money to a friend who was in financial crisis: Her vehicle was about to be repossessed. The transaction troubled me for a number of reasons, which I detailed at my personal website in a post called "I'm not a payday lender. But I play one on TV."


During my trip to the East Coast I spent part of a weekend with "Monica" and her family. (Names have been changed to protect the profligate.)


When we made a Wawa run, Monica didn't want me to pay for my own Tastykake. She threw it in with her own order, which totaled a little more than $34 and included a coffee cake, a box of doughnut holes, and a $2-plus bottle of iced tea.


I started to feel uneasy. In the next 24 hours, the following additional red flags flew:

  • Monica bought about $100 worth of maternity clothes for her married daughter, who right now is still as thin as a candidate's promise.
  • They have satellite television and DSL. Her kids have cellphones with text packages.
  • She mentioned she was planning to buy a snowblower, which after their military discount would run "only" about $1,000. (This despite the fact that she lives in a state where it doesn't always snow in the winter and the fact that she has three healthy teenagers.)
  • Monica also mentioned that her van was about to hit more than 200,000 miles. Her daily commute is about 50 miles each way.

You know what wasn't mentioned? Paying back my $800.


An unsustainable way of life
This isn't just a cranky post about being a human ATM. I knew when I gave them the money that I stood to lose it. Actually, I don't think I will. It took 18 months for the first loan to come back, one $50 check at a time, but ultimately it was paid in full.


After making the second loan I mailed a personal-finance book to Monica and her husband, "Gordon." I also suggested tracking expenses in order to plug money leaks, and urged them to contact a debt management program through the National Foundation for Credit Counseling.


My note concluded, "I know it's not easy to take a critical look at your life and to realize that no matter what happened in the past, you are responsible for the present. Change is never easy. But no one will help you except you."


Monica wrote back, promising they'd work to cut expenses. She said she'd already advocated dumping the TV and cellphones.


Nine months later the television is still on, the teens are still texting, and Monica and Gordon are still living an unsustainable, paycheck-to-paycheck lifestyle. Here are a few more details, to show you just how deep their denial runs:

  • Companywide layoffs are looming at Monica's workplace.
  • Gordon has lower-back issues and is in his early 60s, so there's no telling how much longer he'll be able to keep his job.
  • Neither one has any retirement savings.
  • They don't have an emergency fund. In fact, they have no savings at all.

That's right: No cash is being set aside in case that layoff materializes or for when the vehicle finally dies. But there's money for satellite television, texting and doughnut holes. Maybe a snowblower, too.


Treats before necessities?
I'd hoped that the first crisis -- nearly losing their home -- would force them to wise up. It didn't. Want to know the reason they needed the second loan? They couldn't make the van payment because it had taken all available funds to pay …


… wait for it …


bounced-check fees and Catholic school tuition for their youngest.


They had money to buy technology and other treats, sprinkling NSF checks along the way, but not for an essential recurring expense. Without a vehicle, Monica couldn't get to work.

But they didn't think about that.


I worry deeply about their future. It's a pretty safe bet that more things will go wrong. When does something not go wrong when you own a home and are raising three teenagers?


And when it does, they'll be right back in oh-crap-now-what mode. Post continues after video.

No more bailouts
In that "payday lender" post, I wrote that I could no longer loan money. But I also admitted that I wasn't really sure what I'd do if she called again, frantic for cash.


Now I'm sure.


Let me be clear: I'm not suggesting you abandon people who through no fault of their own have wound up holding the gooey end of the lollipop. For example, every other week I send $50 to my 88-year-old aunt. She uses the money for medical co-pays.


That biweekly payment is a line item in my budget. What isn't in my budget any longer is bailouts. I'm a freelance writer who funds her own retirement and insurance and makes regular charitable donations. And at nearly 54 years of age, I have finally given myself permission to enjoy some of the fruits of my labors (frugally, of course).


It's important to care about your fellow man. But not if you're enabling rather than helping.


I'm not the loan arranger
If my friends ask for help again, bailing them out won't really help them. It would just allow them to postpone, yet again, the very hard and very necessary work of changing the way they spend.


I'm done. Maybe you should be, too. The next time you write a bailout check, swearing it will be the absolute last loan? Make it stick. Frame it any way you like, but tell your sister/son/frat buddy that you can no longer afford to do this.


Maybe it's that your own financial stability is at risk. Maybe it's that you've given and given and nothing has changed. Maybe you want to use your money on something for yourself once in a while.


Whatever the reason, state gently but firmly that your career as loan officer is over.

You could find some other way to help, such as:

If a relative or friend is a financial train wreck, you owe it to yourself to get off at the next station. It will be one of the hardest things you ever do -- and probably one of the most necessary. For your sake, and for the other person's, close the bank and keep it closed.


Readers: Have you had to cut off a family member or friend who needed rescuing but wouldn't do much to help himself? Was it tough? Did you offer any nonmonetary help, and did the person ever wise up?


MSN Money columnist Donna Freedman blogs at Get Rich Slowly and Surviving and Thriving.


More on Get Rich Slowly and MSN Money:

Sep 19, 2011 4:48PM
As a social worker who has administered a program that assists with mortgage/rent or utilities if an unexpected expense comes up for the past 14 years, I am still amazed with the reasons that persons use to try to justify their lifestyle which they can't afford.  I have conversations with persons every day about budgeting, income vs outgo, paying housing as a priority.  I find the biggest killer of budgets are car payments and high insurance costs.  Some persons are insulted when I suggest they take a bus, have a cell phone OR a landline, have only basic cable, go to the library to find free entertainment in their area, etc.  I have had persons make a greivance to the state against me for "... an elitist attitude".  I personally own my home, work every day, drive a 1996 car and attend free or low cost events and have lower stress. 
Sep 20, 2011 1:04PM
Having lent money with less than full payback twice in the past decade, I can assure you I will do so no longer.  It amazes me how lacking the personal responsibility is regarding this.  Whatever it takes to keep the cell phone on for one more month; or the cable running; or the other unnecessary extravagances are to which folks feel entitled, then back to whoever is willing to feed the black hole.

What kills me is when they're reminded of their debt owed from time to time, never maliciously, and the sheer astonishment and audacity that follows then they retort like you're the criminal!  I wish I would have done things more officially, if for no other reason than to bind people to the decisions they make.

On that note, I too have quite a few friends who 'can't quite seem to get it together.'  A married couple I know is constantly broke, despite two decent full time jobs, and a relatively reasonable cost of living.  While I'm a frugalist of sorts, I can't fathom the lack of action toward impending disaster as I've seen with these people.  Cable and cell phones are constantly shut off and reinstated, but we always seem to have money for eating out and convenience store runs; also, when visiting, all the lights are on, all the time, night or day, and the a/c is running at 60F in the hottest of summer.  Bottom line: if people live like they're entitled, without the earnings to stipulate it, they generally get what's coming to them.  I and my significant other are far less off financially, yet we seem to get by without going into hock every month.  Perhaps it's time people focus on what's really important before they decide to spend what they do not have, in order to continually facilitate a lifestyle they cannot afford.

Donna, I applaud you for finally shutting off the faucet, but given the track record of these folks, you should have done it the first time.  While you were lucky to receive your money back initially, this time you may not be so lucky, and while you're fine with that, to you and others I say this:  You can't save everyone; some people just need to learn the hard way.

Sep 20, 2011 4:16PM

"Readers: Have you had to cut off a family member or friend who needed rescuing but wouldn't do much to help himself? Was it tough? Did you offer any nonmonetary help, and did the person ever wise up?" 

Did you really ask that question?  I believe everyone knows the answer; something about having to hit bottom before............

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