Lending and borrowing money from friends
It happens to the best of us: ‘Hey, can you spot me a twenty?’ Lending money to your friends is a situation that many students get into. Whether it be intentional because you’re out at the bar and your buddy wants a few more drinks, or unintentional because you went to pay the by-law fine from last weekend’s party before collecting the cash from your roommates, lending money to your friends can become a sticky situation if they don’t pay you back.
Whether you’re the lender or the lendee, it can get awkward really quickly if the money isn’t paid back ASAP – and that can be rough because the two of you may have different ideas of what ASAP means.
If you’re lending money to a friend, make sure the terms are explicit. Before you lend them your money, you should make sure they’re able to pay you back. Do they have a job? A birthday coming up? Do their parents give them an allowance? At the very least, have an idea of when they’re getting paid, so you know when to expect your cash. A friend of mine has a system where he has people build up credit. He starts with lending friends the cost of a coffee, then moves up to a pizza and so on and so forth. At first, it may seem like a bit of an extreme way to go about lending cash to friends, but it certainly minimizes the risk you take.
The easiest way to go about ensuring you get your money back is to talk about it. If your friend was drinking when they borrowed it, remind them the next day, or send them a text that they’ll see in the morning. You can be super casual about it with “Just get the money back to me by your next paycheque.” In a lot of the scenarios I’ve seen where friends get mad at each other about not getting paid back, it’s because one friend completely forgot they owe the other money. Sometimes people feel like it’s an awkward subject to talk about, but your friend may just need a reminder. Let your friend know your expectations from the get-go for a smooth lending experience.
Some friends can unintentionally be taken advantage of by saying “Just get it back to me whenever you can.” If you’re the one borrowing the money, this can be a tight spot to get yourself into. When you hear “whenever you can,” you should think ‘as soon as you possibly can.’ Having that debt paid off can feel like a weight off your shoulders, as many people find that owing money to friends can be much more stressful than owing money to banks or other creditors. While your credit isn’t necessarily on the line, your relationship is. With that being said, it’s best to pay them back as soon as you can. Just go to the bank and get the money, or grab some cash back next time you’re at the grocery store/LCBO. In the case that you just don’t have the cash available in the bank account, take a look at your next pay and allocate the sum you owe into your budget. If it’s a substantial amount, ask your friend if you can do a payment plan.
Remember that owing money to friends is no different than owing money to a bank. While they may waive the interest, you want to make sure that you have the funds available to pay them back – if not don’t borrow the money in the first place. Living within your means is necessary to perfecting being perpetually poor.