Tired of Lending Money to Family? Time to Break the Cycle
Has a family member ever pestered you for money? If so, you probably know that it isn’t a pleasant feeling. I’ve had a family member ask me for money often, and it really puts me in an awkward situation. While I want to help and be generous, I don’t want people to see me as an ATM machine.
I’m very open with friends and family members about the fact that my husband and I are in debt and trying to pay it off as soon as possible.
Some people who are close to me, however, make judgments about our income and what they think we can afford. They may see us go on a weekend trip or buy something nice and assume we can spare the extra money and lend it to family members. Of course, this isn’t always the case.
Beyond being annoying, a loved one repeatedly asking for money can be a red flag that money is just one of his or her problems. And it can have a negative effect on your situation, as well.
Lending Money to Family Members Can Ruin Relationships
Michelle, a full-time RV-er who runs the blog Making Sense of Cents, had a situation in which somebody close to her ruined their relationship by continually asking for money.
“It started at a young age, and I enabled it for years,” Michelle said.
“Unfortunately, it’s led to a not-so-great relationship, and I didn’t talk to the particular person for at least a year as a result.”
It Can Also Damage Your Finances
Bailey, an army wife who runs the blog Becoming Bailey, didn’t know how to handle her mom constantly asking for money.
“When I was a freshman in college, my mom asked to borrow $1,000 so she could maintain our house until she sold it,” Bailey said. “She then began to ask for more and more and never ended up selling the house.”
Bailey gave up her savings, took out extra student loans, and let her mother charge bills to her credit card to fulfill the constant requests for more money.
“When it was all said and done, I had given my mom around $17,000,” said Bailey. “I ended up having to take antidepressants and go to therapy over it for a long time. I love my mom, but loaning her that money was the worst decision of my life and set me back years, since it’s seven years later and she never paid me back.”
How to Break the Cycle of Lending Money to Family
Bailey, Michelle, and I aren’t alone. Unfortunately, a loved one asking you for a one-time loan can turn into a vicious cycle.
Perhaps he or she thinks you have enough money to spare. This was most likely the case in one situation that Jon Luskin, a certified financial planner and the owner of Define Financial, shared with me. One of his clients had a family member who asked to borrow $60,000. In other cases, the request could be for small amounts from a loved one who’s struggling financially.
Regardless of the reason, it’s not okay to feel pressured — whether you can technically afford to lend money to family or not. Here are a few ways to deal with a loved one’s constant requests for money:
1. Firmly Say No
Your family member might feel more comfortable asking you for money if you continue to give in and say yes. Try giving a firm “no” next time. If she asks why, simply tell the truth. Things may be tense for a while, but it may provide the wake-up call she needs.
2. Offer Help in Other Ways
When my family member asks me for money, I offer to provide financial tips and resources to help him improve his situation. I share advice about starting an emergency fund, lowering expenses, and using credit cards wisely. Hopefully, this will help him improve his finances so that he won’t need to ask for money anymore.
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3. Have a Heart-to-Heart
Sit down with your loved one and explain how constantly asking you for money is damaging your relationship. Let her know that you won’t be able to loan her money anymore, and ask her to respect your decision.
4. Distance Yourself
You may need to physically distance yourself from your loved one if she refuses to stop asking for money. Bailey realized that the only way to get her mother to stop asking for money was to move out.
How to Stop Loaning Money to Family: The Bottom Line
Standing up to your loved one and breaking the cycle of lending money to family is extremely difficult. But you need to do it. It’s best to catch the issue early by putting your foot down and setting expectations from the beginning. You should never feel like anyone has the right to dictate how you use your money or to claim some of it for themselves.