The cost of loaning someone money

Let’s Talk Finances – by Hans Myburgh, registered financial advisor and Northmead resident

We have all been in a situation where a close friend or family member has requested a loan, whether it is in a time of need or in pursuit of bringing a dream to life .

More often than not we offer assistance without giving it another thought, but can your household budget sustain this extra expense?

No one wants to see a loved one suffer. It feels generous at the time, but for many, the long-term cost of loaning money is far greater than they could imagine.

Although loans among friends and family may stem from a place of love and care, relationships may sour when tensions regarding repayment rise.

Here are some tips to navigate ‘supportive’ loans:
• Generosity without limits can destroy your future – Saying ‘no’ is not unkind. Consider your own financial security before agreeing to a loan.

• Have a plan when offering help – Before loaning money to friends and family ensure that you have a written agreement in place. Stipulate clear terms and firm repayment expectations, this will protect your relationship with the individual, thus giving both parties peace of mind.

• Don’t give beyond your means – Do not dip into your retirement savings or emergency funds to assist another. Never compromise your future for someone else’s needs.

• ‘No’ does not mean ‘I do not love you’ – Your love should not be measured by how much financial assistance you can give. Setting frim financial boundaries does not mean that you do not support a loved one’s dream.

It is difficult to say no but yes should never come at the cost of your own financial freedom.

Protect your peace, set limits and remember love does not demand that you sacrifice everything.

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