Helping out a Friend

From time to time, everyone needs a little assistance in one form or another from those that care about them. So what should you do if a friend or relative asks you for financial help? This will most likely be a very tough decision and one I can’t fully assist you with. What I can do is give you some questions to ask yourself before you say yes…


Can you afford to help this person? Although most of us want to help, you first need to evaluate your own financial situation. There is always the possibility that you won’t get paid back, no matter how good the intentions are of the borrower. Take a look at your own situation and decide what this would mean to your future.

What is the friend/relative’s past financial track record? Is it someone who has a great credit score that simply got hit with several life events all at once? Or is it the type of person who is always transferring debt to a new credit card and lives right on the edge. The answer to this may help you decide if you will see your money again.

Is there a way to help besides giving money? Can you offer to watch their child one day a week to cut down on daycare or maybe go over on the weekend and help put a new roof on the house? Sometimes there are alternate ways to lend a hand that will help ease the financial strain.
How will you structure this loan? Everything should be done in writing so that there are no disagreements down the road about what was said. Try to be as thorough as possible and put down every detail. You should seek some professional assistance in creating this document as well.

Are you willing to risk your relationship? No matter how well you know this person, there is a risk that if the loan goes south, your relationship may end. If you care about this person enough to help them out, you most likely don’t want to lose them as a friend. There is a real chance of causing permanent damage to your relationship if they can’t pay you back.

What does your spouse or partner think? Although it may be difficult, you should definitely consult with your other half before making any kind of commitment. If the roles were reversed, I’m sure you would want them to do the same. This would be a good time to review your own finances as a couple to evaluate your ability to lend this help.

What if the person that needs help is your prospective spouse? If the one in need is your special someone, the conversation just became even more critical. With so many potential pitfalls in this situation, I would strongly suggest you seek the assistance of a Certified Financial Planner to help you through the discussions and lay out some ground rules.

Unfortunately, money has a way of ruining many relationships. Although your initial reaction may be to jump right in and offer some assistance, take the time to ask some questions and decide if it really makes sense.

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