You've managed to improve your personal finances and proud of your achievement so far. Then one day, a friend confides to you about his money problems and hopes you may lend him some.
What do you do?
Do you immediately dig into your pocket and help your friend? Or like many Kenyans, do you simply keep quiet and pretend you didn’t hear anything and change the topic of the conversation?
If you find yourself in this situation with someone you barely know, to me, the best advise is to simply say, “I’m sorry, but as a rule, I don’t lend money to friends.” This statement is straightforward and gives your message without attacking the character of the person.
How about the friends you’ve known for years? Do you treat them the same way or do you give in to their request for the sake of friendship? You know “Friendship is more important than money; it takes time to gain friends but money, you can easily earn with your income.”
I agree with the adage, but I also believe that in most cases, allowing them to borrow your money is not the best way to help your friend. So how do you know when it’s best to lend out your cash? And how will it affect your personal finances?
I would suggest that after your friend relates his situation, it’s best to say that you would have to consult your budget if you can afford to lend him the amount he needs. Wait it out for at least two or four days. This will give your friend time to look for other ways to get the money while you try to learn more about his situation from other friends and his family.
The cruel truth is that sometimes, the money is simply being used to fuel an addiction. This does not necessarily mean illegal drugs but more often a frivolous obsession like keeping up with fads or maintaining a hobby that’s too expensive for him. If you find your friend complaining about his financial troubles while he’s drinking coffee at savanna's, then there’s definitely something wrong there.
In case of medical emergencies, I know that it’s really hard to refuse when the life of a person is involved, but immediately giving in to the request is like buying on impulse. There could have been a cheaper alternative or the situation was not really serious in the first place. So it pays to take stock of the situation and know you and your friend’s options first.
In case of business venture, then you would have to clarify if he’s asking you for a loan or he’s inviting you to be an investor. In view of the loan, you’re expected to be paid back. in being an investor, you’ll be sharing in the company’s profits instead. This situation calls for more extensive evaluation specially if you’re being asked to be an investor. In general, the fastest way to give a judgment call whether your friend deserves the loan or not is to examine his entrepreneurial skills.
If your friend has valid reasons for borrowing money, then your next judgment call is to determine if you can afford it or not. If you don’t have a working budget for your expenses. Then I suggest that you make one before you lend out your money. By having a clear picture of your own financial situation, you do not risk having money problems of your own in the end. It’s best to take out this expense from your entertainment budget. Be sure on the amount you could afford to give, this is more important than how much your friend really needs. In the end, no matter the amount you gave, a true friend will deeply appreciate the sacrifice.
What questions do you need to ask your friend before you say YES? I think it would be far worse to hound your friend for the money than it would be to say NO from the start.
To know answers to the questions you need to ask your friends..Pl do click friends and money part 2