When you Should Say ‘No’ to Lending Out Money

Do friends or family members ever ask you for money? How do you feel when this happens and do you loan it to them?

You have to be smart about who you loan money to and I’m on the more skeptical side of people who believe you should avoid loaning out money as best as you can even if it’s for family members. I say this because, while loaning money out money may help someone temporarily, it may put you at a disadvantage later down the line. You can experience unexpected situations just like other people and life will through you curve balls that you will need to be financially prepared for. Then again…what are family and friends for?

Saying no to lending someone money is hard, but in some cases you have to say it. Here are a few scenarios in which you should almost always say no to lending out money.

1. If you Don’t Say No, you May Support a Bad Habit

Don’t support a bad habit of any kind. If someone asks you for money and you have a hunch that what they are going to use the money on is wrong, illegal, or will potentially be damaging to them or their family, then let them know you don’t approve.

If the person that needs the money is using it for drugs or alcohol and you’re aware of this you have to say no. It’s no secret that drugs are not good for your body and will not help anyone. If you know someone who has a gambling problem, you should also lean toward saying no to lending them money even if they have a legitimate reason. There are many other positive and impactful things you can offer someone in need who has a bad habit instead of money.

2. Someone Repeatedly Asks you for Money

It can get frustrating if you are asked over and over again by the same person. It may come to the point where you stop and wonder if your financial support is even helping the recipient improve their own situation. If you’ve loaned out money to help someone pay bills or cover an emergency expense more than two or three times, it’s time to start considering saying no the next time they ask.

You must ask yourself, are they really trying to help themselves and better themselves financially? Sometimes when our financial lives are in disarray, it can be due to our habits and not a lack of money. I find this true when some people long for better paying jobs and more money only to succumb to lifestyle inflation and increase their spending when they do finally get more money. Financial tools and resources along with budgeting help may be the best solution in this case; not loaning out or giving away your hard earned money.

3. You should be saving

One of the first things you should be thinking about when you receive your paycheck is saving. You have to save for a rainy day and to meet your financial goals.

Emergency funds are important and you will be grateful if your car breaks down or the roof on your house needs to be replaced and you have the money for it. If you don’t have the money and your emergency fund is not fully stocked yet, then you have no business giving someone else money. Even if the person is in need, it’s extremely hard to help someone else when you haven’t even helped yourself yet.

4. You are Aggressively Trying to Pay Down Debt

If you are working to pay back your loans and credit card debts aggressively by a certain deadline, you may not be able to help anyone else financially for the time being. Paying off debt takes a certain level of motivation and focus. When you commit to paying off your debt aggressively, it requires even more dedication and you have to make sacrifices and say no to the things you want quite a bit.

This almost always guarantees, that you won’t be able to help anyone else while you are in the thick of your journey and trying to get yourself out of the hole. Getting out of debt takes a lot of money and energy.

To Wrap Up

While there are plenty of times when you should decline loaning out money to someone, there are also a few exceptions and scenarios when you may be able to justify giving someone else money. At the end of the day, the judgement call is completely up to you so I can’t tell you exactly how you should handle your money.

Just keep in mind that you need to pay yourself first and make sure your financial situation is on track before you can give as much as you like.

Has anyone asked you for money lately? What did you say?