Every social circle has “that friend” — the one who invites you out to lunch and forgets to bring cash to the cash-only restaurant, or worse, doesn’t even reach for his wallet. Chances are you’ve seen the same manipulative play over and over again: They’re friends who take advantage of your good nature and your savings.
If these excuses sound all too familiar, it’s time to learn the right way to lend money to friends and how to avoid being targeted as the de facto lender in your group.
A money-etiquette survey revealed that about 50 percent of people have loaned $100 or more to a friend, but only 45 percent report being paid back. Having to deal with a friend who leeches off of your resources is not only a hurdle to address in the friendship, it can strain your budget and force you into the red.
Spotting Friends Who Take Advantage of Your Money
Before taking any sort of action, it’s important to be able to identify friends who take advantage of you versus friends who are coming to you for genuine financial help as a last resort.
Some friends are harder to gauge than others, but there are a few types of borrowers who stand out and need to be distinguished.
1. The Down-and-Outer
This person is typically a responsible character, but has been struck with a string of bad luck financially (i.e. laid off from work or sudden medical bills). It isn’t until they’re left with no other viable option that they turn to you for brief financial relief. When circumstances improve, they make concentrated efforts to make sure they’ve paid their debts.
2. The Habitual Panhandler
When times are rough — and usually even when they’re not — Habitual Panhandlers are friends who take advantage without even hiding it. They turn to you as a quick and easy solution to being short on rent for the month because they blew their rent money on concert tickets or an iPad. This moocher has your name listed as “Personal Loans” on their mobile and your phone number on speed-dial.
3. The Back Scratcher
The Back Scratcher is arguably the worst of friends who take advantage of your finances, as it’s very likely that you don’t even realize you’re being duped. The “I’ll scratch your back, if you scratch mine” mentality is common among these friends.
For instance, at lunch they might say something like, “Can you spot me this time? I’ll get you next time we’re out.” You unwittingly agree to pay for their $12 meal and their share of the tip; the next time you two meet for coffee, the Back Scratcher will call it even by paying for your $3 cup of Joe. Unless you’re keeping a running list of how much you’ve spent alternating in this way (or if you have an impeccable memory), you probably haven’t realized how much of a free ride you’ve given your friend until now.
Once you have determined what type of friend you’re dealing with, it’s time to plan your approach accordingly. Depending on the kind of friend you have on your hands, the conversation will need to be altered to some degree.
How to Stop People From Taking Advantage of You
Being held responsible for bailing out friends who take advantage is never a good feeling. Not only are you put on the spot in an awkward situation, but feelings of guilt, peer pressure or the desire to stay in good terms with your friend can make you buckle by saying “yes” to paying for or lending a friend money.
Discovering ways of how to stop people from taking advantage of you and your finances requires a delicate balance, but it can still be achieved.
- Put yourself first: Being generous enough to lend money to a friend is admirable, but that can quickly change if your generosity begins to put your bills and other financial responsibilities at stake. Will paying for their frozen yogurt put you over your credit card limit? These are the questions to ask.
- Evaluate the request: Instead of saying yes to a loan request on the spot, tell them you’ll get back to them at a later time. A friend with good intentions will understand your initial hesitation. Do a thorough assessment of how much you can spare after bills and miscellaneous expenses and don’t be so quick to forfeit every remaining dollar you have left — you never know when an unexpected emergency will arise.
- Ask yourself, “Do I really care about this person?”: If you’re unsure about the answer to this question, then a.) it probably wasn’t appropriate for them to ask you for money since you two are not that close to begin with, and b.) you two aren’t that close to begin with, so why torture yourself?
- If you do, run through “The Checklist”: If you really do care about your friend’s well-being, certain factors about their habits can help you make a decision on whether to lend them money or pay for dinner. For example, how often are they short on funds, how soon can they pay you back, are they trustworthy, can they commit to their promises, do they make excuses for everything (and is the reason they need you to cover them legitimate?), or are you simply being an enabler to their poor money management?
Making Friends Who Respect Your Finances
With making friends, understand that your financial limitations in helping them out of a tough situation is nothing personal and is integral in keeping the friendship amicable. When having conversations about money, try to have it in person and maintain a serious and honest tone to avoid miscommunication.
It’s not easy saying no to a close friend and sometimes it’s not even easy to say no to friends who take advantage, but getting yourself out of debt can be even harder if you allow friends to abuse your finances.