Borrowing money from friends is always a touchy matter.

Borrowing Friends like Whimpy

Some people will borrow money from you continuously once you lend them money the first critical time.  I’ve even see this kind of borrowing “without repayment” action happen even between brothers.  Both brothers are good guys, but the one would continuously borrow from friends, his parents and his family.  In some ways, it’s like the borrowing brother is playing a game where money isn’t real.  It’s like he chooses to believe that the money is just paper like monopoly money, or that he’s special and doesn’t have to follow the rules and common courtesy conduct when it comes to paying back money.

Such behavior has prompted me to do the following when it comes to people asking me for money.

1. I never have money sitting around doing nothing.  So once I get paid and have some discretionary income (money after taxes and in my possession), I try to put that money to work towards goals (usually investments).  That way when a friend (or really anybody) ask me for money I tell them that I don’t have any money on me (which is the truth).  If it’s a large number that a friend wants to borrow, I never have that kind of money sitting by idle!  By always running tight, it’s harder for a borrowing friend to slip in and take advantage of you if you have money money going to a cause (in my case it’s kid’s college funds, retirement, and goal specific tasks).
2. Occasionally, I will lend small denominations to friends, but it’s money that’s less than $20.  When I was younger, it was $5, then later $10.  The amount has shifted as I continue to build my wealth, but it’s always a small number relative to the amount of money that I have.  I don’t see myself increasing the $20 cap that I currently use for a long time.
3. I make sure that I get the amount that I lent back, or else I don’t lend that person any more money.  When someone comes to borrow money from me again, and if they haven’t paid off the first amount that they have borrow.  I have no problems pointing out that they still owe me money from the first $20 that I lent them.
4. After anybody borrows money from me, I will then later ask to borrow money from them.  This puts you on the same financial borrowing level as them, and since they hate to lend money out (kind of ironic huh), they will start to avoid asking you from money.  At least this is the case in my experience.  Once I ask to borrow money from people that always ask for money from others, it’s like all of a sudden they think I’m broke all the time too.

Using the techniques above, I’ve been able to twist my way out of lending money to people, especially those that always borrow money from people but never repay the money back.

If you can think of another clever way to avoid habitual borrowers that don’t repay money back, please tell us in the comments section below!

Thanks,

MR