Neither a Borrower nor a Lender Be
This morning, I got a 7:00 AM wake-up call from one of my wife’s distant relatives. He wanted to borrow $2,000 and he sounded pretty desperate. He said he had already taken a loan from the bank, but it wasn’t enough. I never bothered asking what the money was for, because I was pretty sure he had no way to pay me back. I had just spent $12,000 fixing up our house, so I used that as a convenient excuse. I really hate lending people money.
Wants & Needs
I rarely get hit up for money, even though most people know I have some put away. My family is solid on both sides and I don’t have friends who are serial-moochers. Anyone who would call around looking for money has usually mismanaged what they had. Since I’m not the type to encourage reckless behavior, I never lend money to people who have no way to climb out of debt. It’s better to cut them off than help them dig a bigger whole for themselves. When banks stop lending to someone, it’s a pretty good sign they are in over their heads.
The people I know who could really use a little help are the ones who would never ask for it. These are the people who have gotten sick or laid-off. They have good long-term prospects, but are temporarily in a tight spot. For those who could really use a helping hand, I usually make it a gift instead of a loan. They often have bigger worries than paying me back a small amount of money.
Cause & Effect
People with serious debt problems often buy things they don’t really need, with money they don’t have. Except for people with medical problems, they weren’t forced into debt under life threatening circumstances. It’s usually the cell phones, TVs, vacations and meals out that are the start of the debt problem. Shoes are a weakness for some people and for others cars are the status symbol. Some people buy too much house or refuse to buy anything used. In most cases, debt could have been avoided with a little self-control.
The real killer is the justification, not the purchase. When people talk about the things they buy, they will often say, “I deserved it” or “I got such a great deal on it”. These are the little lies we tell ourselves to justify buying something we know we can’t afford. It’s the magical phrase that allows us to have it now, instead of waiting until later.
Real Cost of Borrowing
Living in debt isn’t the worst thing that happens to someone who mismanages their finances. The worst thing is never knowing how easily they could accumulate wealth and live happier lives. Most people have no idea how easy it is to take control of their finances and reduce the stress related to debt and collections. It’s incredibly sad for me to talk to people on a daily basis who are struggling financially, when it’s fairly simple and straight-forward for them to turn it around. Yet, they reject good financial advice and continue on their path of self-destruction, because they want it now.
Another reason people struggle is because they are looking for others to solve their problems for them, instead of taking control for themselves. People have no control over whether taxes go up or who wins the lottery. Anyone can save 10% of their paycheck in a brokerage account or a mutual fund. Those who save money regularly aren’t concerned about small problems. They don’t have to beg or borrow from others whenever something goes wrong. They can relax and enjoy their paycheck, instead of owing it to others.
People who frequently borrow need less wishbone and more backbone.
The Bottom Line
The bottom line is the more you do for some people, the less they do for themselves. If you can help someone out and feel good about it, then it is well worth the risk to your wallet and your friendship. If you enable someone to avoid financial reality, you are no longer helping them.
“Neither a borrower nor a lender be, For loan oft loses both itself and friend, And borrowing dulls the edge of husbandry.”
William Shakespeare – English Poet and Playwright
Recommended Reading
Bruce Bucks – Pay Now and Save Later
Money Counselor – Do You Invent Needs?
Watson, Inc. – Why do we Worry about Money?
Many good points made Bret. No doubt, for some, dependence on the social safety net and the goodwill of others becomes a lifestyle choice. But, as you point out, almost everyone middle class and below will need temporary help at some point in their lives, and most will never ask or will grudgingly accept, then work like dogs to get back on their feet.
It is frustrating and distressing to observe folks who spend a lifetime with their financial noses barely above water continue to make poor money choices, virtually assuring that they’ll never accumulate savings or get ahead financially. This economically self-destructive behavior has always perplexed me. For some, the drive to consume always overwhelms the drive to conserve. There’s irresistibly more pleasure for this type in spending than in saving. Like you, I’d find it tough to help out with money in cases like this.
Thanks much for the mention in your Recommended Reading.
Any time Kurt.
I have made it my mission in life to help people who struggle financially and this blog is just one facet of that commitment. I remember struggling early on and thankfully someone lent me a copy of The Richest Man in Babylon. It helped me tremendously. I give away a lot of copies of this book, especially to graduates.
It is extremely frustrating trying to help most people with financial problems. They want an easy answer that involves zero sacrifice and works immediately. I don’t know if it’s the Lottery Mentality or a sense of entitlement, but it doesn’t work.
The good news is that there are very simple, fundamentally sound ways to get ahead, that anyone can use. I’m just hoping to reach a couple of people and help them out. I don’t take it personal when people ignore my advice, but I don’t lend them money either. 🙂
I always find it strange that many people want someone else to take care of their problems. There’s so much power and strength that you gain from handling it yourself…I’m the opposite: I have to push myself to delegate so that I get even more done….
I am right there with you Joe. It’s seems like every year expectations grow and the excuse box gets bigger. People are looking for someone else to bail them out at every turn and they never accept responsibility for their own behavior.
I have long had a saying that I often post on this blog, “When you count on yourself, you are seldom disappointed.”
Great post. Excellent explanation about the real cost of borrowing, a calculation often not taken into effect with beginning borrowers. Thanks!