The Trouble with Borrowing from Friends

If you have ever borrowed a large sum of money from a friend you probably already know the kind of trouble you can get into. If you haven’t, let me break it down for you so that you do. It generally starts off with you venting to your friend about your situation. Then they, being your good friend, try to offer help. You, needing the help, take it. Maybe you don’t take it at first, maybe your sense of pride causes you to think on it for a bit, but eventually you do.

 

At first everything is fine. But, lets say you are really in a financial bind. 5 months have gone by, and despite your best intentions you have not been able to repay a single penny. So now what starts to happen? That owed money will sit in the back of each of your minds. You and your friend have a fight, guess what will come up in that fight. In general conversation with your friend they mention the fact that they are still owed money. As time wears on you start to feel guilty that you have not paid your friend back. Just being around them makes you feel guilty. You start talking to them less to avoid confronting them on it. Or you avoid them altogether.

 

In an even worse scenario, lets say your friend starts to run into financial trouble. Then what? Guess who they will go to, and if not paid back right away, start to blame.

 

All of this; guilt, avoidance, non-communication, results in only one thing. No friendship. The same reason money can kill a marriage is the same reason it can kill a friendship.

 

The Solution

Here is the secret to keeping a friendship in this situation from going down the toilet. Keep talking about it. When you owe a friend money, don’t let the fact that you owe be the unspoken elephant in the room with every interaction. Stick to a repayment plan, and if you can’t follow it, communicate that fact. Make a new plan if you must or form a new agreement or do whatever you need to do to handle the situation, but handle it. And communicate it.

 

Final Thoughts

Borrowing from a friend when you are really in a time of need can be a lifesaver. It can be just the safety net that helps you out of a bind when you need it most. But personally, I consider borrowing from friends a last resort. But if you must, work out a repayment plan beforehand. Make sure this plan takes into account what to do if payments can’t be made. Any expectations on when things should be paid off and if your friend is expecting a little extra for their own troubles (interest.) Being in debt is itself a treacherous mind game. Adding onto it the multi-layered emotions of a good friendship can turn it into a nuclear bomb. So remember that no matter what happens, have a plan, stick to it and always, always communicate what is going on.

 

The Emotional Cost of Debt

 

As if being in debt wasn’t bad enough! There is an emotional cost of debt that many don’t see but almost everyone in debt starts to feel. It is the emotional toll it can take on your mental health. It’s something you may not notice at first, in fact at first you may not have it at all. But just as an investment builds over time, so debt begins to charge your emotional state as well. When this change becomes noticeable is, of course, different per person and situation, but how it happens is the same for everyone. It is the moment you consider you are in control of whatever debt you have to the moment you consider you are not, and once that transition occurs it can be a tough viewpoint to break.

 

The Emotional Cost of Debt

The emotional cost of being in debt can really weigh heavily on those around you. Most likely you will not even be the first person to notice when that transition happens, instead it will be your family and friends. You may find yourself fighting more with your significant other or closest friends. You may become withdrawn and not engage with those around you. I believe this is especially true when you are first trying to turn your debt around. The mindset of “I must not spend another penny on any unneeded activity!” or “I will not do any more birthday outings with friends.” or  “I will not join my coworkers for a cup of coffee.” While these mindsets are not necessarily wrong, especially if you are trying to handle debt, it neglects the human side of the equation.

 

Remember to Have Fun

We need to have fun every once in a while. The lengths a person will go to to achieve only a brief moment of happiness is actually pretty staggering, I mean really think about it. You work 20 to 40 hours a week, to make money, which most people use to do three things; pay bills, spend on life amenities and save for a reward that can take months or even years to achieve. All this can be further reduced to saying, you earn money to handle obligations and for the fun or enjoyment of life.

 

If you enter the mindset of, ‘every action I take is only for the handling of obligation,’ and you eliminate the enjoyment of life, what are you left with? Pretty clearly a lack of enjoyment of life.  Hence, why you may become withdrawn, moody, and in general unpleasant for others to be around. I would argue this is contributing to the emotional cost of debt. There needs to be a balance, even in the toughest of times. Otherwise it all becomes self defeating, everything you do is to pay off what is owed to others. That is, put simply, slavery.

 

Get at Cause

The first step to handling any ill-gotten emotions from debt is to first get yourself at cause over your finances. Really understand what your money is doing and where it is going. Then make adjustments so that what it’s doing and where it’s going all contribute to getting out of debt.

 

How do you handle getting out of debt, but still making sure you can have some fun? For the former I recommend this guide. For the latter, the simplest and recommended way is to add a line item to your budget for just that purpose so that you have money set aside money for it. Literally just call it your fun money. Set aside a small but realistic amount and that will be your money to use to go to one nice dinner with friends or a coffee break or whatever it is that will let you handle your debt but not feel like a prisoner to life in the process.

 

The Final Word

If you are feeling overwhelmed and down regarding being in debt, I understand. I’ve been there. Pick a good friend to vent to if you need, but remember that anything other than gaining a handle on your finances, will only be a bandaid fix not addressing the real problem of being in debt. The first step to handle the emotional cost of debt is to gain the knowledge and understanding of what your finances are doing. With that knowledge you can then take responsibility in confronting them and controlling what your money is doing. This combination of gaining knowledge, and taking more responsibility and control all leads to a greater understanding of what your money is doing, and even better, a greater understanding of how to handle life.

 

Get Out Of Debt And Stay That Way In 5 Easy Steps

 

Get Out Of Debt And Stay That Way In 5 Easy Steps

Have a lot of debt? Spending more than you make? Nothing can be more terrifying than the realization that the bills sitting on the table far exceed what you have in your account. There are many reasons you may find yourself in this situation that have nothing to do with poor spending habits. Regardless of how you find yourself in such situations, there is a way out. So, if you want to get out of debt, or guarantee you never find yourself in it, then read these 10 easy steps to get out of debt.

Step 1: Change your viewpoint

If you are in debt, whatever viewpoint you had on your finances is not working. So the first step then is to change it. Fortunately for you, if you are reading this, you have already completed this step, so congratulations!

 

Step 2: Confront your finances

To get out of debt, you need to confront your finances. This may seem dumb and silly, but you would be surprised how many people, both financially affluent and otherwise are not actually doing this step. Confronting your finances does not mean assuming you are making enough to pay for things. It is truly knowing that you do. If you are properly confronting something, then you can control it. So it follows that if you are not in control of something, you are not actually confronting it.

 

Do you know or have a list of what all your recurring expenses are and when they are due? Or how much you spent on gas? If not, you should start by taking a look and really understand where your money is going. Create a list of all your bills and when they are due, categorize your different spending and understand how much you are spending where. Later after Step 3, this can be further expanded to making sure that when a bill comes in you handle it immediately. Don’t throw it on the counter to handle it later or worse hope it will eventually go away, because it won’t. In fact, it will cause you even more headache down the road!

 

Step 3: Get Solvent

Before you can begin to get out of debt, you first need to make sure that what you are bringing in is covering how much is going back out. The next step to confronting your finances is to then handle them. This will include making a budget and working it and re-working it until the amount going out each month is below what you bring in. This is the step where difficult decisions may need to get made, the step where you may need to give up things like your Netflix or Spotify, so that you can get control of your finances. Check out this detailed guide for help with this step.

 

Step 4: Pay it down

Sounds simple but there are actually a lot of methods and strategies to doing this step, popular examples include the Snowball or Avalanche method. The basic premise is exactly as the name suggests, use any excess money each month towards paying down the debt. I’ll talk about and link to my own strategy to this a bit later.

 

Step 5: Go back to Step 2

Did you catch that last line after Step Two? the one that said it could be further expanded to handling bills immediately? Did you pay attention in Step 3 where I said you would need to work and re-work your budget? The simple truth about managing finances and your budget is that it is a cyclic process. This makes sense right? Life happens; You may get an unexpected expense or maybe you get a raise or get married or have kids. As life goes on your financial situation will change. To match, so must your budget. Truly staying on top of it all is making sure you are always confronting, ensuring you are solvent and paying down your debt.