On Loaning Friends Money (or, I’d rather give)

True story: A couple years ago, someone I know asked someone else I know (let’s say persons A & B) for a favor. Desperate, tears running down his face, A asked B for $20,000+ to help finish his new home and to cover unexpected medical costs for his child.

B loaned him the money.

Weeks went by. Months. Then a big problem: Lender B’s home business was facing some problems, and he needed that $20K back.

He went to A; A didn’t have it and didn’t know when he would. Bigger problem. B wanted his money; A couldn’t believe B didn’t understand. Suddenly, what had been a good friendship became tense, awkward and stressful.

The good news is that this worked out, sort of. A ended up taking out a home equity line of credit to consolidate all of his many debts into one (same money, but one place owed). He paid back B just in time. The bad news is that their friendship was never the same.

I could tell you a lot of stories like this; you probably could, too. Somehow, when money gets involved, things can get ugly fast, even between good friends. I’ve always thought this, way in the back of my mind. I’ve always felt a little uneasy about the idea of loaning friends money.

When I was reading Total Money Makeover, Dave Ramsey pointed out the Biblical principle at work here: Proverbs 22:7 The rich rules over the poor, and the borrower is the slave of the lender.

Essentially, when you loan someone money, you change the dynamics of peer-to-peer friendship. Now you are one who loaned and one who owes. And that makes things complicated.

In fact, in Hamlet, Shakespeare writes something similar: “Neither a borrower nor a lender be. For loan oft loses both itself and friend…”

So here’s my personal philosophy: If my friend comes to me, needing money, and it’s a real need, I will give–no strings attached–what I can. They can think it’s a loan if they want to, but I’m giving it as a gift–no interest and no payment expected. If I’m unable to give them the money, I can offer to do anything else to help. But I won’t lend.

If I, say, go out to eat with my friend, and she asks me to lend her what she’s owes, I will. But I’ll just give it to her. I’ll tell her, don’t worry about it. If she pays me back, fine. If she doesn’t, it was a gift.

And, if at the end of my life, I’ve paid for more friends’ meals than I’ve been given, if I’ve given more money than I’ve received, if I’ve been the sucker as some would say, I’ll consider it a good life, indeed.

Image: aldoaldoz

A Video Blog Round-Up

I’m always honored when people include me in blogging round-ups, but this time I’m also WOWed.

Randy over at Watch my Money Maker (who was so helpful when I moved this site to its own domain) has created a VIDEO round-up of his favorite PF blog posts this week. You seriously should go check it out. It’s very clever, and I’d say that even if it hadn’t mentioned me.

Thanks, Randy, and very cool.

5 Things to Be Happy about, Now

1. Casual Thursday: yeah, jeans!
2. A three-day weekend because of a free nation.
3. Rainstorms (wishing to spread them to you guys in California!)
4. The ability to eat solid food! Finally, as the bug I caught on vacation seems to be leaving.
5. Completed financial goals.

What about you?

New Goal: I want to buy a house with cash! (or, I hate debt)

I feel somewhat hypocritical talking about debt as a bad thing, seeing as I never went into it. It’s a little like a skinny teenager lecturing a Weight Watchers group. True, I have no debt… BUT my parents paid my college tuition. BUT my parents let me live rent-free while I was in grad school. BUT I grew up in middle-class, affluent America, with all the comforts and privileges therein, and I didn’t pay for them.

The truth is, if I had had to pay for all the blessings I’ve been given, I’d be indebted up to my eyeballs. From orthodontia to college to eating out to my car, there’s no way around it: I’ve been given a lot. But instead of asking me to pay for it, it’s as if someone’s wiped my slate clean, forgiving all I could have owed. I get to be debt-free, not because of hard work, but because of grace. This is true in other areas of my life, too, but I digress.

What I’m getting at here is that I know I’m no expert, no authority. I know people in debt have many reasons and situations that have gotten them there, and many times, it’s the same kinds of things I’ve done. No judgment here, OK?

But I HATE debt.

I hate that it traps people, I hate that it takes away people’s homes, I hate that it makes us spend more than we should or buy things we can’t wait for.

After more than a year in the PF world, I’ve only just now read Dave Ramsey’s Total Money Makeover. I’m not saying I see eye-to-eye with him on everything, but a couple things he writes really, really clicked with me. Things like paying off all debt with gazelle-like focus. Things like having an emergency fund in place. Things like not buying a brand-new car unless you have the liquid funds to do so. Also:

*Our society accepts debt as normal.
*Going into debt = paying interest = a larger purchase price at the end.
*There are a lot of things I don’t need; it’s possible to live on less.

Which leads me to the culminating announcement: I’ve made a change to my future home-purchase goal, and here’s my new plan:

When I buy, I’ll put down the largest down-payment I can afford (formerly aiming for 20%, now thinking closer to 50%, though 100% would be ideal and obviously would not require a mortgage).

If I do need a mortgage, it will be a 15-year. I will not purchase the home if my monthly mortgage payment is more than 30% of my monthly take-home pay.

My sidebar goal will stay at $50K, as that’s my 2008 goal. But I’d secretly like to get it up to $60K by December. A lot of people would say this is crazy, that going into debt for a home is not wrong (I agree!). But I’m thinking this: I’m still young, I have a great living situation, I have few expenses.

Why not set higher goals like these? Why not dream of a life with no debt?

Photo: sugu

Savings Updates (Goal #2 Accomplished!)

In the sidebar, you’ll notice a few updates to my savings goals. I’ve removed the Cali Vacation bar, as that’s completed and accomplished.

And there’s a new completed goal, too. As of this morning, at the open of the business day, I will have deposited the final $500 into my 2008 Roth IRA.

Two goal down; two to go!

Image: s2photo

Additional Income for June 2008:

I decided at the end of last month to start looking at my income differently, to start finding ways to bring in alternative income. Here are the results of my first month with this attitude:

$125, Payment for guest-speaking in May
$500, Selling my camera on eBay
$43, Other Selling on eBay

TOTAL: $668
WHERE IT WENT: $500 to Cali fund; the rest to down-payment fund, which I’ve become a little more serious about

Photo: Mint Software

Even Bank Tellers Use ING

Today, my brother stopped by his Washington Mutual, and the bank teller (glorified sales person) tried to sell him on a savings account.

“No thanks,” Brother said. “I have an ING.”

“ME TOO!” the teller exclaimed.

What I Loved on My Summer Vacation, by GG

Dear Blogging World,

As you know, this summer, I went on a long weekend to California, after saving up and budgeting $1000, a little here and a little there. On my trip, we stayed at a swanky hotel, ate some fabulous food and toured San Francisco, Sausalito, Napa, Sonoma and the Muir Woods.

It was really nice to get away from work, especially right after my one-year anniversary, but I’ll admit I came back more tired than I left, in some ways!

Here are the things that I loved the most:

Delica @ The Ferry Building: First night we got there, we were hot and tired and starving! Our hotel concierge recommended we head out to the Ferry building because of its variety and location on the water. The very first thing I ever ate in California, it turned out, would be at Delica, this supercool Japanese delicatessen. I didn’t even know what a croquette was before this trip, but the sweet corn/potato/onion one I had at Delica was AMAZING.

Muir Woods marked the biggest change on this trip–a decrease in temperatures. It went from 114 degrees in Sonoma to 64 in the Muir Woods National Monument. Shocking to my system but pretty cool (no pun intended). These woods are seriously gorgeous, filled with huge cliffs, amazing lookout points and so much natural beauty. This is where I first saw the Golden Gate Bridge, while standing on an oceanfront cliff. Incredible. Later that day, we drove up to the more wooded area farther north, and our car whipped around curves where I could see thousands of feet below me. I’ll be honest–I totally hyperventilated, both sobbing and laughing hysterically, my hands clammy and my breath short. Surprise: I am a little afraid of heights, especially when there are no railings! Totally worth it, nonetheless.

I thought Sausalito was fantastic, filled with gorgeous waterfront homes built into the mountain, a quaint downtown and ocean breezes. On our way in, we noticed an Italian restaurant, Cacciucco, in the residential area, where there was al fresco dining and no line. After we parked in the downtown, it probably took 25 minutes to walk back over, but it was delicious. The salad I had–spinach, pears, walnuts, honey and pecorino cheese–was perfection.

What I Aspire to Be:

A big old YAWN.

That’s right: I’d like to be plain old vanilla, boring as can be. What does that mean? Well, I’d like to be a young, prosperous, frugal girl who lives on less than she makes and gives more to others.

According to Kiplinger’s, I’m not alone.

Hat Tip: I just read this in my Bloglines, and I can’t remember whose blog cited it!! If it was you, tell me and I’ll pass on the credit (and thanks!). (Budgeting Babe)

Grand Total to Vacation: $817

The good news is that this is way under budget, as expected. How did I spend that $817 on my trip; where did the money go? After some quick analysis tonight, here’s what I discovered:

PREPAID SPENDING:
$54 Flights
$330 Hotel

ON-TRIP SPENDING:
$193.40 Food (We took turns paying, without too much of the nickel-and-dime business)
$82.43 Clothes (Totally unprepared for the HEAT!!, I bought a pair of shorts, a sun dress & new sunglasses, which I forget to pack)
$150 Transportation (buses, BART, rental car on Saturday)
$7.02 Toiletries (Again, what I should’ve packed)

The extra (”leftover”) money is going promptly to my savings. I’m even more serious about the downpayment fund here in Chicago now, having compared our real estate prices with California’s (OY!).

Want to know which places were my favorites? Whether you’re headed to SF or just enjoy hearing about trips/travel/food, check back here tomorrow.