Lending Friends Money Is Messy. Here’s How I Do It Without Losing Sleep.

Lending money is often awkward. But when you grew up in a household where asking for it was the norm, it gets even messier. I know because I’ve been on both ends of that uncomfortable conversation. When I was younger, money was the root of every fight between my parents in my house (and pretty much every thought). There were big expenses — rent, car payments, and groceries — but even things that should’ve been “free,” like a day at the park, weren’t. You still had to pay for gas. Or a bus fare. Or a sandwich once you get there.

I used to overhear my parents calling relatives and friends asking for money. Sometimes it was $20 to buy dinner. (Weirdly, that felt more painful to witness than the bigger asks.) After years of hearing those calls, I made a quiet promise to myself: I will never be that person. I wanted to be the person who could help someone out in a pinch, not the other way around.

Learning what not to do from my parents has influenced the way I think about money in all ways, including lending it out to friends. Today, I am fortunate to be in a position to help others, and it took years of living well under my means and saving every penny I didn’t need to spend. There’s a lot of debate on whether or not constantly bailing someone out of a financial situation will help them (and your relationship with them) in the long run. As many as 1 in 5 U.S. adults receive financial support from friends or family, and up to 1 in 3 U.S. adults provide support to others, according to the Consumer Financial Protection Bureau.

Ask yourself: If you never get paid back, will this seriously harm your finances?

“If you can genuinely afford to lend someone money without compromising on your financial needs and goals, but still don't want to, think about why,” says Emily Blain, an accredited financial counselor and owner of Dream Big Financial Coaching. “Is it because you've lent money before but haven't gotten it back? Are you unsure about whether the person needs it or will use it for what they say they will?” Blain recommends paying attention to what your gut is saying. Ask yourself: If you never get paid back, will this seriously harm your finances?

No matter what happens, you should be aware of the fact that money does have the power to change your relationship, for better or for worse. “When you lend money and expect it back, the relationship is damaged if you never see a dollar, or even if you only receive part of it,” says Blain. On the flip side, “If you give money with the expectation that it's a gift and not a loan, then if someone does pay you back, it will strengthen the relationship.”

These helpful tips from Blain are a great starting point. Now, when a friend asks for a loan, I say yes — but only under very specific circumstances. Here’s how I handle it.

The $200 Ex Situation: Would I Miss It If It Disappeared?

After reconnecting with an ex, he messaged me a few weeks later asking to borrow $200. Not gonna lie: he wasn’t exactly the most reliable person when we were together. So I asked myself the question I always do in these scenarios: “Is this an amount that I can live without if I never see it again?”

And according to Blain, this is exactly the right mindset: “If you absolutely have to get the money back or you will be in big financial trouble, you should not lend the money out in the first place,” she says.

In this case, I figured I’d be OK even if the cash vanished forever. He promised to pay me back when his paycheck came through. I figured there was a pretty good shot of him paying me back, and I was right: He reimbursed me on schedule. I felt good about helping out a friend in a bind without taking a hit. Win-win.

The $1,000 Family Loan: Trust + Boundaries = Worth It

A close family member (not my parents) asked to borrow $1,000 to make rent between jobs. I knew they shared the same mindset I had about not asking unless it was urgent. And I trusted they wouldn’t be coming to me lightly.

They gave me a specific payback date and followed through exactly. Even though it was a riskier amount, I felt confident saying yes, and I was right.

However, if you are scared about never seeing a considerable loan amount again, there are ways to decline politely, according to Blain. “Keep it simple,” she says, “and say, ‘I can't help right now.’” However, that doesn’t mean you can’t provide other types of support, such as connecting them to local food banks or rental assistance resources.

The $250 Uncle Loan: A “Paid Forward” Regret

This was my trickiest money-lending situation. Seven years ago, my uncle gave me $250 when I was a broke college student. Eventually, he told me not to worry about paying him back. That meant everything to me at the time. So when he asked me for the same amount three years later, I felt like I owed it to him.

Using my assessment, the $250 would not break me if I never saw it again. This time, I didn’t get paid back. And I didn’t push or bring it up. The amount wasn’t enough to financially ruin me, and I didn’t want to damage the relationship by hounding him.

Now it’s been so many years that I sort of just pretend it never happened. That said, I won’t do it again. Lending money once — even with love — doesn’t mean I have to do it twice.