Chapter 17
Recovering Spender Step 4:
Make a List of All the People to Whom You Are in Debt
I’ve borrowed many things throughout my life and never returned them. This happened so often that I had to stop borrowing things because I didn’t trust myself to return them. This was one of my trigger points that I found when I took the spending quiz I shared with you earlier, in Step 1. In fact, just the other day I finally returned a pair of sunglasses to my sister-in-law, eight months after I borrowed them!
How can borrowing from someone else be a trigger point for Spenders? When you borrow something and don’t give it back, it shows a lack of respect for others’ money. If you are in debt, you have a lack of respect for your own money, as well. When going into recovery, you need to start respecting not only your money, but that of people around you. Stop borrowing things for the time being, because when you are in debt and there is chaos all around you, it is easy to forget what you’ve borrowed. You need to set this as a boundary for yourself; if being in debt isn’t enough trouble, remembering what you’ve borrowed adds an unnecessary stressor.
Multiple credit cards are also a big stressor. If you have a stack of credit cards in your drawer, you may often forget which ones have balances and which ones are canceled. In this section, we are going to work on clearing up confusion by making a list of all the people to whom you owe money. Start with individual people, but also include banks, credit card companies, insurance companies, utilities, everything!
To make this easier, I’ve made a printout for you at the back of this book (see Appendix B). On the printout, I want you to fill in the top of the list with your friends and family. Your first priority (regardless of how much you owe) should be to erase your debt to these people. Money can strain relationships, and you don’t want that with these special people in your life. Make amends, tell them your situation, and let them know when they can expect to get their money back. Make it right with them, and don’t strain the relationships even more.
To make a list of what order to pay back the people in your life, start with this:
1. Family members—Always pay them off first even though they will be the most forgiving.
2. Friends—You may want to pay off your friends first to avoid jeopardizing the friendship, but family always comes first. If you explain to them the situation, they will understand if you have a true friendship with them. Remember to give them a set date, and maybe split payments up monthly if that makes it easier.
3. Coworkers—How often do your colleagues give you money for lunch, or maybe pay half of your hotel stay at that business conference? Make sure that you pay them back before you start paying off your credit cards.
When I made that list, there were only three people in our family we had borrowed money from: my grandmother-in-law (to buy our first house and who we paid off in a few months), and my in-laws.
When my in-laws lent us the $4,000 I talked about in Chapter 8, we still had $40,000 in debt. When we finally sat down to make a list of our debts and to whom we owed money, we put Mark’s parents at the very top of the list. We wanted our relationship to stay strong and were afraid of harming it by owing them money. Even though they weren’t charging us any interest, our loyalty to and relationship with them was much greater than to the person on the phone at the credit card company.
Keep in mind that if you have borrowed money from family members it’s best to make them the number one priority. That way not only do you pay down your debt, but you’ll be preserving an important relationship as well.
This topic really resonated with Amy. Amy joined my Financial Renovation Community with over $40,000 in debt. She had never budgeted before and was very hesitant that it could actually help her. Through the seven-week course, Amy paid off over $1,000 in debt to her family members plus was able to put $300 into a savings account. She was getting really nervous about her future, which is why she joined the course. She had a lot of debt with family members, and it was starting to put a big strain on their relationships. One relative sent her money from her own HELOC (where she borrowed against the equity she had in her home) to help with a large home repair. Not only did Amy not have the money to pay the interest on that loan every month, neither did her relative. Now there were two people in financial disarray because Amy borrowed from a family member and was unable to pay it back on time.
My course exceeded her expectations. She signed up because her husband was the sole caretaker of the money, and it was stressing him out. Amy says, “While we didn’t make a huge dent in our debt, we did begin communicating better about money and began working together. We have a spending plan, goals to pay back our family members, and a working budget with financial goals. This is a first for us. We had our first budget meeting on Saturday, and my husband thanked me for taking this class and coming to his rescue. I am so grateful to have taken this class.”
Amy shares that going through my Financial Renovation course was such a journey. Through the weekly lessons and challenges, she was able to find the path that leads to becoming debt-free and gain the confidence to continue on that path.
Amy as well as many others in my community have expressed regret over borrowing money from family members without any conversation about how it was going to get paid back.
I know of situations where people have lent their entire retirement savings to a family member in need, then have to work an extra ten years just to be able to pay their bills because they never got their money back. Don’t be that person who doesn’t pay back a family member.
I suggest that if you absolutely have to borrow money from a family member, put the payment terms down in writing. Keep the communication open, and don’t let things get weird in the relationship. That relationship is much more important than money, so make sure that the relationship stays the focus.
