When you’re in a solid financial spot, it’s natural to want to help others. But if a friend or family member asks to borrow money from you, you should think carefully about your answer. Spotting someone $10 for lunch is a lot different than a request to borrow $100, $1,000, or beyond.
If you think you can count on this person to pay you back and decide to lend them the cash, type up an agreement. It doesn’t have to be fancy, but should spell out the date, amount, and repayment schedule. If you want to be a financial stickler, you can require your borrower to pay interest; you may decide that’s too much work to worry about. Make sure you both sign it. If the borrower doesn’t pay up on time, you can refer back to your agreement.
In all cases, you should assume the money you’re lending to someone is a gift; if they repay it, be pleasantly surprised. Thinking about loans to friends and family in this way helps you think about whether you really have the money to spare, or if helping a friend would put yourself in a financial jam.