Monday, March 19, 2012

March Money Madness: Rules for Lending Money!

Good Monday Morning Friends!!

I hope you've been enjoying your March Madness basketball games...
i know there have been tons of game watching in my house.
But i wanted to keep the March Money Madness going!!


Suze Orman is another financial person that Team Pancakes listens to.
Every Saturday, we make it a date and watch Suze.
We are such nerds BUT we love her and her fiesty-ness when it comes to finances
 and we love her segment: Can I Afford This?
We've become really good at approving and denying people ourselves.
We saw an episode of Suze on 3/10/2012 which i thought was important to speak about during March Money Madness because it's been a topic of conversation in our marriage.
Suze's points are practical and helpful and i hope they help you too!


The Rules of Lending and Giving Money

Suze is NOT a big prominent of lending and giving money
with the expectation of getting money back because in the long run,
most people lend money but NEVER get it back!

According to Suze, you should NOT give money if:

1. If you have credit  card debt 
(if you have credit card then YOU NEED MONEY)
2. Have at least an 8 month emergency fund
(most people will ask for money when they don't have an emergency fund)
3. You must fully fund your retirement 
(It will generate money for you later in life so it's important to fund it)
4. You can easily make your mortgage or rent
5. Your job is secure
(if you are self-employed, generate enough money)
6. you must have insurance
 (car, home, medical, term life,)
7. You're funding children's 529 funds

The Biggest Mistake in loaning someone money is expecting the money back.   
If the person you are lending money to needs money today, they will need money tomorrow.
If they don't have money today, they will not have the money to give it you tomorrow
(The red light goes off for me....DING! DING! DING!).

According to Suze Orman, the best thing to do is:
Don't loan money,
Give money
 (only if you meet the 7 criteria)
(you don't feel bad if the person doesn't return it, there is no hard feelings)

Here are what she reminds us about loaning money:

1. If you loan money, loan an amount you can afford
 (especially if you are ok NOT getting the money back)
2. Create a promissory note (amount, interest, date to be repaid)
(If you use a promissory note and they don't pay you back, because it's a loan,
 you can write it off on your income tax and it can be taxable to them)


These are the keys to loaning and giving money!
I found this information very helpful because while in college, i lent a friend $100.00
and always wondered when i will get it back.
At this point, i don't hold any hard feelings but i alway wonder,
"did she ever plan to give it back to me?"
I guess the answer is "NO!"

Enjoy your Monday ladies!!


kita said...

Great tips I only loan money if I know I don't need it back because most of the time you don't get it back. Great tips you can't loan if you need a loan.

Anonymous said...

Great tips! We don't really lend money mostly because we need it! LOL

Lauren said...

sometimes I think Suze is crazy...but her loaning/giving requirements are really great!

Liz @ A Nut in a Nutshell said...

All it took for me was loaning friends a couple bucks in high school and college and never getting it back. I'll never loan money again (unless like she said, I think of it as a gift).

Heather said...

Great tips! In general, I don't loan money and only give it as a gift or favor if I really don't need it back.

The Presutti's said...

I actually heard a radio show the other morning and they were talking about this. But this post put a lot into perspective and was way more in depth. Thanks for sharing.

♥ Ka`ili said...

great post! we can all learn a lot from suze orman! *cheers*

HiLLjO said...

She's a smart lady! Haven't seen the show but I bet it's filled with useful stuff.

Cam | Bibs and Baubles said...

sounds like the same advice my mom once gave me. don't lend money you can't afford to lose. If you'll be crying about it later if the person doesn't pay you back then just don't lend it.

Sara said...

I agree- loaning money is for the banks to take care of. If I am going to help a friend or family member out, it's a gift. Loans and repayments can get too sticky for loved ones. I'd rather not get into that type of situation in the first place.

Bravoe Runway said...

I absolutely love her advice and can i afford it!

Mrs. Julius said...

Wow, I've been away for quite some time from the blogging these March Money Madness posts you're doing!

I'm sorry I never got back to you about our "Living Our Vows" much going on I don't even have time to blog anymore. I need some motivation...

Anyhow, I miss reading your blog and will definitely try to catch up some more.

Hope all is well Mrs. Pancakes! ;)


An Irish Italian Blessing said...

I love me some Suze Orman! She's no BS when it comes to finances.

Kate @ Daffodils said...

O my gosh, she is my hubbys favorite! She really does give some great tips though, thanks for sharing the highlights!

Fashion Pad said...

Good advice but I lend money that i don't expect back. I have an emergency fund AND a giving fund. However, I'm not an enabler. I make sure I coach those who ask and I only give in serious situations only. Lessons learned from past experiences.

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Dallas Payday Loan said...

There are many factors on why people are borrowing money from lending companies. But one must be sure about the loans that they are dealing with.