Should You Bail Out a Friend or Relative with Financial Problems?
It is an all too common problem, especially in today’s shaky economy. With job losses mounting and foreclosures on the rise, many people are turning to friends and family members for financial support. This can leave those who are asked in an uncomfortable situation, as they have to decide whether to honor that request for help.
Helping out a friend in need is certainly a worthy endeavor, but it is important to ask yourself a number of questions before reaching for your checkbook. Lending money to family members and friends can be a minefield, and many lifelong friendships have been lost over financial issues. If you value the relationship it is important to take a hard look at the situation and think long and hard about the best course of action.
Is this a one-time setback, or part of a larger pattern?
The nature of the financial problem is a key factor when deciding whether or not to bail out a friend in trouble. Many people get into financial trouble through no fault of their own due to a one time setback. It could be the loss of a job, a sudden medical problem or a large expense no one saw coming. If this is the case providing some temporary help can be a way to get your friend back on track.
If, however, the problems are largely of the person’s own making a one time bailout is unlikely to help very much. Many people who bought homes they could not afford and lived beyond their means for years are now struggling as the housing bubble bursts and equity evaporates. These problems were a long time coming, and providing some temporary financial support is likely to only put off the day of reckoning.