Sad Stories About Lending Money And Not Getting Paid Back

Here are some sad stories about lending money and not getting paid back. In general, I am against lending money to people you care about. These include lending money to friends and family. Don't do it unless it's a life or death situation. Give the money instead.

Lending money to friends, family, and strangers is a tricky situation. I've argued why you should never ask to borrow money from friends or family. If you do, not only would you sully your honor, you will disappoint your parents, and potentially lose your friends.

Sad Stories About Lending Money And Not Getting Paid Back

If you do end up borrowing money from friends and family, my assumption is that as a Financial Samurai, just like a Lannister, you will always pay your debt back in full.

But this is the wrong assumption because some people simply have no honor. They are the takers in this world who mainly think about themselves.

If everybody honored their debt obligations, there would likely never be a financial crisis that destroys the wealth of millions. However, as we all know, crazy things happen all the time.

Bad lending outcomes is one of the main reasons why I rank P2P lending as the worst passive income investment.

I'd like to share several sad stories from Financial Samurai readers who lent money in good faith. Neither of their stories ended well. However, there are some great lessons.

Sad Stories About Lending Money In Good Faith

The Good Uncle And Brother

Jimmy writes,

“Lending money to family and friends is a terrible idea. In most cases, you will lose both: the money and the friends.

I lent about $10,000 interest-free to my nephew 12 years ago. Never saw a dime of it back. Not only that but he totally avoids me and I haven’t seen him in three years. He works and makes good money now. He is also very thrifty, but it’s just too hard for him to pay the money back.

Then I lent about $160,000 interest-free to my sister to buy a house as she could not get a mortgage. She was supposed to get a mortgage within three years and pay me back. Nine years later she has only paid back $40,000.

Now she never comes to see me and hasn't talked to me for the last two years. She makes good money with her husband as they take a lot of vacations. But it looks like it is hard for her to pay the money back.

I didn’t do any loan paperwork with them – just wrote a check and made a gentleman’s agreement. That is the only evidence I have and they know me. I am not the type that would take my family members to court so I guess I will never see my money back at this point.

The worst thing is that I loved them so much and now I never see either of them. My heart has gone cold. So I realize at this juncture, I lost both, money and family.”

The Benevolent LandLord

Irish2four7 writes,

“I “lent” money to a tenant who was neither a friend nor family. The guy was younger. I believe around 23 years old. He had moved from somewhere south up to the Washington DC area. He was under a manager training program contract with his work and I believe he was mis-informed of his potential compensation.

When I had checked him out in the application period he seemed fine enough, and the rent required wasn’t all that much. He was going to be paying around $950/month for one bedroom in a shared unit. He had his first months rent and a security deposit so things were off to a good to start.

The unit was a 2-bedroom, in which he was splitting with an existing tenant that was paying two-thirds of the total rent as she had a much larger space.

Anyway, it started out well and the money was coming in as usual for the first three months. Then on month four, I received only one check from the female tenant. So I sent an email to them to see what had happened, and he said he would get it to me.

He said he just didn’t get paid that day and the check to his account was delayed. I said okay, just get it by mid-next week, assuming it would take a couple days for the bank transfer to workout. A couple days came and went, and still no money.

I reached out again, and he said he was going to send the money next week. He got into a car accident and needed to sort that out. I realized this wasn’t my problem, but I felt bad for the guy, and said, “Okay, just get me the money next week.” That week came and went as well… still no money.

We then approached the next month and again I received a check from the female – only. So now I was down $950 x 2. $1900 isn’t exactly life-changing but it’s not small change either.

So I reached out to him again, and said, “You have missed rent from last month and this month is due as well. You are down $1,900 what is happening?”

He responded that he was going to be getting a promotion as he was finishing his program but it hadn’t hit yet. As soon as it did he would pay the money. The reason he hadn’t settled up yet was because his 3-year-old son was sick and needed treatment. He also needed a new bed. I didn’t know he had a son. It wasn’t my business I suppose.

So, I said, “Okay, I need you to start making payments on this or we are going to have to start the eviction process. I don’t want to kick you out, but I can’t take another $950 hit.”

Would you believe it? He missed another check. I'm now down $950 x 3 = $2,850. This was the last straw. It should have been earlier but I was being nice I suppose.

I had a discussion with the guy and discovered the issue. Not only did he have child support due in addition to another sick kid and a totaled car, he was also fired from his job for lack of performance. So much for that promotion.

I decided to sit down with him and try and impart some wisdom. I told him that he would be evicted, which he knew and he was okay with.

He said he was sorry. But thought that it was going to work out. He wanted to get on a payment plan to pay me back. He said I did him a huge favor letting him live in the place and he never wanted to not make the payments. But he was under so much stress with his kids in a different location, and the car, and the job. It was all really just too much for him at 23.

I said, “Well look. You are already into some serious issues and I don’t want to make life worse for you with legal action but we need to sort this out.” So we came up with a payment plan, and I generously told him I will give him 15 months to make all of the payments.

To this day I have no idea why 15 months. But, that's what I said. So, we drafted a note and both signed it that he would pay back $2,850 within 15 months.

I was shocked that on month 1 he sent $500. I was now down $2,350. on Month 2 he sent $300. Yikes. I was now down $2050. On month 3, can you guess what he sent? If you think $100, you are wrong. He sent $500. Things were looking good… I was now down $1550.

With the last payment he said he had moved to a new place, sold his car and had a new job. He was back near his kids and figured out how to make life work.

Then month 4 came. Nothing was sent. On month 5-7 nothing again. On month 8 I was losing hope. But he sent $50. I was now down $1500.

That was the last money I received and the last contact I've had from him. Month 9-15 zero funds were received. I initially reached out two more times telling him to honor the agreement. However, I eventually lost taste for it.

I came to the conclusion that $1,500 to him was probably a lot more than it was to me. I also knew that it would cost a whole deal more to even try and recover the funds. Even with a favorable verdict payment wasn’t guaranteed. So, I decided to just let it go.

I sent him one last email and said, “Based on the lack of correspondence I understand you have decided to not honor your word. I understand this and can accept it. This is probably the only situation in life where you will get away with this. Think long and hard going forward before you make a commitment and always have a strategy for how you plan to completely execute the agreement. It's how you finish the contract not how you start it. Good luck in life, take care of your boys and teach them better.”

When I think back on it, I see a couple of lessons to learn.

1. Enforce the contract sooner and don’t wait.

2. Evaluate the candidate better and require a higher premium for renting. At the time I only charged a half month security deposit.

I started to think about what it must have felt like to that person. He had his world crumbling around him and here was this person hounding him for funds. While, yes I agree it is part of life and he should have honored the commitment. I also see the other side.

Imagine if your life went to total hell in a day. Your kid has issues. Your car breaks down. You get fired. Now imagine someone coming to kick in your door to take your belongings and shake your core because of a few thousand. (Kind of what's happening during the global pandemic)

Life is more important than money. Sure it takes money to get along, but it isn’t everything. Looking back at the situation, I almost wish I told him on month two to just finish out the month and then leave. The money wouldn’t be due. Go get your life straight and consider this your last free ride towards manhood.

With all of that said, I have a similar thought to the rest of you. To my family, I would lend whatever they needed. They are my support crew and if you can’t be there for your family who can you be there for.

When it comes to my close/best friends, I would lend them what they need. Mostly because they don’t need it anyway. However, if they did and it was a life and death situation how could I cast them out? Like one of the other replies said, maybe someday I would be the one needing money.

You can’t take it with you. So long as you have enough for yourself and your family, that's what matters most. There is nothing wrong with sharing with others to help them on their way.

Sure if they abuse the issue, maybe I would change my tune, but so long as it is a genuine need and not just a cash grab, why not help the ones you love. Hell, I gave $1,500 to a stranger.

The Crafty Master Tenant

After publishing the first two stories, Daria shared her own sad money story as well.

The second story really hit home, except I was the tenant renting from the master tenant during COVID very recently.

The master tenant asked me to prepay 3 additional months of rent (I was already prepaid for the next month) to “cover unexpected expenses”, including her dentures. I work at an education nonprofit and rent in the Bay Area, so rent is not cheap relative to what I make. But I’ve been following your blog for several years and manage to keep a decent savings and liquidity buffer at all times.

Seeing as I was in a position to help, I sent her extra rent with no questions asked that same day. A few days later shelter in place began, and I started sheltering with my mom in the East Bay (about 40 miles away).

During this time she told me not to come back, repeatedly saying I would be “bringing foreign germs into the house”, while continuing to collect my rent.

I finally got her ‘permission’ to return to the premises. That's when I discovered HER SON had been living in my room that I was paying for for the last 2+ months. Not only that, she threw my clothes onto the floor in a pile. She had searched through my drawers and taken my N95 masks for her own use.

I emailed her right away after moving out all my belongings immediately from the room, asking for my prepaid rent and deposit back. She began threatening me, making wildly untrue statements, saying I owe her *more* because of a spike in PG&E bills during November/December (I was traveling for work and holidays, so those were definitely usage spikes from her 2 adult children who came home for the holidays), and more. She also flaunted the fact that she has copies of my drivers license and passport, in some absurd way to keep me quiet. This woman is more than twice my age (her children are my age, including a daughter who is lawyer), likely makes a multiple of what I do in her occupation and seniority, receives several thousand in alimony from her real estate mogul ex-husband every month…

To this day, I have not recovered a penny of what I prepaid to her on good faith. I'm still waiting for courts to re-open in San Mateo County. However, the backlog seems like it’ll be a year before they start processing new small claims cases.

I guess my learnings are: (a) Sam is right! People who are desperate for money may not have the honor to return it later, and (b) protect yourself. Don't send prepaid rent for several months out.

Thankfully, tenant laws are strong in California. I was able to find pro bono help. My rights as a tenant were violated (unlawful eviction, covenant of quiet enjoyment, deposit return, covenant of habitability, etc).

Related: Why You May Need A Real Estate Lawyer

Lending Money Is Giving Money

Although these sad money lending stories have a different tone, they remind me that if someone is desperate enough to ask you for money they could seriously be in a world of hurt.

If you lend money to friends and family, just assume you are never getting it back. Once you set expectations to zero, you won't feel significantly disappointed.

Of course, you secretly hope your friends and family will do the right thing and pay you back. At the very least, to preserve a valuable relationship. However, just being in the position to lend or give money is something to be grateful for.

If you think about it, someone asking for money must really be hurting because you can get a personal loan for under 10% nowadays. Worst case, you can put expenses on your credit card and pay a ridiculously high interest rate in the teens and up. Payday loans are just out of the question.

Average Personal Loan Interest Rate

If someone close to me asks for money, I will give it to them. I'll first let them decide the terms in which they plan to repay. If they can't pay for some reason, I'll suggest a plan where they can do some helpful work to pay off their debt.

There's always something someone can do to provide value. And I've found that giving people the opportunity to work is a great honor. Nobody feels good about stiffing someone who lent them money in good faith.

Related: The Various Types Of Debt Ranked Worst To Best

Readers, do you have any other sad lending stories you want to share?

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37 thoughts on “Sad Stories About Lending Money And Not Getting Paid Back”

  1. Joe Siczpak

    Fvck that. I loaned a good friend $3K after he’d been fired. We specified no terms. I just loaned it and counted on him to be responsible. He got a job a few months later, but didn’t mention repaying anything. I asked about it in email. At first he was adamant saying, “I’m going to repay you”. After a few weeks, he sent $500, so I thought that he might send another $500 next month, but I got crickets instead. After a few weeks, I asked again, and he got whiny and defensive, saying he had mental problems and other bills and saying that I was “making horrible demands”. He offered to pay me $100 a week, stating his excuse as “we had no terms of payback”. I had considered him one of my best friends and a real confidant. What a crybaby. He did commence paying $300 monthly, and I eventually got the total $3000 back. But now he’s blocked me on a social site and has refused to answer all of my polite email inquiries as to his well being. What a baby.

  2. I also lost a friend because of this. It has been years since we last spoke to each other. One day she messaged me on Facebook. I thought she just wanted to catch up, but instead she asked if I could lend her some money. I lent her the money, no questions asked because it was only a small amount of money. She said she’d pay it back soon, but several months later she still hasn’t paid me back or made an effort of giving me a status about it. Then one day she messaged me again, she was selling me a ticket for a raffle she was arranging. She still didn’t mention the loan, so I reminded her by telling her since she owes me money I’ll just use that as payment for the raffle ticket just so we can call it even.

    Then a week after, she tried to sell me a ticket again and kept bugging me for it. I got pissed because she didn’t even say sorry about not paying the loan and tried to sell me a ticket instead. Although it was only a small amount, I was kind of turned off by how she dealt with it. It would have been fine if she just said sorry. So I just blocked her instead so she can’t sell me anymore tickets or try to borrow from me again.

  3. Fortunately, my family has never had to ask me for money – though I do give my Mum a monthly allowance as she is a pensioner. However, in the past I lent a friend’s Mum money and she never paid back. Lesson learnt.

  4. I only loan what I can afford to do without. If I get it back, great… if I don’t, it won’t ruin my day as I didn’t expect to get it back.

  5. My mother in law once lent her son $10,000 for a car. It’s been close to 10 years and he hasn’t paid back a dime. You can’t even get him to admit he owes her money. We lent my wife’s cousin $350 to buy a flight…we haven’t seen a single penny back. She also refuses to admit it was a loan.

    My wife and I agreed that we would never lend money to friends and family again. We only lost $350, but it became obvious that friends and family do not pay back loans. Now, if anyone ask for a “loan”, we usually say no. On the rare occasion we say yes, we tell them don’t worry about paying us back. It’s a gift.

  6. Here is a lesson I learned from my parents and uncles a long time ago.

    Never loan out money to friends and family.

    But….

    If you decide to give to friends and family because something tugs at your heartstrings, consider it gone or (more benevolently) a grant. Don’t expect any favors as a result. That being said, if you go on this premise, relationships don’t get soured, and you give what you are comfortable giving out as a “charity case” and don’t lose sleep over it. If they pay you back, that is a bonus (but not a basis to repeatedly loan to that person – first rule applies. Future requests from the same payer are treated like a Nigerian Prince scam).

    Hope it helps.

    1. Dear K Pad,

      I am a Nigerian and take exception to your comment. Not fair to tar a whole country with the same brush.

      cheers

  7. Hi,
    I let out my properties for almost last 2 decades. At the beginning we used to have housemates often in the property I have rented myself. One of them was young, very nice young boy (about 15 years younger) in his early twenties. He seemed to spend a lot of time at home. Also he had some health issue (no problem for work). He always used to work only casually and liked to party a lot.

    Same story as usual. First he was late and promised that he will pay next week. Next week he postponed it again. I was bit sorry for him but he seemed to have enough money for partying and not working, but not enough $200 for room. Then he asked me to use his deposit. Situation dragged a bit more and I have ended up around 1500 out of pocket. Then he said he is moving out. Good on him. He just managed to get himself few weeks of free rent.

    What I got for being positive, letting him work out his issues? Well bit of attitude on the phone while reminding him the money and his previous promises. He left lots of his stuff (rubbish) there. Did not clean anything. Later I got massive electricity bill which was probably due to his electric heater which was always on, sometimes even when he was not at home.

    I had few other similar cases. This one ended up owing me the most. Luckily it happened at the beginning of my landlord “career” so I am much careful now. Practically people often try to lay on you their problems, mostly caused by bad choices anyway. I would like to remind that vast of my tenants were nice and responsible people. But as a landlord it is necessary to be firm and stand your ground otherwise you will be turned into charitable organisation.

    I write about my journey towards financial independence also on my blog.

    Mr Whyninetofive

  8. I would never be in the financial situation I’m in today if it wasn’t for loans I’ve taken from friends in the past. Their faith in me to pay them back drove me to return the favor and them some which I believe has strengthened our relationships.

  9. Isn’t there any old adage about never lending money to friends/family- if you want to help them out just make it a gift and don’t expect repayment .

  10. I’ve been sending money to my parents every month to help out with their cost of living. I don’t expect any payment back, of course.
    Occasionally, my dad would ask for $50,000 or something like that to invest. I usually tell him no for the larger amounts even when he promises to pay back.
    It’s better to gift than to lend.

    1. Richard Wilfred Storey

      Yes I totally agree with you. After all my parents have done for me I feel I owe them. If they asked me for money and I could afford to I also would give it to them as a gift not a loan

  11. CaptainCash

    My Rules:

    1. Never Lend Money To People. This is what Banks are for, stupid! If They want a loan, let them go through the professional channels!
    2. “Play Dead” if they come looking for you. Behave as though you’re not home and they’ll go elsewhere. Easy for me since I live alone and have no one left in my life. I’ve got a red CoVid warning sign hanging on my front door!
    3. Stay Away from humans in general. This is especially true during a crisis period such as now. Desperate people do desperate things.
    4. Think Poor. Act Poor. Look Poor. This keeps the bipedal predators away from your doorstep in general! Let the Look-At-Me lightning rods who flaunt wealth via conspicuous consumption take up the slack!

    1. I had a friend who lived in a very bad part of town. When he first arrived, he “loaned” small amounts ($5-$20) to some of the local creatures. He said it was a good investment, as they would make themselves scarce when they saw him coming.

  12. What an incredibly timely post. I’m a long time reader and fan, but first time posting a comment. The timeliness of this post in our current environment made me want to share my perspective as a first generation immigrant. I came to the US from India with the proverbial $200 two decades ago, but always had loving parents and siblings back home growing up. My parents are no longer alive, and unfortunately my siblings have fallen on hard times (sometimes due to poor choices, lack of hustle, and recently exacerbated by covid economic shutdowns).

    I am very fortunate to have a steady high income with a senior tech job and have built up reasonable assets through a couple of decades of hard work, savings, luck, and reading FS. My wife works hard too in her marketing job at a tech company and we are well positioned with a house in the bay area , and adequate savings for two teens about to go to college In a few years.

    My brother recently called me for a 10K bridge loan to help him get over covid economic crisis. I had loaned him 20K a few years ago which he said he intends to pay back but hasn’t happened. I agreed to send the money this time as well. But the hardest part has not been the money but the emotional conflict for myself –
    I often shuttle between desire to help, guilt of being selfish and too “money minded”, annoyed by being taken for a ride, sometimes guilty for giving away our hard earned money, and sometimes feeling bad for even entertaining the thought of not helping if my family needs it ! (I’ve been conflicted to the point I didn’t even tell my wife about the first loan to not inflict my guilt on her, and send it from my bank account). Never knew how to resolve those feelings till I read this post. Don’t know if I am setting a precedent for continued ask for help, but I guess time will tell.

    Makes me feel a lot better after reading this post and reminding myself of the hurt my brother must be in to again ask for money, feel gratitude above everything else to be a position to help, and also to mentally think of it as a gift with no expectations to see it again.

    Thank you Sam for your effort and posts.

  13. What an incredibly timely post. I’m a long time reader and fan, but first time posting a comment. The timeliness of this post in our current environment made me want to share my perspective as a first generation immigrant. I came to the US from India with the proverbial $200 two decades ago, but always had loving parents and siblings back home growing up. My parents are no longer alive, and unfortunately my siblings have fallen on hard times (sometimes due to poor choices, lack of hustle, and recently exacerbated by covid economic shutdowns). I am very fortunate to have a steady high income with a senior tech job and have built up reasonable assets through a couple of decades of hard work, savings, luck, and reading FS. My wife works hard too in her marketing job at a tech company and we are well positioned with a house in the bay area , and adequate savings for two teens about to go to college In a few years.

    My brother recently called me for a 10K bridge loan to help him get over covid economic crisis. I had loaned him 20K a few years ago which he said he intends to pay back but hasn’t happened. I agreed to send the money this time as well. But the hardest part has not been the money but the emotional conflict for myself –
    I often shuttle between desire to help, guilt of being selfish and too “money minded”, annoyed by being taken for a ride, sometimes guilty for giving away our hard earned money, and sometimes feeling bad for even entertaining the thought of not helping if my family needs it ! (I’ve been conflicted to the point I didn’t even tell my wife about the first loan to not inflict my guilt on her, and send it from my bank account). Never knew how to resolve those feelings till I read this post. Don’t know if I am setting a precedent for continued ask for help, but I guess time will tell.

    Makes me feel a lot better after reading this post and reminding myself of the hurt my brother must be in to again ask for money, feel gratitude above everything else to be a position to help, and also to mentally think of it as a gift with no expectations to see it again.

    Thank you Sam for your effort and posts.

  14. Wow oh wow on all three stories. It’s sad how money can ruin relationships and that people get taken advantage of in so many ways. Fortunately I’ve never had a friend ask to borrow more than $30. The few times I had friends borrow $20-30, they said they’d pay me back and never did. I quickly learned that if a friend of mine couldn’t honor an amount that small, that I’d definitely never get anything larger than that back. So I’ve probably only lost about $100 in total from friends, thankfully not a big deal. I’m not friends with them anymore interestingly, but not because of that.

    As for family, yes I’ve had immediate family ask to borrow money. It didn’t bother me in the beginning so I did it without hesitation. Did I ever get that money back? No. One family member asked for money from me probably 7-8 times, maybe more. Another family member has asked indirectly by strongly implying how much stress they have with bills and debt more than 20 times. This person is a pro at laying on the guilt thick. I’ve lost track of all the asks.

    Each time I’ve helped. Sometimes with cash, other times by paying off their debt or home maintenance bills directly, buying a computer, paying for medicines, etc. Not always for the entire amount or ask, but I’ve had the means so I’ve helped. After the second or third time paying for each person I knew the money I was “lending” would never come back so I stopped expecting it.

    Sadly this has created an emotional wedge between me and both family members. I will always help when they need it because they’ve helped me in other ways. But it sadly has impacted our relationship. I admit I don’t like to answer the phone when either call because they almost never call just to say hi, how are you? It’s 99% about problems they want me to help with or to off load emotional baggage. I try to help when I can, but it’s not something I enjoy anymore. I sadly dread it.

    Great powerful post. Thanks Sam and to all the readers who shared.

  15. desidividend

    I am familiar with some one who lost quite a bit to 200k from lending ,never recovered anything.My policy is no lending to family or friends ,but when i was young some one helped and he needed some money later that was the only case where i lent and they paid back.

  16. Lord, it’s like a right of passage to get taken for a ride, on the road to wisdom.

    People mismanage their money and expect a bail out… Co-workers Colleagues and Friends.

    I made a couple of loans to 2 sisters/co-workers, who I Happened to be friends with outside of work; 1 even had her husband call me for money a few times ($1k to $1.5k) to pay his NYC Taxi Medallion Business expenses

    I was saved by another female colleague, who sat me down and taught me how to get off that slippery slope.

    She said:
    Julia, #1) Those people are using you as their personal banker, and you need to Stop it now.
    #2) They actually envy, resent and are jealous of you, because I heard them, on a few occasions, while complaining about bills, you didn’t respond, and one said to you “you never seem to have money problems.” This same happened to me, so that’s why I’m telling you to do something to stop it; “next time, mention that you screwed up and maxed out 2 or 3 cards last couple of months, plus some other bs money problem(s).” This will accomplish 2 things for you #1) It’ll make them feel better, #2) You’ll have a perfect excuse to say “No” without them resenting you. I’m telling you this, because it happened to me, and I lost lots of money, and those friends of mine became my enemies.

    I listened, I thought about, and a few little nothings on their that added up to make sense on what Robin said to be true. I did exactly what she advised on, after that, whenever the conversation starts to move towards money issue, time to make a call, use the restroom and I’d leave. I survived 30+ yrs on the job.

    But, it was harder to distance with the family, in-laws and close family friends, so I used a different tactic; I’d say things are tight, I only have $500 (of the $3k they’re looking for), but if you really need it, I’m willing to Give it to you and if you can pay it back fine, if not no problem… This has guaranteed a no return for more. Although I still I experienced a little distancing on their part, but not a total lost of the relationship. They never intended to repay.

  17. Canadian Reader

    Yeah… similar story with a renter we had that didn’t pay for 2 months toward the end of his lease – and my husband only made him pay half of a security cost to start with- so we ate those costs and decided to sell the property.
    My husband’s best friend once asked to borrow 25k to cover his bridging costs while they moved into a new house. My husband wanted to give the money and I said no. They are still friends, but we aren’t that close with them. I felt if we gave the money we would never see it again and it just wasn’t our responsibility to pay for their housing upgrade.
    I wanted to help my sibling who suffered reduced income from COVID lockdowns, but didn’t know how to do this because there is a major addiction in the picture. I did 2 major grocery/household supply runs and gave a bit of cash in a card. This person never asked to borrow money, but I know help is for sure needed.

  18. This is a very good point to bring up. Lending to family, even with zero interest turns the relationship into a transactional one. I would include co-signing a loan for someone as well.

    A gift, on the other hand, keeps the relationship personal and actually strengthens it.

    I’ll never forget what Dave Ramsey says about borrowing or lending to family. “It sure makes Thanksgiving dinner taste different, doesn’t it.”

  19. Sam, thank you for imparting this wisdom and sharing these stories on your blog. The second story really hit home, except I was the tenant renting from the master tenant during COVID very recently.

    The master tenant asked me to prepay 3 additional months of rent (I was already prepaid for the next month) to “cover unexpected expenses”, including her dentures. I work at an education nonprofit and rent in the Bay Area, so rent is not cheap relative to what I make. But I’ve been following your blog for several years and manage to keep a decent savings and liquidity buffer at all times.

    Seeing as I was in a position to help, I sent her extra rent with no questions asked that same day. A few days later shelter in place began, and I started sheltering with my mom in the East Bay (about 40 miles away).

    During this time she told me not to come back, repeatedly saying I would be “bringing foreign germs into the house”, while continuing to collect my rent.

    I finally got her ‘permission’ to return to the premises, where I discovered HER SON had been living in my room that I was paying for for the last 2+ months. Not only that, my clothes were thrown onto the floor in a pile, and she had searched through my drawers and taken my N95 masks for her own use.

    I emailed her right away after moving out all my belongings immediately from the room, asking for my prepaid rent and deposit back. She began threatening me, making wildly untrue statements, saying I owe her *more* because of a spike in PG&E bills during November/December (I was traveling for work and holidays, so those were definitely usage spikes from her 2 adult children who came home for the holidays), and more. She also flaunted the fact that she has copies of my drivers license and passport, in some absurd way to keep me quiet. This woman is more than twice my age (her children are my age, including a daughter who is lawyer), likely makes a multiple of what I do in her occupation and seniority, receives several thousand in alimony from her real estate mogul ex-husband every month…

    To this day, I have not recovered a penny of what I prepaid to her on good faith. Waiting for courts to re-open in San Mateo County, but the backlog seems like it’ll be a year before new small claims cases are heard.

    I guess my learnings are: (a) Sam is right! People who are desperate for money may not have the honor to return it later, and (b) protect yourself. Don’t do anything you aren’t obligated to do, like sending prepaid rent for several months out.

    Thankfully, tenant laws are strong in California, and I was able to find pro bono help when realizing how many of my rights as a tenant were violated (unlawful eviction, covenant of quiet enjoyment, deposit return, covenant of habitability, etc). Wish this piece was published earlier, but glad it was, for anyone in the future who faces a similar situation.

    Thanks Sam! Love your work.

  20. In my 10 years of owning rental property houses, I’ve had to “eat” the rent one time and evict the tenant. Same familiar story, down on their luck, felt sorry as I was new to the rental game. I started looking at it from this perspective. As the owner, my obligations are still there, whether you pay rent or not. So in a sense, when a tenant does not fulfill their contractual obligation, they are taking food off of my plate. When it comes to money matters, logic must trump emotion. As for lending to family or friends, I would agree with some of the other posters. Consider it a gift or look at it like Vegas money (don’t expect to see it again).

  21. Kevin Prochaska

    In the early 80’s, I borrowed $20,000 from my parents to have a medical procedure done. Since this was a period of high inflation, my Dad made a note with a 16% rate payable over 2 years. I paid that off on time.

    I was raised with a very strict concept of money and responsibility, and it has served me well.

    A couple of years ago, my Mother needed to move to independent living in another state after my Dad passed away. She couldn’t sell her house immediately due to estate issues and needed $400,000 as an entry fee for the facility. I prepared a note at 6% for her secured by her brokerage account (extremely low basis, so it wouldn’t have made sense to sell). When her house sold, she paid off the note.

    I don’t think I would ever consider my siblings, as they seem to have developed different values.

    I have had friends ask about short term loans in the past and have always referred them to pawn shops. If the loan is small and short term, it makes a lot of sense. You get to keep your friends, and if they can’t or won’t pay back their loan, they only lose their pawned item and not your friendship or their credit rating.

    1. “I was raised with a very strict concept of money and responsibility, and it has served me well.” So far, so good.

      “…I don’t think I would ever consider my siblings, as they seem to have developed different values.” Uh oh. Deets, please?

      I am always fascinated by families where the parents are clearly responsible w/money and take it seriously and who have at least one child who carries that value on, and yet they have other children who don’t. I’d like to know why this happens. Is it favoritism (a favored child is often irresponsible)? Gender expectations?

      If anyone can point me to a study on this, I would like to read it.

      1. I’m the oldest of 5, immigrated to the US at 8, only kids #5 born in America. Here is my “study”

        Kid #1 Female, 35 married, kids, paid off house, no debt, 6 figure savings account and fully funded retirement. On my own since 19 with 0 financial help from anyone.

        Kid #2 Male, 33 single, no kids, own home, owns business (mechanic shop) 6 figure salary. No financial help from parents

        Kid #3 Male, 30 single, no kids, former drug addict in and out of jail, bailed out by mom numerous times, used to work for kid #2 but fired due to theft to support drug habit. Lives at home, in debt , 0 saved. Mental illness

        Kid #4 Female 28, Married, 1 child, home owner , debt free. Had a lot of help financially from parents

        Kid #5 Male 25, single, no kids, in college (first in our family) works full time. Lives for free with kid #2. The baby of the family who basically gets everything for free, our dad still pays his phone bill.

        The most “successful” in the family are the kids who had very little help from parents and have had to earn every penny they have by hard work

        1. I have absolutely agree with you. I got lots of support while growing up and my parents paid my accommodation and food during 5 years of Uni. I know I was lucky and I had awesome childhood, teenage years and time at the Uni. All pocket money, clothes and any WANTS I had to make myself in casual jobs. I had a first casual job at about 10 and first full time holiday job at 15 (it would not be legal before that). I used to work EVERY summer holiday.

          I like to think that I am reasonably successful. Being able to modestly live of our rental income with family of 4 at the age of 43.

          My brother unfortunately never cared about money. I mean about making and keeping it. Mum always paid many of his WANTs (including phone and social security bills almost till 35). He never had a casual or holiday job until about 23. Mum used to pay for him holidays in the beach resorts. At 40 he still lives in share house, no savings.

          I am saying this not because I am jealous. I love my brother. At that time as I am 5 years older I was already at the Uni and later moved to live overseas. I mention it because I will keep this in mind for my kids.

          I write about my journey on my blog.
          Mr Whyninetofive

  22. Financial Freedom Countdown

    If I have a family member ask me for money and it is genuinely needed; I would just give it as a gift so there is no expectation to return the money. No hurt feelings.

    What makes me sad is when I lend on these crowdfunding sites. I wrote a post about how I lent on RealtyShares debt deal and lost money. Was a learning experience for me to be more careful. Those hurt the most cause some random scum got my money.

    I don’t feel bad if my family gets my money.

  23. I agree lending money to friends or family should be viewed as a gift. Never give more than you feel comfortable just giving away.

    It is hard to turn away someone who is asking to borrow money but you also do not want to be enabling them either. If it is something that is out of the blue like an accident or illness then it is much easier to lend. But if it is because they are behind in payments because they are trying to maintain a lifestyle that they can’t afford then a hard no may be the best thing for them in the long run.

    I had a former employee ask me for over 2 grand to cover rent once saying he would get kicked out. I declined because I said that was way too much money for me to just hand over even as a physician. He eventually moved and got a more suitable place and is doing fine now. If I had given the money I am sure I would have just postponed the inevitable by a month.

    As an only child I do not have siblings in need. I could see how that would be a much harder issue to deal with and could strain family relationships.

  24. I’ve given money and vehicles to friends that have been down. I’m not a big proponent of personal lending. When I part with something valuable under those terms, I generally have no expectations of repayment. I make it clear that it’s a gift. My parents were that way with me. In fact, I credit much of my current net worth to a $10k gift my dad gave me decades ago. My ony rule is applied to myself. It is that I must be able to afford to part with it.

  25. We had the same kind of thing as the tenant with my college-aged nephew- who would be “down on his luck” circumstances would happen beyond his control(??) and we would “help” him- I think it’s easy to have a good heart and hard to cut off these situations… we had to decide that the money is lost, but we are not going to make it more damaging by beating ourselves up over it- just be pleasant and move on- we are nice to him- but after a couple times of saying” sorry- can’t help you at this time” we gave broken that cycle… just wrote this to uplift all who have tried to “help” and gotten burned!! We can afford the money loss-and that the person had a few opportunities to make changes and didn’t- is on them-not you… consider it a gift that you tried to help some-one else out of a tough spot-and they couldn’t get their act together! But it’s not on you.

    I will also mention that we have a successful business and could have employed this nephew and maybe allowed him to be a partner, making a six figure income/could start other branches, take it in any direction he wanted-but this is of course, not going to happen! We will at some point- sell to a complete stranger who will keep it going, expand, or continue to build it !!

  26. “Expectation is the parent of Anger.” – Kumar Thangudu

    FS, this is a wonderful subject to explore, for the reason that it happens to most of us at some point. Our expectations of others are not met, and the emotions provoked are uncomfortable. The money itself can be measured, but not the negative emotions. I have a few stories of money lent to friends, found in the link on my handle.

    Sam, you recently observed that “detachment and acceptance” were worth striving for, in addition to “gratitude.” I have been thinking about that a lot. Thank you for this post, and a subject that really hits home for me.

  27. I do not know about this lending money as if we are in that business. Since we are not a lending company, bank, credit union, or institution it is not a loan but more like a gift. We did not take anything as collaterial, like a title to a car or furniture or something, then we would have collaterial for the loan. Otherwise it is not a loan but a gift. We have no way of forcing the person to pay back the monight ey or even an insentive. Therefore we are out the cash and crying does not help. We are stupid if we believe we can conduct business as a lending institute. We are not.
    One thing that might work is to threaten to break their legs or cut off a finger. Even that does not work all of the time. But, it worth trying.

  28. Yep. Never lend money to family without clear written expectations. My father lent us $40,000 to buy our first condo and we paid him back within the first year. We bought our first minivan from my sister-in-law used, and we paid full Kelly Blue Book value $20,000 back then and paid that things off again within 6 months. I hate owing people money but I know most people are not like that. I have a work colleauge who owes me $138 for the holiday party and is a physician, but still has not paid me back. How a physician does not have $138 is beyond amazing to me. Some people are just horrible with their money and it’s better never to mix money with relationships. I still remember this fellow student in 7th grade who borrowed $20 from me at the library to pay her fine. It wasn’t even a close friend. I always remembered that she never would look me in the eye for years afterwards but never paid me back. I only asked once for it, and she kind of scurried away. That lesson really stuck with me after that.

  29. I can relate with the landlord situation. i just went through my first eviction process that started in a remarkably similar way. plausible excuses each month and too much empathy on my part. By the time it was clear that I was not going to get paid and the reasons for non payment were lies to get another month for free, they were 3 months behind. Add in another 1.5 months to get a court date and follow-through with the eviction and I lost almost 5 months of rent. As one final poke in the eye, they sent an email the day before the eviction stating that we had met and they paid me in cash so they no longer had the debt. Not only had we not met and they didnt pay me but the house a mess. Despite having a court order for the balance, the sheriff told me its very difficult to collect and I am writing it off as a learning experience – a costly and painful one…

    In the end, I blame myself for allowing it to get too far and hopefully have learned my lesson. the shame of it is that people who may really need help wont get the benefit of the doubt in the future.

    Regarding lending money to family. I completely agree that you should not do it unless you are doing it as a gift. Nothing good can come of having owed money hanging over your relationship.

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