One of the most embarrassing and potentially harmful thing we did was to put ourselves in a position where we owed friends and family money. In our case, we borrowed $6,000 from my grandfather to put together with the $1,000 that we saved for a down-payment on a car the we desperately needed as our workplaces had changed and we lived too far away for any type of public transportation. We had started paying my grandfather back (and with substantial amounts) until we hit some hard times financially. He said “pay what you can” and we did a horrible job of keeping up with our payments. Flash forward to a conversation he had with my mother where he told her that we still owed him money and this is at the top of our radar. We thought that we had been really clear with him over the first few years that money was so incredibly tight and we weren’t doing much with it but paying bills, but it has strained the relationship and evidently was weighing on him as much as us.
Now, we need to address it directly with him (boy, that’s not going to be fun) and apologize for not making it a priority. And then we need to start making payments – consistently and soon. We would have started this month, but we had the car repair (extra $400 of expenses) so we are beyond tight. Hopefully April will be a different matter.
We also owe our friends money for their truck that we purchased a few years back. It’s a really old truck (17 years) and we know that our friend charged us more than blue book for it $1,000, but we had another situation where we needed two cars and this was the best answer. We made steady payments until the cancer diagnosis and then the rest of the things (see The Crisis) that caused problems fell into place. So we still owe $250 to them, but we’ve also communicated to them that money is so tight and $250 pays for more than the majority of our food in a month, so we’ve not been able to make the payments. I think that part of the reason that we haven’t pushed harder is that we hear from them all the time about the really expensive things they are doing ($800 dancing lessons, just because; $1,500 baby photos; lots of traveling). As my husband and I see our parents once every 1-2 years, we have a hard time when one of them says “we really need the money.” This is incorrect thinking on our part – we know we have this obligation and we really want to be able to pay it and have it behind us. But it makes it hard to have empathy for them. This also brings up a future topic I’ll write about – what happens when the Earnings Gap between families widens.
What has been your experience with family/friend loans?