Ever noticed that disputes which arise between family and friends are always about money?
When it comes to cash and any kind of financial transactions, the initial intentions in most cases are good, however when things go wrong, falling out and arguments quickly follow.
To avoid getting into unnecessary disagreements, over money issues, here’s our top 10 mistakes to avoid or be aware of.
- Never lend money that you don’t have. It goes without saying that you should never lend money you personally need for yourself or cannot afford not be returned to you in the future. Never put yourself into debt for others. Unfortunately, this happens all too often. I see parents risk their retirement help their children buy houses etc. Whilst I understand the urge to do this, if it puts you into financial hardship, it should be avoided.
- Never borrow money for someone else. If a person cannot get a loan for themselves, should you really do this? The short answer is NEVER. If your relationship deteriorates or the person stops paying you, guess what, the loan is yours to repay in FULL.
- Lending money can ruin relationships. Many relationships fail because of money reasons and it is quite often the lack of money that is the cause of the problem. Relationships can be irreparably broken when someone fails to repay money. Arguments can last for years, making family gatherings difficult, leading to some avoiding them altogether. The easiest way to prevent this is by not lending money out in the first place. Finding an alternative solution is nearly always a better idea.
- A gift is never a loan. Disputes can often arise between people when the money he or she has received is regarded as a gift. If the person you gave the money to didn’t sign a loan agreement, the loan will always be regarded as a gift in a Court of Law. If it is loan, always get a loan agreement signed.
- Be wary of being a co-signatory to a loan or other financial commitment. If you really must, it’s essential to draft a legal document between you and the co-signatory clearly stating who is to repay the loan and what happens if they DON’T! Remember: When you are a co-signatory, the lender can will definitely come after you for the full amount, if the person for whom you went into the agreement with, fails to pay.
- People are irrational, especially when it comes to money. Even the most pleasant of people can become unreasonable and unpredictable when their money is at risk. So, before getting into a money transaction or lending money personally, it wise to bear this in mind. Seeking the advice of a professional financial adviser can never be a bad thing!
- Oral agreements are very difficult to enforce. This can quickly lead to disputes – typically, he said … she said scenarios. If you lend money to someone claiming that person orally agreed to pay back is unlikely to suffice in a dispute as there is no written proof. A verbal promise to repay a loan is not going to hold up in court.
- Always keep clear records. If you and someone else make a big purchase together, such as a house or car, you should keep very clear written records of how much you personally contributed and when. The other person you are making the purchase with should always keep clear records as well, to be sure that disputes are avoided in the future.