How to Handle Money Issues Between Friends

Mixing friendship and money can test even the strongest bond. Use these tips to keep your relationship and your finances on track.

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My office buddy asked me to lend him a few hundred dollars, but the idea makes me uncomfortable. How should I handle the request?

Lending a friend a few bucks for coffee is usually no big deal. But for a sum that feels significant to you, ask your colleague for time to think through the decision.

If, after careful consideration, you’re still uneasy about lending the money, phrase your refusal politely but without leaving room for negotiation or delving into the details of why you’re saying no. Pamela Eyring, president of the Protocol School of Washington, suggests saying something like “it’s my personal policy not to lend money to friends or family” or “I’ve had bad experiences with ruined friendships, and I don’t want that to happen to us.” Then brainstorm other ways your friend could come up with the cash—say, by referring him to a freelance job or showing him how to sell on eBay.

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If you decide to lend the money, insist that you both sign a promissory note. Explain to your friend that clarifying the terms of repayment on paper will help preserve your friendship.

I offered to buy concert tickets for my group so we can sit together. How can I ensure that everyone pays me back promptly?

Before clicking “buy,” calculate the amount each member of your group will owe (including fees and taxes) and get everyone’s go-ahead to make the purchase. Once you’ve ordered the tickets, forward your receipt or e-mail confirmation, and tell the group when and how you would like to be repaid (“I’d prefer cash or a check the day of the show” or “Please send me the money via PayPal by Friday. Thanks!”).

It’s likely that someone will forget, but don’t assume people are trying to stiff you, says Jodi RR Smith, of Mannersmith, an etiquette consulting firm. Before meeting up with your forgetful friend at the next social event, text or e-mail a reminder, keeping the tone friendly. If that doesn’t work, pin down a time to meet in person and get the money.

My friend helped me paint my house. How should I compensate her?

Often, a thank-you note and a home-cooked meal, or the sincere offer to reciprocate in the future, is fine. Use the complexity of the task and your own budget as a guide. If you decide to do more, offer a gift card (say, to a favorite store or restaurant) as a gesture of thanks. Eyring suggests spending $50 to $100 as a general range.

If your friend is using a professional skill to do something that takes a lot of time, such as building a Web site, settle up front on how much you should pay for the project.

Miriam Cross
Associate Editor, Kiplinger's Personal Finance
Miriam lived in Toronto, Canada, before joining Kiplinger's Personal Finance in November 2012. Prior to that, she freelanced as a fact-checker for several Canadian publications, including Reader's Digest Canada, Style at Home and Air Canada's enRoute. She received a BA from the University of Toronto with a major in English literature and completed a certificate in Magazine and Web Publishing at Ryerson University.