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Should You Ever Loan Money to Family?

Short answer to that question: No!

Let me explain.

It’s Christmas, and you’re probably going to spend a little more time than usual around family over the next month or so.

Maybe your Uncle Jim knows you’ve been on the Dave Ramsey plan. You’re out of debt and doing better than ever.

So after Christmas dinner, Uncle Jim approaches you and politely asks if you could loan him $500 to help open his new cupcake shop. He’s always wanted to own a cupcake shop, and he would be “so grateful” if you could just spare a few hundred dollars.

You have three options here.

First option:

You can loan him the money. As a result, your uncle will be in debt to you, and every time you see him from now until he pays that money back will be an awkward experience. Thanksgiving dinner taste different when a family member owes you money.

Second option:

You can politely decline to loan him the money. You might tell him that, even though you’ve been on the Dave Ramsey plan, the budget is still tight because you’re saving, investing, and planning for your kids’ college. There’s absolutely nothing wrong with making that decision.

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Third option:

You can just give him the money. Don’t loan it. Give it to him. If you’re out of debt and you have the money, then there’s nothing wrong with blessing your Uncle Jim with a $500 gift. He’ll probably appreciate it more than you’ll ever know, and you might get free cupcakes for a year!

The takeaway is that family and business rarely mix well together. And whenever you loan money to a family member, you’ve become their creditor. You’re more than just family members—you’re now a lender, and they’re a borrower.

With Christmas season here, it’s a great time to bless other people who could use a little push. So, if you can do that financially, then go for it! But don’t put yourself in a hole or stretch your own budget out of some sense of guilt and family responsibility.

Pay off your debts and save for the future, and soon you’ll be able to give away as much as you want!

Rachel Cruze

About the author

Rachel Cruze

Rachel Cruze is a #1 New York Times bestselling author, financial expert, and host of The Rachel Cruze Show. Rachel writes and speaks on personal finances, budgeting, investing and money trends. As a co-host of The Ramsey Show, America’s second-largest talk radio show, Rachel reaches 18 million weekly listeners with her personal finance advice. She has appeared on Good Morning America and Fox News and has been featured in publications such as Time, Real Simple and Women’s Health magazines. Through her shows, books, syndicated columns and speaking events, Rachel shares fun, practical ways to take control of your money and create a life you love. Learn More.

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