How to Ruin a Friendship: Just Add Money

If you clicked on the link to read this article, I'm guessing you've either a) loaned a friend money, b) are thinking about loaning a friend money or c) are thinking about asking a friend for money. In my opinion (and admittedly limited experience) there is not faster way to put strain on a friendship than by introducing money into the mix.  Here's why:


How to Ruin a Friendship with Money

Once you either give (or take) money from a friend the relationship transforms. You're no longer BFFs, confidants and bosom pals. Once money changes hands your relationship becomes strictly business, like the relationship between a bank and a borrower. Few relationships have a strong enough blueprint to handle such a dramatic and stressful shift. What happens if they can't pay you back? What happens if your friend isn't super creditworthy but you feel obligated to lend them money because of your attachment?

Yikes. Double Yikes.

Maybe you don't lend money but instead lend time or other resources like a place to crash. Once you become a lender (or lendee) this new relationship model can open up lines of inquiry into you or your friend's personal finances, and you won't be able to keep from noticing other money behaviors. Which is exactly what happened to me the first time I mixed friendship and finance.

The short story: a friend of mine needed a place to stay and was crashing on my couch to save up money for an apartment in the city (I had done this and wanted to pay it forward, and I also truly adored this person's friendship and liked having them around. I thought having them crash with me in my studio apartment would mean slumber parties every night.)

Except instead of saving, said person kept buying things off the internet.

This was right as I was getting my financial act together after years of being a financial mess, so I was admittedly a little too self-righteous at that point. I still completely mishandled the situation by confronting the person and expressing how rude I thought it was they were staying on my couch for free while constantly buying things online.

It came off that I was insulted they were indulging in such behavior under “my roof” when in reality I was concerned about them meeting a goal they'd said was important to them. We didn't get into a big fight, but our relationship was tense and odd afterward, and after they eventually moved out, we haven't really kept in touch. Even today, it makes me super sad to think about the dissolution of our close friendship, but it taught me a valuable lesson about keeping my mouth shut when it comes to other's money decisions.

I've you've ever wondered how to ruin a friendship, just add money. Learn how to avoid the awkward friend drama without being rude, mean, or stingy.


I'm using my own personal example to illustrate my point: once money becomes involved new behaviors, very personal behaviors like how someone spends their time and money become apparent to both parties. Knowing about these behaviors isn't good for either side of the relationship. And it's not like the person asking you for money is going to have absolutely perfect finances, if they did, they wouldn't need to ask you for money, would they?

A friend asking you for money means they've likely hit on hard times (it takes a lot of humility to ask others for help, especially when it comes to money), but they might be asking you because they likely can't get the funds from somewhere else (parents, banks, peer-to-peer lending platforms, crowdfunding, etc.) Maybe it's bad luck, bad credit, or maybe they didn't prepare an emergency fund. Do you think they'll get their act together enough to pay you back?

Maybe. Perhaps. But until then it's going to be very, very awkward.

3 Additional Times Money and Friendship May Not Mix

Friends lending friends money is one extreme, but there are other money situations that can play out in our personal relationships. It can be a small instance, like splitting a group check when you're on a budget, to the larger ones like spending more on a group vacation than you're comfortable with. My only advice is to speak up, otherwise, a seed of resentment will start to grow inside of you. And whether you realize it or not, everyone acts weird with a seed of resentment inside of them.

And whether you realize it or not, everyone acts weird with a seed of resentment inside of them.

Those are situations that can be rectified with a little clarity and preplanning. Unfortunately, I can't help when it comes to cases of jealousy, and yes, money jealousy can ruin friendships too.

So, what if you want to help a friend out? Gift, Don't Lend

The premise of this piece is to help those who want to navigate money issues while keeping their relationships intact. If you're a Scrooge McDuck and want to loan friends money and charge interest while wheeling and dealing, be my guest. But you've been warned that this approach may leave you wealthy and alone.

The purpose of this piece also isn't to say you shouldn't help a friend in need, or share your resources with the people you care about. After all, you work hard. Why have that money if not to help out a loved one? Still, it's worth repeating that you are not a bank. Your friends? Also not banks.

I fully stand by my opinion that money and friendship don't mix.

Gifts, however, fit wonderfully within any relationship.

Which is why my advice to those starting down the “loaning a loved one” money gauntlet is to gift whatever amount you feel comfortable losing: whether it's $10, $50, $100 or more. Gift that money to a friend without the expectation of getting it back. They'll, of course, verbally promise to pay you back, so smile and nod politely, but in your own heart and mind, you should consider the money gone.

Even if someone doesn't ask you specifically for money, with the gift approach you can offer to help financially which could also save a lot of “face” within the relationship as well.

Most families already take the gift. vs. lend approach to keep the peace, which is why I believe most folks in need of money turn to family first (if they can.)

So, treat your friends like family. Gift rather than lend money. If they happen to come through and pay you back in full, it will be a nice surprise and you'll have your cash back. If not, you didn't expect it anyways. Low expectations for the win!

Have you ever borrowed money from a friend or lent money to a friend? How did it work out for you? What are your “money lending rules” when it comes to friends and family?

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  • Money Beagle
    October 29, 2015 at 11:47 am

    That’s a bummer. I think what I would have advised is not to have confronted them about the spending, but basically to have set an end date for the arrangement. With that in mind, it would have put the burden on your friend to make sure that they were able to hit that date and make the appropriate changes to their spending habits to ensure that they were able to do so.

    • Lauren Bee
      November 2, 2015 at 4:04 pm

      Yes. Hindsight is always 20-20. 🙂

  • Giulia Lombardo
    October 29, 2015 at 11:16 am

    I’m agree but I must to say that if you or one of your friend needs help and you are sure to “see” again your money you can offer your help, while if you are sure that your friend will never give you back money be honest, or maybe you have money that your friend need but that doesn’t want to ask help, you can gift her/him without expecting nothing… true friendship is based on honesty…but probably money is always a weird topic in every kind of relation!!!

    • Lauren Bee
      November 2, 2015 at 4:05 pm

      Yes. This is why I say it’s best to just avoid it.

  • Jason Hull, CFP®
    October 29, 2015 at 8:56 am

    There’s a psychological reason for the phenomenon you describe. Duke’s Dan Ariely describes it in his book Predictably Irrational – basically, two separate sections of the brain fire up. One section fires up when you are doing something for moral reasons, which includes helping out your friends because they are your friends. Another section of the brain, which includes pain receptors, fires up when you involve money. When you introduce money into the friend scenario, then the part of the brain that covers money and transactional relations trumps the part that deals with friendships. It’s a tricky situation to deal with, and it also applies to going into business with friends. They quickly become business partners and no longer friends. The only time I’ve seen this not happen is when the business is quite successful and money never is really an issue with the company, causing it not to come up as a factor in the existing friendship.

    • Lauren Bee
      November 2, 2015 at 4:05 pm

      Ah! I love this bit of information you’ve gifted me with. Makes so much sense now!

  • Jeremy Norton
    March 17, 2013 at 4:03 am

    I don’t actually lend a friend more than $50 because I am not the type who ask to have to pay me back. I always just wait for that friend to pay me back which is why I can’t lend more than that amount.

  • Canadianbudgetbinder
    March 16, 2013 at 1:17 pm

    No, I don’t lend money to my friends at all and neither does my wife. She has in the past but the said person seems to forget about it and she hates having to ask for it back. It should not have to be that way. The person who borrowed the money should give it back in a timely fashion or by said date that was agreed on. That’s likely why we don’t talk about our finances with our friends. Sometimes what they don’t know is better but I’m also not shy to say, sorry mate, we ain’t got none! Cheers

  • The Happy Homeowner
    March 14, 2013 at 3:23 pm

    I absolutely will not lend money to friends–I will cook you dinner, give you a bed to sleep in, etc, etc, but I won’t give you money! It’s too much of a loaded proposition to expect your friendship to also take on money stresses.

    March 14, 2013 at 1:11 pm

    Lending money to friends is really a gift in most cases. This money is usually never returned and the friendship ends. My dad once sad to me never lend money to friends and I could not get how absolute this statement was, but I now understand it. Think of it as a gift because that what it is.

  • KK @ Student Debt Survivor
    March 13, 2013 at 12:58 am

    Never borrowed from a friend, but have lent money. I would never lend out more than I could afford to lose (just in case I didn’t get it back) and I always go in with the expectation I *will* lose my money. So then when it’s paid back it’s like an added bonus.

  • Johnny Moneyseed
    March 12, 2013 at 6:30 pm

    I won’t lend money to anyone that doesn’t brown bag their lunch, or who has any type of credit card debt. Sorry, I just can’t help! Nice post!

  • Rich Uncle EL
    March 12, 2013 at 6:25 pm

    I lent 100 bucks once and the friend stop calling me to hang out, it was crazy. I also have lent to another friend and co-worker but this time it was paid back on time. I guess my stance on it is Ill give you if you are in a tight stop, and I will not call it a loan just a gift. When it is given in those terms then you can move on and be friends.

  • Shannon @ The Heavy Purse
    March 12, 2013 at 6:25 pm

    I think you’re spot-on. When you loan money to friends and/or family – you do so with the expectation of never being paid back AND being okay with that. If you will be resentful, then don’t loan them the money or only give what you loan without being upset about later. It also says a lot about the friend too. I’m well-aware that lean times can last a long time, but be upfront about it. Admit that times are still tough but you haven’t forgotten about the loan.

  • Jacob @ iHeartBudgets
    March 12, 2013 at 5:49 pm

    I won’t post this up on my own blog, but my parents “borrowed” over $10k like 7 years ago, and I don’t expect to see the money. Actually, I told then to their faces that the debt is forgiven, because the relationship is much more important. Would it be nice to have another $10k? Sure. Is there even a remote possibility I would ever see it? Nope. So I emotionally gave it up, forgave the debt, and left it at that.

    But yea, don’t loan money that you expect to see back. That’ll f things up for a long time!

  • Jon @ MoneySmartGuides
    March 12, 2013 at 4:28 pm

    Lending money to friends is usually a bad idea. I have never lent money to a friend, but have given a friend some money without the intent on getting paid back. Lending money to a friend is certainly a fine line to walk.

  • Drop that Debt
    March 12, 2013 at 2:50 pm

    My family has definitely had experience with this. My father’s brother borrowed a bunch of money from my grandparents and never paid it back; it was a HUGE point of contention for the rest of their lives. My parents loaned me some money during school at a point when I needed it, and my dad made sure to say as soon as I was working that I needed to pay it off asap because he didn’t want it to become a family issue. I completely agreed, and after very generously letting me buy a car off of him in installments (I gave him a monthly cheque) I will be paid off completely at the end of tax time this year and will hopefully never need to borrow or loan money again. It can definitely be dangerous to let money interfere with a relationship.

  • Budget & the Beach
    March 12, 2013 at 2:49 pm

    I have seen this happen as well. I’ve never had a friend ask me for money, so I guess I never was faced with having to deal with this, but I think I would be very, very cautious before I ever did it.

  • Miss JJ
    March 12, 2013 at 11:53 am

    What if there was a one in lifetime event that both you and your bff have always wanted to go to? And the chance came up but your friend was newly unemployed. However he said “let’s go”, and you thought that it means he could pay for himself via past savings etc because he had never hesitated to say no before when he was broke. So you paid for the air tickets and registration fees upfront, understanding that you would be paid back. But right after making payment, your friend asks you if you minded that he paid you back only after he gets a new job since he is broke. And when you ask him why he didn’t just tell you before you paid up, because both of you could just not go, he says, “but it’s a one in a lifetime thing, and YOLO. You can always earn the money again.” And when you hesitate, he says he has got to borrow the money from his mother if you insist on having the money upfront. And you remember his mother is a near retiree and single mom and not very well off, and you aren’t heartless enough to take the little she has. And so you end up making the loan of $2700.

    I’ve never believed in lending friends money before the episode but what does one do when one gets baited and switched into it?

    To end the story, it has been almost 3 years, and he is still underemployed, and I haven’t seen a single red cent. I have since written off the loan and we are still great friends, although i struggled with the decision for over a year. I still don’t lend money to friends, and i’ve got an additional rule…never offer to front ANY payment to ANY one unless i have no problems gifting it. Oh, and I have since learnt to totally despise YOLO, especially when it is done on my dime. 🙂

  • Michelle
    March 12, 2013 at 3:09 am

    Weeell, I have been that lame friend who borrowed money from friends and I have been the friend who loaned money to friends. In general neither scenario works. I will write a post about a specific situation sometime in the future. I was lame and I own it! At this point I only give what I can lose. It works well because my friends will buy me things after I’ve forgotten all about buying them something. There is a fine line between being generous and loving and being taken for granted. My lovely group of friends have found the right balance in dealing with these situations. I do have one friend who we have stopped inviting to events that cost money. She never pays what she owes, is too cheap, and it creates stress. We just go hiking with her! It’s free 🙂

  • Edward
    March 11, 2013 at 8:24 pm

    No way in hell, man. I keep a printout of Len Penzo’s “Dear Friend: Here Are 41 Reasons Why I’m NOT Lending You the Money” at home. Anytime a friend gets dumb and asks for cash, I say, “Read this.” I have #36 highlighted. Friends get the message pretty quick and back off.

    • L Bee
      March 12, 2013 at 2:35 am

      Looove Len Penzo! He’s one of my faves.

  • The Norwegian Girl
    March 11, 2013 at 7:47 pm

    I never lend money to friends, because I`ve seen what the results could be. BF has this friend that keeps calling him at random hours asking to lend some money, because he has “nooo money”, as if trying to guilt-tripping BF! And next thing you`ll see on facebook is this friend out on the town buying expensive champagne for random girls… And what`s weird about this is that the guy actually owns his own 3-bedroom apartment! So keep money and friends apart, unless you want to lose them both.

  • Lance @ Money Life and More
    March 11, 2013 at 7:05 pm

    Borrowing or lending money definitely adds a new facet to relationships so I always avoid it or treat it like I will never get the money back. I will loan a few dollars to friends but once they don’t pay me back before asking to cover another meal (or other expense)they are cut off.

  • Pauline
    March 11, 2013 at 4:38 pm

    I have lent money to a couple of friends and had different outcomes. I like the saying “if you lend money to a friend and never see that friend again, it was money well spent”.

    • L Bee
      March 12, 2013 at 2:34 am

      Ha! Clever 😉

  • Chris
    March 11, 2013 at 4:20 pm

    Consider using collateral. I know that’s not very friendly or whatever, but it kept my situation from getting out of hand. Just say, I’ll buy that “whatever” from you for $”amount they need” and then say they can just buy it back whenever they have the money. And I agree, don’t ever do this unless you’re perfectly willing and able to never see that money again.

  • Michelle
    March 11, 2013 at 2:30 pm

    Me and my friends try not to ever borrow from each other. Of course I have one friend who never minds me paying for things though (this is a good way to lose a friend).

  • John S @ Frugal Rules
    March 11, 2013 at 1:56 pm

    I have lent to a friend in the past but really do not anymore. Now, if I run into the situation, if the friend is truly in need I’ll just give the amount I can and not expect it to be paid back. That generally has worked much better for me and gets rid of some sort of expectation.

  • AverageJoe
    March 11, 2013 at 1:15 pm

    So many stories, so little time….why do friends even go to friends to borrow cash? It can’t end well. Maybe that’s what I’ll do when I want to get rid of an annoying so-called “friend.” Ask them if I can borrow $100.

  • Leah
    March 11, 2013 at 11:36 am

    SO TRUE. This happened to me while studying abroad.

    One of my friends just kind of “ran out” of money and needed help to get by. Five or so of my friends (her included) went on a trip where everyone just kind of picked up her tab–hotel, food, outings, etc. Feeling like I couldn’t be the ONLY person who denied her, I paid a few hundred dollars toward her trip. That was a TON of money to me at the time, and I really needed to get it back.

    She “paid me back” 5 months later with like, $60. She said “this covers the cost of the soccer game we went to, I checked the ticket prices online.”

    Needless to say, we haven’t talked since. I felt resentful and she felt embarrassed, and it was a sad ending to an otherwise beautiful friendship.

    Never doing that again.

    • L Bee
      March 12, 2013 at 2:34 am

      Woah! She just expected you to pay? Rude!

      • Leah
        March 12, 2013 at 2:43 pm

        All of my friends were like, “awww…we want you to come, we’ll help pay!” and then I got suckered in, too. Suuuckks.

        • The Happy Homeowner
          March 14, 2013 at 3:34 pm

          Ahhh…a friend of mine did something similar although not on such a large scale. She claimed to not have any money and said she had a $10 budget to go out for a drink. My BF & I thought a drink would be nice and that would be it. So we went out and she started to order a bunch of apps, etc. while I was in the bathroom. BF had no idea what to do. Then we all ate and when it was time to pay the bill, she didn’t offer one PENNY.

          I chalked it up to an ignorant anomaly until the next night when I saw her checking in left & right on FB and posting about what a great time she was having. I couldn’t help but wonder who she’d suckered into paying for that night out, too!

  • Holly@ClubThrifty
    March 11, 2013 at 11:21 am

    I agree that friends shouldn’t borrow money from each other. I would gift my friend money if she needed it, but I wouldn’t expect it back. That way I wouldn’t end up mad when I wasn’t repaid.

  • Glen @ Monster Piggy Bank
    March 11, 2013 at 11:07 am

    I have had a few cases where I have lent people money only to have them not pay it back. That’s why I only lend to a select few people now, the rest will have to find someone else to borrow from.

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