10 Rules for Lending Money
If someone asks you to lend them money, think before you act. As much as you may want to help out a friend or family member in need, there are several rules you should follow before you hand over any cash.
Financial expert Suze Orman lays out her 10 rules for lending money - rules she says must never be altered. They will help you determine if you are in a position to lend or give money, and if so, how to go about doing it. "Live by [these] rules and one day you will be happy that you did," she said. Read ahead to see Suze's must-follow rules for lending or giving money.
1. Have No Credit Card Debt
Never, ever, lend or give money to anyone if you owe money on your credit card. "If you have credit card debt, you need money," Suze said. "You don't have the money to give to somebody else."
2. Have an Eight-Month Emergency Fund
It's important to have an eight-month emergency fund before parting with your money. "Possibly, people are asking you for money because they didn't have enough of an emergency fund. They got into trouble," Suze said. "And if you don't have at least an eight-month emergency fund, you don't have the money to lend."
3. Fully Fund Your Retirement
Even if you feel like you may have a little extra cash right now doesn't necessarily mean you can afford to lend someone money. "There will come a day, trust me, where you are going to have to live off of your retirement plan," Suze said. "It's what gives money to you when you no longer have a paycheck coming in."
4. You Can Easily Pay Your Mortgage/Rent
Before making a loan, make sure you have plenty of money to pay your rent or mortgage. "If you are struggling with everything else, funding the eight-month emergency fund, funding your retirement, doing all these things…and you are struggling to pay your mortgage payment or your rent payment, you do not have extra money to give to somebody else," Suze said.
5. Your Job Must Be Secure
You need to know that you are not going to get fired, or that you have a secure clientele if you are self-employed, so that you can continue to generate money. If you don't have a job, you'd be surprised at how fast you go through your money, Suze said. Then you'll be the one looking for a loan.
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