“I will gladly pay you Tuesday for a hamburger today.” – J. Wellington Wimpey
What are friends for?
Payday seems an eternity away and you only have two loonies in your wallet. All your credit cards are maxed out and you need some quick cash. What do you do?
Just ask your friend to loan you some money. Assure him that he will be repaid on Friday. Of course, when you receive your pay cheque you’ll have less disposable income because you have to deduct what you owe from what you have. Or you could ask your friend if you could pay him back later when you have more money. After all, this is your friend.
Some parents (and siblings) will also lend out money – and they don’t seem to mind if you take a while to pay them back(!).
Or get a temporary cash advance
When you run out of friends, you can get a temporary cash advance loan. As long as you prove you are working by producing a pay stub, you issue a cheque and you’ll have the cash in your hand in no time. The cheque won’t be cashed until your pay goes into your account. Unfortunately, this puts you on a revolving wheel of cash crunches that you may never get off.
Or get a bank loan
If all else fails, go see your banker. She can offer you a great solution – the consolidation loan. This type of loan allows you to get out from under all your debts while having only one smaller payment to make each month. It’s designed to help you make a fresh start and it feels good. But guess what someone who is financially challenged does when they’ve paid off all those debts?
You guessed it – they apply for a new credit card, go shopping and start all over again. The problem was fixed but the behavior didn’t change.
Borrowing from ourselves
Savings are meant to be saved – for the long term. In fact the government encourages us to save with RRSPs and TFSAs. Withdrawing money from these accounts on a whim – buying a new computer or a weekend getaway – will deplete our assets and leave us with a net nothing!
You can have good reasons to borrow
There are plenty of good reasons to borrow money as long as you can afford to make the regular payments and as long as you view the loan as a shorter-term plan to assist in a longer-term goal. Loans, like credit cards, carry with them a promise you make to yourself and to the lender.
The obligation you sign up for is what they used to call “a matter of honour.” Your lender wants to help you make a fresh start. You’ve made a decision to borrow and a promise to pay back. That’s a legal agreement. That means fixing what’s not right. It means budgeting, changing your spending habits, looking to the future, and changing the past.
Borrowing can be a good thing, but don’t make the mistake of using it poorly.