Have you ever noticed that disputes that arise between friends and family are often about money? Well, at least it was until recently and now politics has taken over. But enough of that.
When it comes to money and any kind of money transactions, at the outset intentions in most cases and good, however when things go wrong, arguments can quickly follow.
To avoid getting into unnecessary disagreements, over money issues, here’s my top 10 mistakes to avoid or be aware of.
1. People are irrational, especially when it comes to money. Even the most pleasant of people can become unreasonable and unpredictable when their money is at risk. So, before getting into a money transaction or lending money personally, it wise to bear this in mind.
2. Be wary of being a co-signatory to a loan or other financial commitment. If you really must, it’s essential to draft a legal document between you and the co-signatory clearly stating who is to repay the loan and what happens if they DON’T! Remember: When you are a co-signatory, the lender can will definitely come after you for the full amount, if the person for whom you went into the agreement with, fails to pay.
3. Never borrow money for someone else. If a person cannot get a loan for themselves, should you really do this? The short answer is NEVER. If your relationship deteriorates or the person stops paying you, guess what, the loan is yours to repay in FULL.
4. A gift is never a loan. Disputes can often arise between people when the money he or she has received is regarded as a gift. If the person you gave the money to didn’t sign a loan agreement, the loan will always be regarded as a gift in a Court of Law. If it is loan, always get a loan agreement signed.
5. Oral agreements are very difficult to enforce. This can quickly lead to disputes – typically, he said … she said scenarios. If you lend money to someone claiming that person orally agreed to pay back is unlikely to suffice in a dispute as there is no written proof. A verbal promise to repay a loan is not going to hold up in court.
6. Lending money can ruin relationships. Many relationships fail because of money reasons and it is quite often the lack of money that is the cause of the problem. Relationships can be irreparably broken when someone fails to repay money. Arguments can last for years, making family gatherings difficult, leading to some avoiding them altogether. The best way to prevent this is not to lend money in the first place. Finding an alternative solution is nearly always a better idea.
7. Always keep clear records. If you and someone else make a big purchase together, such as a house or car, you should keep very clear written records of how much you personally contributed and when. The other person you are making the purchase with should always keep clear records as well, to be sure that disputes are avoided in the future.
8. Never lend money that you don’t have. It goes without saying that you should never lend money you personally need for yourself or cannot afford not be returned to you in the future. Never put yourself into debt for others. Unfortunately, this happens all too often. I see parents risk their retirement help their children buy houses etc. Whilst I understand the urge to do this, if it puts you into financial hardship, it should be avoided.
If you would like to talk to about financial planning, please get in touch for a no-obligation meeting. Go to our website www.miadvice.co.uk and contact us via our “Get in touch” form on our home page or Contact Martin Dodd on 01902 742221.
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It is advisable to take advice from a professional financial adviser when making major financial planning decisions.
Check out our other recent articles here This article has been prepared in good faith and based on Midlands Investment Agency’s understanding of the law and interpretation thereof at the time of creation. The contents should not be regarded as specific advice and we always recommend that specific advice is sort from a qualified professional. No responsibility can be accepted by Martin Dodd or Midlands Investment Agency Ltd., for any loss that may occur by a person acting or refraining from acting on the basis of this article.