Whether you're starting up a new business, moving to another city, putting the kids through college, or paying off your maxed out credit cards, the time may come when you need to borrow some much-needed money. Lots of folks take the bank loan route, but not everyone qualifies, interest rates can be exorbitant, or another roadblock can make this path difficult or impossible to take.
That's why borrowing funds from family or friends becomes a feasible solution for those in need of financial aid. But before you take that route, consider the pros and cons of borrowing from those close to you. It's a blessing for a loved one to offer or agree to help you out, but there's more that goes into the transaction than a smile and a handshake. Weigh these plusses and minuses to assess whether or not borrowing from a friend or family member is the best choice for your financial needs.
PROS:
Flexible Repayment
When you're dealing with a personal friend or family member, things aren't as rigid as they might be when working with a bank for financial loans. Someone close to you may not even take your financial history or past debt into consideration. They may give you a longer time to repay the loan or allow you to pay back sporadically, when you've got the money to do so.
Intuit QuickBooks notes, "Young entrepreneurs and those with poor credit may struggle to secure a loan through traditional means. According to a recent university study, just 39% of small businesses managed to secure funding through a bank, with the most common causes of rejection being insufficient debt load, cash flow and collateral. A benefit of borrowing from loved ones is that you don't have to jump through the same financial hurdles to be approved. Because they are eager to help you achieve your goals, friends and relatives will often lend to you in cases where banks would not."
So if you need flexibility, borrowing from friends or family can really help you get off the ground or out of a hole. Unlike a bank, they may give you a grace period where you needn't pay them back for months until you can do so with confidence and without the fear of falling back into debt. But don't forget, as Chron encourages, "No matter what terms you work out, it is important to put them in writing. All parties must understand, and agree to, the terms of the loan and the repayment arrangement before signing the loan paperwork."
Lower Interest Rates
Another perk of borrowing from friends or family is the ability for them to allow you to pay them back with much lower interest rates than the bank might. At the end of your borrowing period, this will have saved you lots of money that you can put to better use than giving it to a bank.
If you are embarking on a startup business, a bank may charge high interest rates, as per Intuit Quick Books. "Because of the inherent uncertainty of small businesses and startups, banks tend to charge higher interest rates on loans for newer businesses than for more established companies. One of the benefits of borrowing from friends and family is that you can typically land a lower rate. Not only does this reduce your overall debt level—helping to boost long-term credit for your business—but it also enables you to invest more of your hard-earned cash back into the company. Investing money back into your business will help you grow faster and ultimately pay off loans quicker."
Even though the rates may be better thanks to family or friends, Chron still warns to get the terms laid out in writing and agreed upon by both parties. "Of course it is important for all business loans, even those financed by family members, to be properly structured. The startup money you receive should be structured as a loan, with a written loan agreement, monthly payment terms and interest rate clearly spelled out. This will help you avoid disputes in the future and protect your interests in the event there are problems down the road."
They Believe in You
While it may seem hokey, one reason borrowing from loved ones can be ideal is because they care about you, want to see you succeed, and trust you. While a banker may agree to lend money, they don't have that same level of investment in your well-being – in fact, the very opposite could be true.
As Small Biz Daily says, "No one believes in you like your friends and family do. Assuming you have a good relationship with your family members, they're naturally inclined to lend you money—after all, you're family! Friends and family members are motivated to help you financially because they want to see you succeed, unlike outside lenders and investors who are motivated solely by their own financial gain."
Prove to your loved ones that you're reliable and this will be a successful financial agreement. Don't take their generosity for granted and treat them with the same respect you'd treat a financial institution, and the interaction will be smooth.
CONS:
Tax Issues
While the lender may have the best intentions for you, make sure they don't get hit with tax problems because of poor documentation or preparation. According to Intuit Quick Books, "In their eagerness to help a friend or loved one in need, lenders may neglect to consider the effect a loan will have on their tax liability. Not only does insufficient loan documentation open the involved parties up to IRS scrutiny, but it may also lead to a contribution being categorized as a gift instead of a loan."
To prevent any issues, have a promissory note and detailed and signed documentation along with an agreed upon repayment plan. Intuit Quick Books suggests to take the same steps a bank or credit union would when setting up the loan, and you'll be clear of any tax violations or liabilities.
Can Affect Relationship
Money issues have been known to break families apart and put strains on friendships. What if you cannot pay back on time or need even more money than you initially thought? How will you separate the financial side of the relationship from the personal? Can you? Think about things not going swimmingly and talk about that openly before making a loan arrangement with a loved one.
Aabaco Small Business makes the point, "While your family supports you in your business endeavor, they might not truly understand the risks they would be taking if you were unable to pay off the loan they give you. If your business fails and you are unable to pay the loan, you may put your family member in his own financial crisis. This can put a serious strain on your relationship. Is it worth the risk?"
If you and the person lending are aware and OK with the potential twists and turns and bumps in the road that may come, but still believe you can manage the financial arrangement, go for it. Just be sure your faith in the strength of the personal relationship will make it through the hurdles.
Lack of Clarity
A big problem that can come from borrowing from a friend or family member is a lack of a clear-cut arrangement that can become something that over time is misconstrued or forgotten. As per Chron, keep things as formal as possible. "Many people treat loans from family members as informal transactions, but that is a big mistake and can be a big disadvantage of borrowing money from family members. The best way to avoid this problem is to document the loan as thoroughly as you would if the money was coming from the bank. Ask your business attorney to draw up the loan paperwork, detailing the amount borrowed, the interest rate and the required payment terms. Have your family member read the document carefully and take it to his attorney as well."
Just because you have a personal relationship, it doesn't mean the financial aspect should be as easy breezy. It's OK for the lender to have questions, stipulations, and barriers as long as you both work through them and come to a clear and formal arrangement in the end.
A friend or family member can be a lifesaver for you when you're in need of money. Weigh these pros and cons before making any major financial plans and you'll know whether it's best to go with a loved one or seek out a bank. Friends and funds can work harmoniously, but only if you think it through and take things as seriously as you would with a bank.
- Asking For Money: 8 Etiquette Tips On Borrowing And Lending Money ›
- Should you borrow from family or friends? - Money Advice Service ›
- 9 Tips for Lending Money to Family & Friends ›
- How to Borrow Money from Friends and Family | QuickBooks ›
- 10 Reasons Why You Should NOT Lend Money to Friends & Family ›
Afghan women
Over the past month, both Haiti and Afghanistan have been pummeled by tragic disasters that left devastation in their wake.
In Haiti, a 7.2 magnitude earthquake erupted, leading over to 2,189 deaths and counting. A few hours later, in Afghanistan, Kabul fell to the Taliban just after U.S. troops had pulled out after 20 years of war.
In many ways, these disasters are both chillingly connected to US interference. The United States invaded Haiti in 1915, ostensibly promising to restore order after a presidential assassination but really intending to preserve the route to the Panama Canal and to defend US creditors, among other reasons.
But the US forces soon realized that they were not able to control the country alone, and so formed an army of Haitian enlistees, powered by US air power and intended to quell Haitian insurrection against US controls. Then, in 1934, the US pulled out on its own, disappointed with how slow progress was going. Haiti's institutions were never really able to rebuild themselves, leaving them immensely vulnerable to natural disasters.
Something similar happened in Afghanistan, where the US sent troops and supported an insurgent Afghan army – only to pull out, abandoning the country they left in ruins, with many Afghans supporting the Taliban.
In both cases, defense contractors benefited by far the most from the conflict, making billions in profits while civilians faced fallout and devastation. While the conflicts and circumstances are extremely different and while the US is obviously not solely to blame for either crisis, it's hard not to see the US-based roots of these disasters.
Today, in Haiti and Afghanistan, civilians are facing unimaginable tragedy.
Here are charities offering support in Afghanistan:
1. The International Rescue Committee is looking to raise $10 million to deliver aid directly to Afghanistan
2. CARE is matching donations for an Afghanistan relief fund. They are providing food, shelter, and water to families in need; a donation of $89.50 covers 1 family's emergency needs for a month.
3. Women for Women International is matching donations up to 500,000 for Afghan women, who will be facing unimaginable horrors under Taliban control.
4. AfghanAid offers support for people living in remote regions of Afghanistan.
5. VitalVoices supports female leaders and changemakers and survivors of gender-based violence around the world.
Here are charities offering support in Haiti:
1. Partners in Health has been working with Haiti for a long time, and they work with the Department of Health rather than around them, which is extremely important in a charity.
2. Health Equity International helps run Saint Boniface Hospital, a hospital in Haiti close to the earthquake's epicenter.
3. SOIL is an organization based Haiti, "a local organization with a track record of supporting after natural disasters." They are distributing hygiene kits and provisions on the ground to hospitals and to victims of the earthquake.
4. Hope for Haiti has been working in emergency response in Haiti for three decades, and their team is comprised of people who live and work in Haiti. They focus on supporting children and people in need across Haiti.
When the new Tiffany's campaign was unveiled, reactions were mixed.
Tiffany's, the iconic jewelry brand which does not (despite what some might be misled to believe) in fact serve breakfast, featured Jay Z, Beyoncé, and a rare Basquiat painting in their recent campaign.
The aesthetics were undeniably luxe and historic. The campaign showcased the rarely-seen Basquiat painting Equals Pi (1982), which the brand acquired for the background's proximity to its distinctive Tiffany blue. Also notably historic is that Beyoncé was the first Black woman to wear the 128.54 carat Tiffany Diamond.
Before Beyoncé, the only other stars to wear the yellow diamond were Mary Whitehouse, wife of American diplomat Edwin Sheldon Whitehouse, Hollywood icon Audrey Hepburn, and singer Lady Gaga.
"Beyoncé and Jay-Z are the epitome of the modern love story …. Love is the diamond that the jewelry and art decorate," said the press release accompanying the campaign.
The campaign, titled "About Love," is stunning and has both classic and contemporary references. The image of the couple posing in front of high art recalled the iconic stills from their "APESHIT" music video, for which they famously rented out the Louvre and posed in front of the Mona Lisa.
THE CARTERS - APESHIT (Official Video) www.youtube.com
Their "APESHIT" photo made a giant cultural impact for its juxtaposition of Western beauty and Blackness. Tiffany's campaign seemed to have similar goals — showcasing Beyoncé and Jay Z as the peak of luxury, this time juxtaposing the Basquiat and the Tiffany diamond.
As a Black couple, their appearance in such a luxury campaign was a big move for representation, but in a post 2020 landscape, there was an outcry of criticism.
Despite the aesthetic beauty of the image, the high capitalist undertones didn't sit right with some on the internet — largely younger demographics. Though this campaign was an effort by Tiffany's to appeal to younger audiences and make the brand feel more relevant, Twitter's verdict was clear: a blood diamond wasn't the way to go.
The diamond, which was mined in South Africa in 1877, comes from origins laden in the implications of colonialism. The practice of mining in South Africa at the time was exploitative and destructive, eschewing the livelihoods and safety of African miners and their communities for... what? Money? So Tiffany could try to sell us some dream of affluence using Black celebrities as to "Blackwash" the history behind their treasured piece?
The Washington Post also had some choice words, saying: "Its campaign does not celebrate Black liberation — it elevates a painful symbol of colonialism. It presents an ostentatious display of wealth as a sign of progress in an age when Black Americans possess just 4 percent of the United States's total household wealth. If Black success is defined by being paid to wear White people's large colonial diamonds, then we are truly still in the sunken place."
Alongside the campaign, Tiffany & Co have promised to donate $2 million to HBCUs to fund scholarships and internships. But this measly amount (considering the multi-billion dollar net worth behind LVMH) is not enough to cover up that, despite their performative efforts to promote "diversity," Tiffany's is entrenched in a colonial history that neither beauty nor Beyonce can make us ignore.
While Black representation has been increasing over the past few years, the question of how we are represented is starting to be considered with more nuance. And as we examine the structures of wealth and hierarchical values, many people are starting to ask whether these should be the standards we aspire to anymore.
Jay Z and Beyoncé have come under fire before for their promotion of Black Capitalist values — which the kids don't seem to want. Jay Z especially seems invested in the trappings of traditional (read: white) success and wealth. His cannabis line recently unveiled a campaign based on the work Slim Aarons — which was famously focused on "attractive people doing attractive things in attractive places" — and its unashamed opulence raised some eyebrows.
Images like this aren't as revolutionary as they once might have been since they reinforce the status quo and tell marginalized people to reach for the same luxuries and lifestyles deemed aspirational by the people who have oppressed them.
Anti-capitalist theory has been around as long as capitalism has, but younger generations are more likely to question the status quo — even when it comes packed with Basquiat and Beyoncé.
The conversation about the Tiffany campaign is indicative of how Gen Z thinks differently about money and what it means to them. They are less likely to be seduced by the luster of the aspirational, and more receptive to relatability.
This is why apps like Cleo have been on the rise. Cleo is a budgeting and personal finance app which makes money feel less inaccessible and makes engaging in personal finance relatable and easy.
No more does financial literacy seem restricted to the pretentious or the elite — we get it, finance bros; you love capitalism. With Cleo, understanding your money is something that can align users with their values.
And those values don't look like blood diamonds or corporate pandering.
- Sorry, Beyoncé, but Tiffany's blood diamonds aren't a girl's best friend - Washington Post
- The Black-white wealth gap left Black households more vulnerable — Brookings
- The Unashamed Opulence of Jay Z's Luxury Cannabis-Themed Slim Aarons Photoshoot — Popdust
- ATTRACTIVE PEOPLE DOING ATTRACTIVE THINGS IN ATTRACTIVE PLACES WITH SLIM AARONS — Elle Decor
Stacker
Road trips can be a lot of fun — but they can also drain your wallet quickly if you aren't careful.
From high gas costs and park admission fares to lodging and the price of eating out every night, the expenses can add up quickly. But at the same time, it's very possible to do road trips cheaply and efficiently. Without the headache of worrying about how much money you're leaking, you can enjoy the open road a whole lot more. Here's how to save money on a road trip.
1. Prepare Your Budget, Route, and Packing List in Advance
If you want to save money on a road trip, be sure you're ready to go. Try to count up all your expenses before you hit the road and create a budget. It's also a good idea to plan your route in advance so you don't end up taking unnecessary, gas-guzzling detours. And finally, be sure to pack in advance so you don't find yourself having to buy tons of things you forgot along the way.
2. Book Cheap Accommodations — Or Try Camping
All those motel rooms can add up surprisingly quick, but camping is often cheap or free, and it's a great way to get intimate with the place you're visiting. You can check the Bureau of Land Management's website for free campsites. Freecampsite.com also provides great information on If you don't have a tent or don't want to camp every night, try booking cheap Airbnbs or booking hotels in advance, making sure to compare prices.
camping road tripConde Nast Traveler
If you're planning on sleeping in your car, a few tips: WalMart allows all-night parking, as do many 24-hour gyms. (Buying a membership to Planet Fitness or something like it also gives you a great place to stop, shower, and recharge while on the road).
3. Bring Food From Home
Don't go on a road trip expecting to subsist on fast food alone. You'll wind up feeling like shit, and it'll drain your pocketbook stunningly quickly. Instead, be sure to bring food from home. Consider buying a gas stove and a coffee pot for easy on-the-go meals, and make sure you bring substantial snacks to satiate midday or late night cravings so you can avoid getting those late night Mickey D's expeditions.
Try bringing your own cooler, filling it with easy stuff for breakfast and lunch — some bread and peanut butter and jelly will go a long way. Bring your own utensils, plates, and napkins, and avoid buying bottled water by packing some big water jugs and a reusable water bottle. Alternatively, try staying at hotels or Airbnbs with kitchens so you can cook there.
4. Avoid Tolls
Apps like Google Maps and Waze point out toll locations, so be sure to avoid those to save those pennies. (If it takes you too far off route, you might have to bite the bullet and drive across that expensive bridge).
You can also save on parking fees by using sites like Parkopedia.
Road TripThe Orange Backpack
5. Save on Gas
Gas can get pricy incredibly fast, so be sure that you're stopping at cheap gas stations. Free apps like GasBuddy help you find the most affordable gas prices in the area. Also, try going the speed limit on the highways — anything faster will burn through your tank. Be sure that you don't wait till you arrive at touristy locations or big cities to fill up.
6. Get a National Park Pass
All those parks can get really expensive really fast. If you're planning on visiting three or more parks, it's a great idea to get an America the Beautiful National Parks Pass. For $80 you can get into every National Park for one year.
