What boundaries you have drawn to protect yourself?

A personal message drops suddenly in the morning. It's from an old friend whom you met just two days back in a get-together after almost a decade or so. During the get-together you both had moments cherishing the old days, the nostalgia about the college or work years together, etc. You would’ve discussed the details of your current life/career and how things are going your way or how you’re leading a comfortable life.

The message is about requesting a sum for a hand loan to be repaid in a few days or by the month-end. Now, you’re in a torment on how to deal with it. Whether to ignore or respond? It’s not the sum that worries us, at times, but the very request bothers us. Should we remain insensitive to an old friend or get involved for an uncertain return.

Then there’s another kind of request we face usually? A distant relative calls up to inform suddenly about availing a loan from a financial institution or a bank. It could be from a co-worker you know very well. It places us in a tricky place as the timelines of repayment could run into multiple years in future and there’s every possibility of drifting away in our lives. Not because we chose to but just part of the routine. You might lose contact of that person or simply just forget about this whole episode.

Out of the blue, you might receive a demand from the bank for the due as the original borrower defaulted. It upsets you not just for the amount but psychologically you feel cheated. That feeling is very stark and painful than the actual loss of money. These situations are pretty common in our lives and many of us would’ve waded or endured them. The need could be genuine and you don’t want to miss out on helping an old friend. But, how to respond to these situations with control while making it sound insensitive. This is where one must become aware of their own circumstances. This can’t be a reactive measure but a much more prepared action. Always get back to the premise. What are your goals on saving, investing and budgets. Would this decision to lend impact any of those? What sum is expendable? Are the timelines clashing your budgetary allocations or commitments?

You would want to help but sometimes, incapable of extending the entirety of the requested sum. So, what sum is comfortable on both the quantum and timelines. What if the money isn’t repaid in the agreed timelines? Would you be comfortable in seeking or following up? Is it easy for you to reach and extract your due? These questions shouldn’t be asked when such a situation arrives, but you should’ve already got the plan in rock.

In the book, “Set Boundaries, Find Peace” by Nedra Glower, she describes three types of people: The compliant, The controller and The assertive. Those who struggle to set boundaries say yes when they wanted to say no are the compliant. The controllers define other’s actions and try to impose their needs, expectations or limits on others. Those who respect their and others’ boundaries are the Assertive people who understand their own behaviour and limits. So, it’s important to know thyself before making commitments, and below is a rational approach to that. Do we aspire to be the ‘superhero’? This aspiration could extend our boundaries beyond the capacities. Should we please everyone or would we seek appreciation and only good about us from others? Saying NO is another aspect that hurts most of us. This dilemma could push us to commit to unreasonable parameters that directly add stress to our lives. Once we know what our weaknesses are, we’ll be aware and allow less people to exploit us.

If none of these are your concerns, you should still suspect this sudden communication. While you might have caught up on each other’s lives within a few hours during the get-together, you still mayn’t know completely what circumstances have changed at their end. The lack of communication and the whereabouts wouldn’t help much on what went through in their lives. That calls for caution and a source of risk on personal finance angle. The first question one should always pose is - why me? Put yourself in that situation and check who would you venture for such a help. Whom would you first approach, who’re those people, how they are related or how frequentlyyou’re in contact with?Where do you place this person in that list? Now flip it and if you can’t visualise in the near or inner layer, then the request has crossed many thresholds to reach you. That’s a red flag despite the innumerable transactions you might have had before this latest contact.

Then consider the timelines. No, not the ones you were promised for the return but your existing commitments. What contingencies you’ve provided to tide over in case the borrower delays, would you be able to manage the shortcoming. Would that upset the existing cashflows? Next is what if the person defaults altogether. Isyour budget sound enough to absorb this shock? These’re the pertinent questions to be thought through even before you respond to the message.

Now, if your conscious doesn’t allow you to keep quite during a genuine distress of an old friend. You now must decide what’s the expendable amount that you’re willing allocate. Deliberately using the word ‘expendable’, it’s the amount comfortable for you to write off and still feel good about being part of a cause. Whether the money was extracted as an excuse or otherwise, you should live with the fact of unreturned money, in peace.That’s the reason, I tend to counter-offer an amount that I could lend. If the need is genuine, the borrower welcomes but persists for the requested amount. In case of a serial offender, there would just be an expression of gratitude from them. Most of the times, they wouldn’t come back to you for any fresh request and so you could get rid of a risk with minimal cost or damage.

(The author is a partner with “Wealocity Analytics”, a SEBI registered Research Analyst firm and could be reached at [email protected])