On Debt and Friendship

Posted by Fitz Villafuerte under Life Lessons on February 5, 2009

Someone I know recently accumulated more than P40,000 in debt – around P20,000 in his credit card and the remaining as a personal loan from a friend.

His younger brother had a medical emergency and, being the sole breadwinner of the family, he had to shoulder all the expenses.

Even though he had an emergency fund, it was not enough to cover all the hospitalization expenses and the cost of the medicines.

I was able to talk to him a few days ago and the conversation was a very interesting one. Specifically, it made me realize that being financially smart is not necessarily always, the smart thing to do.

Why? A part of our talk that night went something like this:

bar-conversations

“It’s a good thing that my friend, John, was able to loan you out the money you needed,” I said.

“Yeah, he’s a lifesaver,” he said. “The money came from his own emergency fund and he even said that I can just pay whenever I can without interest.”

“That’s great to hear,” I answered.

“I’ve been over my finances lately and I think I’ll be able to manage and save around P5,000 each month,” he stated matter-of-factly. “Given the monthly minimum payment of most likely around P1,500 for my credit card, I’m expecting to be able to pay him fully within 6 months.”

“So you’re planning to pay him first instead of your credit card?” I asked. “But you’ll accumulate interest fees.”

“I know,” he answered. “But I’m not really comfortable with owing someone money. I know my loan to him is interest-free and all, but I think the friendship is more important than the extra money I’d have to pay to the credit card company.”

At this time, I was listening in silence. I know he had something more to say and was just gathering his thoughts.

“I know it’s not really financially smart to do that,” he continued. “But I believe that paying our friend first is the ‘real-life’ smart thing to do, and that is what’s more important for me.”

If you were in his situation, would you have done the same thing?

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Photo courtesy of Kevin H.

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11 Responses to “On Debt and Friendship”


  1. Rico says:

    I think I’ll talk to the friend I owed money first. I’ll lay all my cards and give him my financial situation. If he says he needs the money too, then I’ll pay him first. If not, I’ll first settle the credit card loan, then him. The key to borrowing, especially from a friend, is transparency. If you think you can’t pay in time, just tell him right out. That way, he’s not left wondering whether you forgot or choose to forget the loan.

  2. Cecile Yap says:

    Hi Fitz, I’ve been reading your site, I learn a lot and it is so very inspiring. But I have a question I hope you can answer and give ideas what to do?
    My question is, WHAT WOULD YOU DO IF YOU DON’T HAVE MONEY TO SAVE? because you don’t have an income? I’ve been through a lot of up’s and down but today is really DOWN.. . Hope you can help. Thank you! Cecile Yap

  3. eMz says:

    i would’ve probably done the same thing — maybe it’s this kind of mentality that’s made me poor! hahaha

  4. jessie says:

    Fitz,

    Based on your post I can say that you’re a good friend. These days, even friends will hesitate to lend his friends money. At any rate, I’ve learned something good today. 🙂

  5. Yes, money can easily be earned but friendship is hard to earn. When you lose money you can easily earn it by working but a lost friendship is hard to bring back.

  6. If you were in his situation, would you have done the same thing?

    – of course 😀

  7. Rina says:

    This is very interesting …

  8. Fitz says:

    Thanks everyone for the comments. 😀

    @Rico
    Yes, when it comes to money and friends… transparency and honesty is a necessity.

    @Cecile
    Saving money starts with the right mindset. Try thinking positive first. Then, examine your lifestyle. Cut back on unnecessary expenses. Last, and most importantly, find an income source. Read about the income opportunities I’ve written here, maybe some of them could give you an idea. Good luck!

    @eMz
    Your comment made me laugh. 🙂 Well, there’s nothing wrong with having this mentality. As long as you have a good understanding of your financial situation, you’re fine. It’s being ignorant with our finances which makes us poor. In my friend’s case, he knew that he’d be paying interests because of his decision.

    @Tyrone
    That’s a very, very good point!

  9. Jen says:

    Hi. If I was in the same situation, I would do the same thing. I have loaned a couple of friends some money about 2 years ago when I was still in college. By the way, I was living alone on what my parents are sending me monthly since I originally live in Palawan. So that means that what I loaned them was my allowance. There were instances when I couldn’t pay my bills since they haven’t returned what they owe me. I don’t know if I should ask them to pay me or should I just forget that I lent them money. Up until now, they still haven’t paid me yet. T_T

  10. gladita says:

    I’m in the same situation and I did the same thing. You can easily find money but a friend’s trust is hard to recover once you broke it.

  11. junior@aol.com says:

    in 2010 i loaned my brother 24,000.00 dollars to date he has paid
    back 6,000.00 dollars. He got a little settlement from some work injury but only sent me 3000.00 dollars he bought another tractor for the business i helped him start, but didn’t pay me off totally. he still owes 18,000.00 dollars and i am on ssd
    once a month he ignores my pleas for help last payment was in feb 2012. i am thinking of going to court. he has his own business. any suggestions.

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