While Lee Daniels’ was collecting his edges from the way Dame Dash checked him about the $2 million debt he owes him, the rest of us got a crash course in why you have to be extra careful when lending money to friends.
Dame ran up on Lee like Usain Bolt charging for the finish line to speak to the director about getting his money. Dame informed Lee that he was getting ready to slap him with a $5 million lawsuit if he didn’t pay up which, understandably, wrecked Lee’s night as he was watching Diana Ross perform some of her most iconic music. In the court of public opinion, though, the music executive was well within his rights –$2 million isn’t exactly pocket change.
While the public embarrassment was a costly lesson for Lee, we, too, can pick up a few free pointers on what to do when friends ask for money.
Set Terms & Conditions
Before handing friends any money, there needs to be a clear understanding of the nature of the exchange and the conditions of the agreement. Clearly, there was some miscommunication between Dame and Lee about whether the $2 million was a loan or an investment, each of which come with different expectations. Make sure you and your friend are clear on whether the money exchanged is a gift or a loan and if it’s the latter, set a clear timeline on when the money will be repaid.
Ask Within Reason
Good friends are like family, and family does almost anything it can to help each other. When the help is financial, though, a borrower needs to consider how much help a potential lender may reasonably and comfortably be able to provide.
Say you’re short on bills for the month, and you’re thinking about asking a friend to float you a few dollars to make ends meet. Work out how much you should reasonably be asking of them. You can’t expect your friend to cover your entire expenses because they simply may not have it to give. Even if they do, as a borrower it’s important to be mindful of how your friends manage their money and whether they have any major expenses on the horizon themselves. Instead of asking for an exorbitant amount, sometimes its best to just ask for enough to cover the expense that’s most critical — and that you know you can afford to pay back.
Take The Debt Seriously
No matter how debts occur, they show friends how seriously they take each other and their relationship. Repayment can be murky territory among friends. Some people work out a barter system to cover expenses or debts, while others prefer to just get their money back outright. No matter what method of repayment is agreed upon, a borrower needs to make that repayment top priority after taking care of their necessities. Waiting to pay someone back while you’re living your best life in high style will always lead to conflict.
Look at Lee, he has two hit shows on TV, and he’s been enjoying the fruits of his labor for years. No one is begrudging him that, but he was also expected to repay Dame’s investment for Shadowboxer even though the movie didn’t make its money back. The lack of communication and disregard for this debt resulted in a hefty lawsuit for more than Lee originally owed and, let’s remind you again, public embarrassment. In the world of social media, it wouldn’t be above your friends to expose you online for doing the same. To avoid this kind of trouble, first determine whether borrowing from a friend is absolutely necessary. And if it is, make repaying them just as much of a necessity.