How to deal: “Nearly half of all loans to friends and family members are not repaid,” Dr. Frankel says. “It's almost impossible to ensure ten dollars here or twenty dollars there is ever repaid without damaging the relationship. For example, you might say, ‘Hey, Susan, I'm wondering when you're going to repay that ten dollars I loaned you two weeks ago.’ Now this puts you in an awkward situation. So when ‘loaning’ these small amounts you might best consider it a gift if the person doesn't offer to repay it. When it comes to larger amounts, you want to put in writing the expectation of how and when it will be repaid. The other person should sign the ‘loan’ agreement. If you're not willing to do this, then you shouldn't loan the money because getting it back is pretty iffy.”

Big-ticket activities.
“One time my friends wanted to go to Palm Springs for the weekend, but I had literally no money in my bank account,” says Sarah, 23. “I told them I couldn’t go but they whined and said ‘It won’t be any fun without you!’ and my friend said she’d loan me the money for the weekend. I finally agreed, but it was miserable. I couldn’t enjoy myself because every time I spent any money I worried about paying my friend back.”

How to deal: Frankel says: “Honesty is the best policy. [Say] ‘That sounds like a wonderful activity and I would love to join you, but my budget just can't afford it. Thanks for including me and let me know next time—maybe I'll be in a better financial situation.’ Then do not succumb to someone who says, ‘I'll loan you the money’ or ‘I'll pay for you.’ Your response needs to be a firm, ‘I'm so glad you're such a good friend, but I really do want to pay my way.’” Remember, true friends won't want to drive you in debt just to spend time together.