Help! What Happens if I Owe Someone Money? 3 Steps to Eliminate Stress When Borrowing Money Goes Bad
In today’s blog, I will talk about the three steps to handle when you owe someone else money. These three steps will stop the stress and the fighting to the extent that those are occurring.
Step #1: Look Inward
I often recommend this as a first step when facing financial conflict. Start noting how you feel about the situation. If we don’t bring some awareness, it will be easy to show up as defensive, resentful, angry, etc.
Journal and/or just pay attention to your emotions. You might feel shame, guilt, or anger. You may even feel like someone manipulated you or treated you unfairly.
Whatever it is, let it come out before the conversation. Then, you can be with that and process it.
Step #2: Get Organized
Take stock of your current finances:
Your assets, i.e. things that are worth money
Your debts, i.e. what you owe and the interest rates
Your income and your expenses
Next, create a goal for when to pay the other person back. Then, build out a plan that will get you there. This may involve decreasing expenses, increasing income, or both.
Now, there’s at least one other person involved. So, you’re not going to execute the plan without their input. But, this will give you a framework for a conversation with the person to whom you owe money. That preparedness will make a huge difference.
Step #3: Get Connected (to the other person)
First, invite them to talk about the money you owe them. Second, apologize for the impact on them of this situation. Acknowledge the ways that your actions or inactions have harmed them.
Whatever it is, own it. Maybe you've been a jerk to them about the money you owe them. Or you fell out of communication because you were trying to avoid the topic. Or you didn’t stick to the plan you two created…
If so, say that. Say all that. Own all that, what you have done or not done.
Then, ask if they're willing to share with you how the situation has affected them. In particular, how has it hurt their finances or their relationship with you?
Now, let me be clear:
This is not a space for arguing with their feelings or experience. This is where you listen. Ask questions. See it from their point of view, and validate their feelings.
Their experience is valid, just like yours is. That's what we were looking at in Step #1 - validating your own experience. It’s natural to feel all kinds of emotions if you owe someone money.
It’s also natural to feel all kinds of emotions if someone you care about owes you money. They may feel confused, resentful, angry, or bitter. This is why it’s helpful simply to listen and validate them.
Even if you think that they’re being irrational, stay the course. This isn’t about morality. It doesn’t make you a bad (or good) person.
Straight up: you took some actions, and it led to their feelings in some way. If you can come from that place, they likely will feel heard and understood.
Step 4: What’s Next?
By this point, the energy should shift. They should see that you care about how this has been for them.
Now, create something new with them!
For example: “I want to create a plan with you that we both feel good about.”
Share that you’ve taken stock of your current finances. This is key if you’ve damaged their trust by not fulfilling your promises around paying them back.
Share the plan you created in Step #2 as an option. You don’t have to choose that exact plan. But it’s a starting point to create something that leaves each of you feeling good.
An important note: it’s normal to be nervous, afraid, worried, or anything like that. And you might fail to follow through on this plan. They might be skeptical. But your job is to clean up the mess of the past and create a space for new actions. This gives each of you the opportunity to step into a new future.
To recap the 4 steps:
#1: Look inward. Understand your feelings about the situation.
#2: Get organized. Understand your current finances. Create a goal and plan to pay back the money you owe.
#3: Get connected. Apologize for what's happened. Acknowledge your role. Ask them to share how it affected them. Invite them to co-create a new plan with you, using the one you created in Step 2 as a jumping-off point.
#4: Share the plan
Make sure you two are on the same page. Once you do, there will be a new beginning. You’ll each have more peace and partnership. And you’ll be on track to elevating your finances -- and your relationship -- to the next level!
Want to level up your game around money in your relationship? My free quiz will help you learn your Couple’s Money Personality Type AND how you can grow from there!
Adam Kol is The Couples Financial Coach. He helps couples go from financial overwhelm or fighting to clarity, teamwork, and peace of mind.
Adam is a Certified Financial Therapist-I™, Certified Mediator, and Tax Attorney with a Duke Law degree and a Master's in Tax Law from NYU. He is a husband, dad, and musician, as well.
Adam's wisdom has been shared with The Wall Street Journal, the Baltimore Ravens, CNBC, NewsNation, and more.
