You obviously don’t *have* to loan friends money, but here’s what to do when they ask

Figuring out how to say no when that one friend asks to borrow money for the umpteenth time is stressful. But figuring out how to say no during the holidays, when you’re also very much strapped for cash after buying everyone gifts, ratchets the tough feelings up a notch. After all, your heartstrings are fully engaged and pulled tight.

How exactly is a caring friend supposed to act when somebody—especially a potentially desperate somebody—asks for a loan? Is there a way to turn them down without putting a strain on your relationship? And is lending money to a friend ever advisable?

According to Maggie Baker, PhD, financial therapy specialist and author of Crazy About Money: How Emotions Confuse Our Money Choices and What to Do About It, the holidays can be a particularly fraught time for friends and finances. You’re either feeling generous—or guilty that you don’t feel generous. Because of that, you’re probably more likely to say yes to these asks, even if your own financial situation is a little precarious. But, beware of letting those warm and fuzzy holiday feelings get the best of you. “It’s the season of giving, when people are more relaxed and open—but that doesn’t mean they should be exploited,” Dr. Baker says.

If you have even a flicker of doubt about lending money to someone, don’t ignore your instincts. Rather, Dr. Baker says it pays to be a little bit selfish. Because while the denied loan may sting your relationship in the short-term, it’ll not only protect your hard-earned savings, but it’ll also preserve your relationship from potential future strain.

But, y’know, easier said than put into action. Here are a few things to consider (and tips for what to say!) the next time a buddy asks you to spot ’em some bills—especially during the holidays, when everyone seems to have a higher expenditure rate.

5 tips for preserving your funds and friendship when a buddy hits you up for money.

1. Consider who you’re dealing with before deciding

While there aren’t hard and fast rules for money-loaning choices (you’re probably not going to make your bestie fill out forms and run background checks like the bank might), it is important to consider whom you’re dealing with. For instance, are they trustworthy? Are they out of control with spending? Introspect before writing a check (or sending a Venmo).

And remember, it’s okay to say no; there are plenty of ways to do so without letting the other person know that you don’t necessarily trust them not to pay you back. Dr. Baker says a simple, “I hate to disappoint you, but I’m just not in a position to do that,” should do the trick.

2. Offer a helping hand rather than a handout

If somebody is asking you for a large sum of money (i.e., not $5 for a beer here or a coffee there), they must be incredibly bold or incredibly desperate. If you’re in a position to help them and truly want to, then go for it—just be mindful of not enabling a potentially bad habit or self-sabotaging behavior that got them to this point in the first place.

“You want to make sure the issue that’s motivating [the request] is getting addressed,” Dr. Baker says, adding that you there are non-financial ways to assist. She recommends saying, “’I’m a little stretched too, but if you want to talk about how you’re dealing with money, I could offer some suggestions.’” You might not get taken up on your offer, but you’ve still managed to show you’re a caring friend—without putting yourself in a compromising monetary situation.

3. Share that you’ve been burned before, if that’s why you say no

If you’ve had issues with friends and money before, you’re obviously going to be hesitant to loan more funds. (And you wouldn’t be the only one in this sich, BTW. More than 50 percent of respondents to a Bank of America survey say they’ve seen friendships end over money issues).

“Tell them, ‘I’ve done this several times and have had regrets because the person never paid me back and it put a real strain on the relationship,’” says Dr. Baker.

4. If you decide to loan the $$$, definitely make a contract

Sure, asking a close friend or family member to sign a contract might seem extra and awkward, but Dr. Baker argues it’s about more than protecting your cash—it’s about protecting the relationship you share. “I’d write down the conditions, how much [the loan is], how long before they can pay me back, and how they’re going to pay me back,” she says.

Be super-specific about the repayment terms. If they’re borrowing $1,000, for example, decide on a reasonable repayment frequency and amount, then write it into the contract before you both sign on the dotted line.

5. Then set check-in reminders for requesting your payback

Say you’ve decided to lend some money to a particularly forgetful friend. In this case, technology can be a valuable tool for diffusing at least some of the awkwardness that can come from asking for it back. If you’re both on a mobile payment app like Venmo, give a nudge by requesting the cash they need to pay.

Even better, says Dr. Baker, is letting them know that you’ll be checking in after a certain amount of time. “When I first loan the money, I’d ask, ‘When do you think you can pay it back?’” she says. “Then ask, ‘Do you mind if we go past that date if I put an alert on my cell to remind me it’s due? Will that work for you?’” You might even consider asking them to set an alert on their own device. The key is for everyone to be on the same page so it isn’t a surprise when you check in weeks or months down the line.

The bottom line is that during holiday season (and all seasons, really), you should manage your own expectations first. If you’re in a position to spread some financial cheer, do so—but not for any amount that you really need for your own livelihood. “Think of it as a gift that you probably won’t see back,” Dr. Baker says. Budget accordingly, then be pleasantly surprised when when you actually do get paid back rather than financially ghosted.

Want to save some money? Here’s how to start investing—no matter how much you have to start with. And here are simple tips for saving more of what you’ve got.