If lending to friends is ill-advised, what about giving?

Dear Dave,

The guy who has been my best friend since grade school recently asked me to loan him $5,000. All I have in savings in $5,000, but I would be willing to give him $1,000. The problem is that while he's a great friend with a good heart, he's always getting himself into binds when it comes to money. Do you think I should give him $1,000?

Israel

Dear Israel,

If I were in your shoes, and I was going to give this guy a fifth of everything I had, I'd want to know it was going to save his life. From what you've said, it sounds like he's just out of control with his money while you're trying to save. That being the case, I'm not sure you'd really be helping him.

If you want to gift your friend some money, then do it. But there's no way I'd tell you to give him everything you've managed to save. And I certainly wouldn't do it as a loan.

Ask yourself if you believe deep down in your heart that giving this guy $1,000 would truly be a blessing to him or if, by doing it, you'd be acting as an enabler and basically just funding more of his stupidity with money. From what you've told me, I think there's a good chance the answer is the latter. And if that's the case, you can be a much better friend by saying you love him enough to not ruin your friendship.

-Dave

Dave Ramsey is America's trusted voice on money and business. He has authored five New York Times best-selling books: Financial Peace, More Than Enough, The Total Money Makeover,EntreLeadership and Smart Money Smart Kids. The Dave Ramsey Show is heard by more than 6 million listeners each week on more than 500 radio stations. Follow Dave on Twitter at @DaveRamsey and on the web at daveramsey.com.