“Do you remember [Name Withheld For Reasons That Will Become Obvious],” a young author friend e-asked me.
I was afraid I might have to break the news to him that Name Withheld had died – a suicide, if I remembered right.
“He thinks you hate him.”
As it turns out, I didn’t remember right. Name Withheld had not killed himself; he had gone bankrupt. Big difference.
“Apparently, you helped him out and he —-ed you. But he’s written a pretty good book, and I’ve been emailing with him to get a blurb from him for mine. He told me my writing reminded him of a young author he once knew – you – and I told him that actually we were friends and you were my copy editor, so maybe that’s why the style seemed similar, and he couldn’t believe that I lived in your walk-in closet for three months.”
(I had offered the living room couch; my friend preferred the closet. More of a cave, really. But free copy editing, so he could hardly complain.)
“How much did he owe you?”
“Actually,” I said, “I don’t hate him and I’m pleased to know he’s alive. Tell him hi. I have no idea how much he owed me.”
“But wait,” I said, now curious. “Let me look.”
And there, in Managing Your Money, the greatest computer software program ever written (thank you, Jerry Rubin, Spencer Martin, Mike Starkey, and so many others who made me look good), I found the loan, along with my notes. From July of 1987.
Name Withheld had left me holding the bag for $5,323.13 on a one-year 18% loan that he had been welcome to pre-pay at any time (and that was to jump to 2%/month if he went into default).
I know 18% may seem like a lot in 2014, but in 1987 it wasn’t so crazy – the prime rate was 8% or 9%, and he was no General Motors. (Well, or as it turned out, perhaps he was.) I was borrowing at 12% myself in those days, and so just tacked on an extra half a percent a month because I really barely even knew the guy. If he could have taken a cash advance on his credit card at 29.9%, that would have been fine with me, but apparently he considered my 18% a better option.
Anyway . . .
“So tell him hi and no hard feelings. But just for fun, let’s see what he’d owe me now, with interest.”
Wanna guess? $5,323.15 at 18% for 26.3 years?
I know – but guess anyway!
It comes to $413,680.93. Unless you apply the 2%/month default rate. Then it comes to $1.5 million and change.
Lesson #1 — Never borrow at 18%, let alone 2% a month.
Lesson #2 — Lending money to a friend or acquaintance generally turns out to be giving them money — and, often, losing the friend.
These lessons are nothing new to you, but I didn’t quite finish the column I had planned to write today, and I had this one sitting on the bench, tapping its foot, hoping to be called in to play. So I’m basically just stalling for time. If Name Withheld should happen to read this, perhaps he’ll want to give $5,323.15 — or $413,680.93 — to the Democratic Party. (I’ll let you know if it shows up.)
Quote of the Day
The people who sustain the worst losses are usually the ones who overreach. And it's not necessary: steady, moderate gains will get you where you want to go.~John Train
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