Shakespeare warned, in Hamlet, "neither a borrower nor a lender
be — for loan oft loseth both itself and friend. And borrowing dulls the
edge of husbandry." That aphorism conveys primarily a moral, not a
financial, message. In our discussions of the modern world, the basic
principles are often put off into broad generalities — whether we want
to speak about governments, banks, corporate America, the mortgage
industry or consumers. But at the basic level, every one of these
abstractions is built upon the activities of individuals. One of the
most salient lessons we can learn from the subprime debacle is about
individual behavior — specifically, the way in which individuals should
deal with debt.
A virtuous approach is usually to spend only after one has earned. Being in debt is never an ideal situation for anyone. First, it reduces freedom. Also, friendships suffer when someone holds the reins over another. It causes a reduction in the flow of affection and creates a formality that weakens social bonds between friends, family and colleagues. Refusing to lend money to an irresponsible friend or family member may, in fact, be the best thing a true friend could do.