The dilemma I made the classic mistake of mixing friendship and money which, of course, turned out to be disastrous. Two years back I ended up in a tight spot. My best friend of 25 years offered me a loan that, in her words, I could pay back in my own time. It was a sum that I’d have struggled to borrow, but it would save my business. In return I felt obliged to offer her an interest in my business.

Before signing the contract, she proposed partially merging our businesses, for which she’d knock off part of the debt. I had doubts, but it felt difficult to deliberate the situation properly among the chaos in my life. When I was able to sit back and think, I decided to renegotiate. It ended in disaster. She gave me an ultimatum: go along with her plan or pay the whole sum back in a few months’ time. If not, there would be lawyers involved.

Luckily by then, I was eligible for a bank loan, but my friend’s behaviour might have ruined me – and she knows that. She is now mad at me; she says she feels taken advantage of. I have apologised and expressed my hope of restoring our relationship, but she keeps giving me the cold treatment. Should I stay in contact, or wait until she contacts me (if ever)?

Mariella replies You don’t really have a choice. As you describe, it’s been a messy business from the start and the best lesson you can take from it is the one you were aware of: mixing money with friendship is fraught with complexity and you should only resort to it if there are no other options and you’re sanguine about the possibility of it ending unsatisfactorily.

I’m afraid you have to sit back and wait for the dust to settle. I hate to repeat a platitude, but there really is no such thing as a free lunch. I understand how painful this must be for you, but it’s an incredibly common problem.

A loan is an emotionally exacting exchange; few emerge unscathed

Money, no matter how much of it we have, does not flow like the milk of human kindness is meant to. It stutters and starts; it sows resentment and poisons relationships. Today’s liberating loan is the root cause of tomorrow’s trauma. Even when money is freely given, hidden non-financial costs almost always arise – costs that tend to be far larger than the original cash sum.

People guard their money closely, use it to equate value in unconnected areas and manipulate it for power – and so it is never what it seems. It is the most toxic influence in our lives. It affects the dynamic of almost every human exchange and it’s puzzling, to say the least, why we’ve allowed an elevated form of exchange mechanism to become imbued with such power to devastate human relationships.

From the lender’s point of view the first rule should be: don’t lend what you can’t afford to lose. The second is that repayment has to be safeguarded and, where possible, never mentioned again. From the borrower’s side, it’s far more emotionally complex and you will need to eat extreme portions of humble pie along the way. The cost of a loan is not simply the figure that’s transferred into your bank account, it’s a multilayered and emotionally exacting exchange from which few emerge unscathed. It shouldn’t be, but in almost every case I’ve ever encountered that’s what happens.

(My most satisfactory experience was guaranteeing a bank loan rather than actually loaning the money. The borrower then paid it back on a monthly basis to the bank putting the whole transaction at arm’s length and removing any personal sting. My worst was accepting a financial gift that made a dream possible, but started a malignant tumour at the core of an important relationship that I failed to spot until it was too late. The dream wasn’t worth the nightmare of the fall out.)

Our relationship with money is irrational, and it’s not to our credit as a species. It’s high time we re-examined it and put it in its rightful place. Money makes the world go around, but it also restricts our friendships, our choices and our potential. Maintaining friendships across the money divide is as difficult as across any sectarian one. Who pays the bill? Who holidays where? How are our children educated? All these are everyday considerations that money complicates and corrupts.

The American dream, which is basically to be rich, may not be the most admirable, but it has a breath of honesty about it that I sometimes think we’d do well to adopt in this country. In the UK, the rich are happy to talk about anything but their wealth, but in America if you’ve got it, you flaunt it. We may laugh but, ultimately, I’m wondering if that isn’t a more functional approach.

Americans find nothing shameful in being open about money, but here in the UK the sting of class infects the whole business. Maybe it’s time we changed our attitude but, in the meantime, I’d sit back and wait for the power dynamic between you and your friend to rebalance and then decide if, having revealed her true colours, she’s still someone you want in your life.

If you have a dilemma, send a brief email to mariella.frostrup@observer.co.uk. Follow her on Twitter @mariellaf1

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