If you borrow money, you are expected to pay it back according to the terms of the loan. If you lend money, you expect repayment plus interest as agreed.

If you borrow money, you are expected to pay it back according to the terms of the loan. If you lend money, you expect repayment plus interest as agreed. These are fundamental tenets of free enterprise, global commerce, and common sense. Not so much in Greece. Are there lessons learned for you as a citizen and for personal financial planning?

Envision a family. Your brother asks you to lend him $10,000. He will pay you back in one year at 5% interest. You comply and in your mind you have a $10,000 asset marked “receivable” along with $500 in interest income. Your brother has a liability of $10,500 due in one year.

Except that your brother has a devil-may-care attitude and you wonder about him taking a nice vacation when he still owes you money and you are working 50 hours a week with no vacation to speak of to earn the after-tax money you lent out. At year’s end you demand payment. Your brother says he doesn’t have it and wants more time. Now, instead of the good guy you were when you made the loan, you are an unreasonable [insert unprintable word] for wanting your money back. A family feud intensifies. Does this sound like Greece versus Germany and other EU lenders?

A “tragicomedy”? Loans to family members or friends can morph into friction-laden resentments and fallouts. Compassion is one thing and if you want to loan or give money with no expectation of repayment that’s a personal choice. But if you lend money to anyone, adult children included, and expect repayment, be realistic. Don’t be surprised if tensions arise.

When it comes to an investment, either you are a lender or an owner. As a lender, the value of the asset on your balance sheet depends of the ability of the borrower to pay you back. The only entities that can guarantee payment are the U.S. Government and insurance companies. The government has a printing press and can create money. Insurance companies cannot print money so financial strength ratings are important. Rampant money creation by a government ultimately devalues currency and inflation erodes the purchasing power of your debt asset. With a tradable bond or other marketable debt, the value varies with the credit rating of the issuer, the maturity date, and the rate of interest. In general, as interest rates rise the value of the bond decreases.

Puerto Rico has been dubbed “America’s Greece.” The island territory narrowly dodged default on July 1 but with $70 billion of debt outstanding the future is fuzzy. Governor Alejandro Padilla flatly states that there is no way Puerto Rico can pay all of that back.

According to a 7/1/15 CNNMoney report, 20% of U.S. bond mutual funds—377 out of 1884 funds—hold Puerto Rican debt, mostly municipal and high yield funds. Who suffers if they default? Investors take a hit, as do citizens if the government turns to austerity.

“Austerity” is a stressful word. If the person or entity who made a promise to pay you back or pay you a future income stream faces default, as in the public pension underfunding challenge, cutbacks may arise. It may not seem fair if you are the one suffering when it was politicians who created the debt and spent the money. That’s why citizens have an obligation to understand issues, increase financial literacy, and cast informed votes. Cities, counties, states, and the federal government have a debt problem. Cutbacks and tax increases also gore somebody’s ox.

The world is awash in debt, and politicians keep promising more unfunded or underfunded freebies. Raise taxes? Based on 2012 tax data (latest available), the top 1% of taxpayers, with a taxable income threshold of $434,682, paid 38.1% of federal taxes. The top 25%, income threshold of $73,354, paid 86.4% of income taxes. If you squeeze earners, job creators, and investors too tightly, while marginal tax rates rise, the total tax take decreases. Greece has suffered a tremendous brain drain, especially professionals and the higher educated, as they migrated to other countries where opportunity was greater and taxes lower. American cities and states also see people vote with their feet.

There’s a timeless adage: If your outgo exceeds your income, your upkeep will be your downfall. If that is Greek to a person or entity, don’t lend them money!

Lewis Walker is President of Walker Capital Management, LLC. Certain advisory services are offered through The Strategic Financial Alliance, Inc. (SFA). Lewis Walker and Mike Hostetler are registered representatives of SFA which is otherwise unaffiliated with Walker Capital Management, LLC. lewisw@theinvestmentcoach.com