How do you back out of a handshake agreement?

April 5, 2011: 9:16 AM ET

How do you face someone and tell them you simply can't contribute to their cause, make a previously-promised loan, or bankroll a friend's business? Here are a few tips.

By Jodi Glickman, contributor

FORTUNE -- Life has changed for everyone since the beginning of the Great Recession. Today, it's almost hard to remember what it was like to be certain you'd make more money the following year, to know your home value would continue rising, or to consume as though things would never change for the worse, only the better.

For many, we're no longer buying into that fairytale American dream that seemed attainable such a short time ago. Everyone is tightening the belt. And so, I recently found myself in the unenviable position of having to back out of a financial commitment to ReadWorks, a non-profit whose board I sit on.

Pre-recession, I committed to a certain level of fundraising and private donation that was a big number for me. It wasn't unattainable so much as it was aspirational, and I knew I could make it work. I was extremely committed to the organization (I still am) and I was excited by my ability to actually write that check or raise that level of money.

In today's economy, it's a check I simply can't write. Nor have I been able to raise the balance from the once-flush friends and family whose charitable actions I counted on. To be clear, this isn't a legally binding decision -- I'm not bailing on my mortgage nor failing to meet my monthly car payment. It's a moral conundrum rather than a legal one.  Nonetheless, the experience has been painful and I can't imagine I'm alone in facing a financial commitment I can no longer meet.

So what do you when you find yourself in an impossible situation? How do you face someone and tell them you simply can't contribute to their cause, make a previously- promised loan, or bankroll a friend's new business venture?

If you find yourself in the awful position of having to pull the purse strings, here are four tips for getting through the process as easily as possible:

1. Be transparent

First and foremost, be honest. Face the facts and come clean about your inability to provide whatever level of financial support you had promised. With your tail between your legs, be forthright and explain how your financial reality has changed. Explain why you're no longer able to follow through on your promise. Don't try to make excuses or sugarcoat the truth -- that will only make the situation worse. People appreciate candor and transparency in the face of bad news.

2. Propose an alternative

In advance of my conversation with the executive director of ReadWorks, I thought long and hard about what value I could bring to the organization in a non-monetary way. I immediately offered to replace my financial support with "in-kind" support. I offered to increase my volunteer hours for the organization, continue mentoring staff and help with new business development. I tried to come up with ways I could continue to participate in, and contribute to the organization.

There certainly is no substitute for cold, hard cash, but if you're tapped out, how else can you help? If you can no longer provide seed funding for your friend's start-up or supplement a relative's income, can you provide expertise instead? Can you make introductions to people in your professional network that may be able to help the other person's cause or provide babysitting on the weekends to help out a relative in need?   There's got to be something you can do to help.

3. Offer a concession

My in-kind offers of support not withstanding, I did also offer to resign my board post. I understood that I was failing to meet a commitment I had made and I took the matter seriously. As such, I was fully ready to accept the consequences. I offered to step down and stay involved as an informal advisor. The board gracefully declined my offer, however, and agreed instead to my proposal of continued support for the organization in other non-monetary ways. I was thrilled.

4. Move forward

Finally, I committed to continue working to raise awareness and fundraise for the organization (whether or not I kept any formal role). I also said that I hoped to be in a position again someday to contribute at the financial level expected of board members. I continue to work toward that goal.

If you have to bail on your friend or disappoint a family member, do let them know that you sincerely care about their financial well-being. Offer to do everything you can to help going forward. If your financial situation changes, perhaps you'll be able to pick up where you left off. It's not easy to let someone down or to be let down, but it happens to the best of us. As you both work through the disappointment of the situation, new opportunities are bound to arise.

Jodi Glickman is the founder of communication training firm Great on the Job. Her forthcoming book, Great on the Job, will be available in May 2011. You can follow her at @greatonthejob.

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