Your neighbor appears to be doing fine: nice parties, good cars, well-maintained yards, private schooled kids, leisurely vacations, etc. You did not pry much. It is none of your business, until the day he comes over for a loan.
It turns out he has been debt-financing his lavish life-style. Over the years, his debts has mounted to the point of hopelessness. If you don’t lend him money, he will go bankrupt and foreclose his house. That’s not good for your own house value. Furthermore, he borrowed money from the same bank that your hard-earned money is deposited. He owed the stores that you have a stake in and also the restaurants that you frequent. If he really bankrupts, these bank, stores, and restaurants will lose money; so will you.
Then you learned that he is not the only one. Two other neighbors have been doing just about the same and the third one made some bad investment decisions and is now financially stressed. Your community is in trouble.
Fortunately, not everyone was irresponsible. Many saved and worked hard. They have strong earning power and can come up with money to bail those weak ones out. Emotionally, though, they don’t want to. Particularly when the life-styles of those irresponsible are not really changing. You saw them drinking good wines at the restaurant and kids are still in private school. Yes, they did not take vacation this year, but the good cars are still in the garage and parties are still going. They had you.
What are you going to do?