Neighbor trying to borrow money?

I think you already know you won't get the money back if you loan it. You have good money skills and good morals it sounds like so you fully realize the good and bad of the situation. Loan the money to him and it'll only start a cycle of asking for more later. Just say "sorry, but we can't." You don't have to be mean but just be firm and short with your answer-you don't need to explain any further. That's just being honest and doing the right thing. Sounds like that's what this guy needs more of anyway. He just doesn't realize it.