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How to Set Good Money Boundaries with Family and Friends

Updated on October 10, 2016
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Sadie Holloway writes about enjoying the good life while living on a modest income. She loves finding creative ways to save money.

Do you feel uncomfortable when a friend asks to borrow money? It may be time to draw clear boundaries around your personal life and your personal finances.

Remember: Money can't buy love. Before you give money away to friends and family, have a talk with yourself about the impact it will have on your relationships.
Remember: Money can't buy love. Before you give money away to friends and family, have a talk with yourself about the impact it will have on your relationships.

Have you ever lent money to friends, family or co-workers?

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Is handing over cold hard cash the best way to help a family member in need? Are there other things you can do to help out?
Is handing over cold hard cash the best way to help a family member in need? Are there other things you can do to help out?

Do you spend or lend money because you feel pressured to do so by co-workers, friends, partners or family members?

Giving in to social pressure just to keep up with the Joneses can lead to long-term money problems.

Here are some tips to address toxic money situations that can lead to feelings of guilt, anger and resentment.

1. Separate money and love. Have friends or family members ever asked you to lend them money? If so, you know that it can feel quite awkward to say 'no' because you don’t want to see a loved one facing financial hardship. At the same time, it's scary to risk your own financial security for the sake of other people, no matter how much you love them.

Fortunately, there are many compassionate, dignified alternatives to lending money to a friend or family member. For example, you can offer other types of support, such as:

  • helping them write their resume and/or introducing them to your professional networks
  • offering to babysit while they look for work or go to night school
  • cooking large freezable meals together that can be divided up and taken home
  • helping them organize their finances so that they can create a realistic personal budget
  • offering gently used household items, clothes and accessories to help them get back on their feet

2. Learn how to be a good negotiator. To manage your money more efficiently, you need to learn how to communicate your needs and expectations clearly. Whenever there are two or more people involved in a decision, negotiating is essential if all parties are to succeed. Don’t let yourself feel pressured into buying something or signing a contract because the other party is a friend, co-worker or family member. While these people may be loyal and trusted friends with the best intentions, you must draw clear boundaries around what you will or will not agree to financially.

3. Always put financial agreements in writing. One of the biggest money management mistakes you can make is not getting deals, offers or verbal agreements put in writing. Always ask for a written contract outlining the details of:

  • a sales quote
  • a job offer
  • a business partnership
  • the division of joint or family property
  • renovation and construction work or service contracts.

Reputable businesses shouldn't balk at a request to put the details of a financial transaction in writing. Even if you're dealing with relatives and friends, get the details of the money exchange down on paper and have the document signed by all parties. People who respect you and your financial boundaries shouldn't have any qualms about putting a loan or partnership agreement in writing.

4. If you live with other people, share responsibility for keeping the household on budget. Whether you're living with family members, sharing a house with roommates, or buying a house with a common-law partner or spouse, make sure that each of you takes responsibility for watching the dollars and cents. You shouldn’t have to carry the entire weight of setting and reaching household financial goals. Sit down together and make a plan to determine how much each person should (and can) contribute to groceries, utilities and rent or mortgage payments. Once the common household expenses have been covered, each person should be free to spend the remainder of their disposable income on whatever they choose.

Do you have any tips and suggestions for how to set good financial boundaries with friends and family?

If you have roommates, have an honest, upfront discussion with them about how groceries and household expenses will be divided.
If you have roommates, have an honest, upfront discussion with them about how groceries and household expenses will be divided.

For your own good, for the good of your family and your future, grow a backbone. When something is wrong, stand up and say it is wrong, and don't back down.

— Dave Ramsey, The Total Money Makeover: A Proven Plan for Financial Fitness

© 2013 Sadie Holloway

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