As we know, especially if you have read my previous blog, boundaries are important in every part of life, and your finances are no different. Not only can setting financial boundaries help to protect your money, but it can also protect your relationships and your mental health. But what exactly are financial boundaries, and how do we set healthy boundaries when it comes to our finances?
Financial boundaries are the limits you set for your money. In some cases, financial boundaries are those you set for yourself. In other cases, they might be boundaries you set between yourself and others.
So why do we really need to set healthy boundaries for their finances? The data is clear that finances can greatly affect someone’s mental health. More than half of people report feeling anxiety around money, with more than 40% facing depression around money. These feelings become even more complicated when you add other people to the mix.
So, how do we set healthy boundaries for your finances? Here are the 8 Wise Ways to start doing exactly that.
1. Set clear financial goals
One of the most important steps in setting healthy financial boundaries is first setting clear financial goals for yourself. When you have financial goals in place, you can make a place for your money and more easily prioritize those goals in your financial plans.
Remember to set short-term (3 months), mid-term (6 months), and long-term (12 months +) financial goals. This way, you achieve those big financial goals much easier by taking baby steps. It’s easier to set healthy boundaries with your money when you have a clear vision to follow.
2. Create a budget for yourself
Regardless of your financial goals or any other challenges you place, it’s critical that you have a budget for your money. Your budget tells your money where to go, putting you in control. Pick a budgeting method that best suits you and use it to set healthy boundaries with your finances.
3. Prioritize your goals
When it comes to setting your budget and making spending decisions, it’s critical that you prioritise your own goals. At times, those priorities might be in conflict with others and that’s OK, just remember during those moments, remind yourself that you are your own best advocate, and if you don’t prioritise your goals, no one else will.
4. Set ground rules around lending
One of the greatest issues that many people face around money and relationships is the pressure of lending money to loved ones. It can be challenging to say no when someone we love asks to borrow money. The best way to face these situations is to have clear ground rules in place. For example, some people have a clear rule that they don’t lend money to family and friends. However, if they have room in the budget, they’ll simply give the money as a gift. It’s important to set healthy boundaries when it comes to lending or giving money to friends and family.
5. Decide how much money is available for gifting
If helping family and friends is important to you, then you can leave money in your budget for gifting. This money can be used to support causes that are important to you, and when there’s a loved one in need, you can use it to support them. But before you hand out money, be sure that you have enough room in your budget to do so.
6. Have the tough conversations
There’s no doubt that setting healthy boundaries requires having difficult conversations. But those conversations can be critical to help avoid conflict in the future. One factor making financial boundaries difficult is the fact that so many people financially support parents. These situations can become even more complicated if supporting loved ones places you in a difficult financial situation or if it comes as a surprise. One difficult but necessary conversation to have with your parents is about their retirement plan. Do they have money set aside to retire? Or do they expect that you’ll help support them? These conversations are never comfortable but can help to avoid even more challenging conversations down the road.
7. Stand up for yourself
You are your own best advocate, and there will almost certainly be times where you need to stand up for yourself and your finances. Picture this situation: You make plans to go out to dinner with friends. But one of your friends chooses an expensive restaurant that you know you can’t afford. Far too many of us would simply put the dinner on a credit card to avoid an uncomfortable conversation. But instead, you could set healthy boundaries and request that the group agree on a more affordable place.
Another similar situation might come when you’re out to dinner with friends. Maybe you had just dinner and water, while others had appetizers and cocktails. But suddenly, the bill comes, and your friends want to split it evenly. To protect your own finances, you can advocate for yourself and request to pay for only what you ordered.
If it currently feels easier to avoid these conversations and simply take the financial hit, then do so, but remember prioritising your financial goal also means standing up for yourself.
8. Set healthy boundaries for spending on family events
People often find themselves overspending on family events. One of the best ways to avoid that is to set healthy boundaries around spending. One financial boundary you can set with family events is around Christmas.
If you come from a large family with many nieces and nephews, it can be easy to overspend during the holidays. Instead of racking up debt, as many people do at Christmas, you can set spending limits with loved ones. Another example of when financial boundaries make sense is in the case of a family vacation.
If you and your family are planning a trip together, be upfront about your budget and how much you’re willing to spend. By doing so, you can avoid a situation where you have to back out or change plans after they’ve already been made.
Here are some bonus financial boundaries for you to think about too.
9. Communicate your boundaries clearly
It’s easy to feel resentment when friends and family don’t respect our financial boundaries. But you can only expect people to respect boundaries they’re aware of. It’s critical that when you set financial boundaries, you also communicate them clearly to your loved ones.
10. Expect resistance when you set healthy boundaries
Any time you’re setting boundaries where you put yourself first, you may face resistance around them. People may resent that you won’t lend them money when they ask, that you don’t want to go to expensive restaurants, or that you can’t provide the financial support they want. The important thing is to prepare for this resistance and stand firm in your priorities. Once loved ones see that you’re serious about your financial boundaries, they’ll treat them as serious as well.
11. Offer non-financial help
Just because you can’t or won’t help someone financially doesn’t mean you can’t provide another type of support. If supporting friends and family is important to you, look for other ways to do it. For example, rather than lending money to an unemployed friend, you could offer to look over their CV and cover letter as they’re applying for jobs.
12. Let go of guilt
If you set boundaries to protect yourself, you very well may deal with people who are unhappy with them. You may be faced with unsupportive family or friends who don’t agree with your decision. And when it’s those nearest and dearest to you, it’s easy to feel guilt when that happens. Just remember that you’re taking care of your own financial and wellness, and you have no reason to feel guilty.
13. Set healthy boundaries with yourself
It’s not only important to set financial boundaries with others but also with yourself. These boundaries can help prevent overspending, adding additional debt, and protect your financial future. Here are some examples of financial boundaries you can set with yourself:
- Start setting healthy boundaries around spending by creating a budget and sticking to it.
- Create boundaries around how much you’ll keep in savings at all times.
- Set healthy boundaries around under what circumstances you’re willing to take on additional debt.
14. Recognize others’ financial boundaries
Just as it’s important to set your own financial boundaries, it’s equally important to recognize and respect other peoples’ financial boundaries. Everyone has a right to advocate for their own financial health. When you prioritize your own financial goals, allow others to do the same for themselves.
There’s no doubt that setting healthy boundaries can be challenging. It takes courage to approach loved ones with tough conversations. And sticking to those boundaries can be even more difficult, especially when we receive pushback.
Our 8WiseTM Wellness Programme focusses on Mental Wealth to develop optimal levels of Mental Health and Wellbeing, helping to cope, even when experiencing the most difficult times in life and financial wellness can be a huge trigger for many of those difficult times. It can help you address every aspect of your health and wellbeing and improve your quality of life, especially of experiencing a huge life transition, such as those triggered through bereavement and loss.
If you would like to book an 8WiseTM session or register for our next 8WiseTM Wellness Programme cohort, get in touch today.
For more information on 8WiseTM and the mental health services provided check out the website: 8wise.co.uk.