How to Establish Financial Boundaries With Relatives and Friends

Lynnette Khalfani Cox - financial boundariesHave you ever wondered how to establish financial boundaries with relatives and friends? If so, you're not alone.

As a Money Coach, I'm constantly asked for suggestions on how to put an end to the money-draining behavior of family members and friends.

Well, this may come as a shock to many of you who keep getting approached for financial handouts, but the problem isn't the person asking for money. The problem is you: the person who keeps doling out the cash, over and over, vainly hoping that it will be the last time.

In truth, that "last time" will never come. To truly help someone fix their financial woes, as well as keep your own finances own track, it's often necessary to get rid of certain people in your life – at least your financial life.

Unfortunately, too many of us don't know how to say "no" when necessary.No to grown, able-bodied freeloaders who try to take advantage of you or make you feel guilty because, in their mind, you "have money to spare."

No to schemers who concoct one cockamamie business idea after another and expect you to continually invest good money after bad in their failed efforts.

No to dreamers who have big plans to go back to school, start a business, or fulfill some other lifelong dream (with your money, of course), but then never follow through on those plans.

No to individuals who sport new clothes and jewelry every time you see them, but for some reason can't seem to pay their car note, rent or gas bill on time and then expect you to bail them out of one crisis after another.

No to deadbeat friends and people who think, in short, that you are their very own personal ATM, bank teller, savings account, and rainy-day fund all rolled up into one.

As harsh as it may seem, you simply need to muster up the courage to just say "No" and you need to establish boundaries when it comes to finances, friends and family.

It's one thing to help someone out of a one-time jam. But if you have people who rely on you as their "Plan B" or their financial back-up plan whenever something goes wrong in their life, that's indicative of a financially abusive relationship.

To break this cycle, have a one-on-one conversation with anyone you deem necessary, in which you explain that your days of serving as a piggy bank are over.

Needless to say, you don't have to be that blunt about it. But, you should be direct enough to tell the person something like this:

"I want to talk to you about finances. I've started doing a lot more financial planning and looking at areas where I'm spending money in my personal life. In the past you've come to me on a number of occasions for money, and I've given it to you, thinking I was helping. But I don't feel comfortable doing that anymore.

I now see that when I repeatedly give you money, it sends the wrong message -- and suggests that you don't always have to be financially responsible for yourself. The truth of the matter is that you do. I want you to learn proper money management skills and to watch your spending so that you don't have to turn to me for money.

I want to maintain a close relationship with you. But I also want to establish some boundaries when it comes to money. So please don't ask for me to pay your bills or loan you money in the future. I hope you understand that I'm not trying to hurt your feelings or offend you. But I need to tell you this for your own good, as well as for my own financial peace of mind."


Obviously, this is just a sample script. As I explained in my book, The Money Coach's Guide to Your First Million, you should say whatever comes naturally and whatever is appropriate for your situation.

For example, if the giving or loaning of money has been a two-way street, you should acknowledge that the other party has helped you out financially too, and that you likewise will no longer be relying on that individual economically.

You also should be prepared to be tested. So expect to have to reiterate your message a few times for it to really sink in. And anticipate that you'll probably have to reinforce this message at the most inopportune time -- like when the individual in question is asking you for money again.

But if you don't stick to your guns, he or she won't think you are serious and the money-draining cycle will continue in perpetuity.

Ensuring your own financial stability first and foremost is a difficult but necessary part of building wealth. It's kind of like being on an airplane when the flight attendant gives passengers safety instructions.

They always say that in the event of an emergency you should put your own oxygen mask on first, and then offer assistance to children or others who may require help. The unspoken question behind this practice is: What good will you be to those around you if you lose consciousness or become mentally unstable at high altitudes?

So it is with your finances.

You have to safeguard your money, even if you have a lot of it, in order to maintain financial stability and to be around to help out in the future when you are truly needed.

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