Setting Sound Financial Boundaries in Four Methods in 2024

It can be challenging to set limits, let alone financial ones. The number of former love partners is the only topic that is considered more socially taboo to mention than money, according to a January 2024 survey by Wells Fargo and The Female Quotient.

Setting financial boundaries is a wise move that will safeguard your emotional and financial well-being as well as your connections with your loved ones. You may find yourself overextended emotionally and financially if you don’t set up financial limits and learn when to say no.

CNBC Select offers advice on how to establish and uphold financial limits in order to preserve happy and healthy friendships, family ties, and romantic partnerships.

Establish Reasonable Expectations and Goals

It’s crucial to establish your financial objectives before establishing any budgetary restrictions.

Organizing your goals into short- and long-term goals may be helpful. After that, rank them according to significance so that you may take more concrete action. Starting with high-priority tasks like setting up an emergency fund or paying off credit card debt is a smart idea. Long-term objectives, such as setting aside money for the education of future children, can still be considered, although they might not always come first.

These objectives will encourage you to maintain your financial boundaries and facilitate discussing them with others.

Apps for budgeting are a terrific method to monitor your spending and make sure you’re sticking to your spending plan. For instance, Honeydue enables couples to connect their credit cards and bank accounts to the app in order to manage their money more openly and make better long-term plans. The app is available for free and has features including warnings for monthly spending restrictions by category and bill payment reminders.

Put Your Personal Financial Needs First

According to a Federal Reserve research from May 2023, a third of adults who are living with their parents between the ages of 22 and 24 do so in order to provide them with financial support; this number rises as adults become older. While providing for your friends and family financially is an admirable objective, you also need to be honest about your own financial need.

In response to the study, about 40% of adults stated that they couldn’t use their cash resources to pay for a $400 emergency. In addition to hurting your present self, putting extra financial strain on yourself can also keep your future self from being able to assist others after you’ve achieved greater financial stability.

Before you think about giving money as a gift, make sure your finances are in order. Investing your money in a certificate of deposit (CD) or high-yield savings account can be an almost risk-free strategy to grow your wealth. With APYs of 5% or above, many of CNBC Select’s top-rated high-yield savings accounts—like Lending Club High-Yield Savings—offer rates that are far higher than the 0.47% average savings rate for the country.

Eventually, you will be in a better position to assist others if you have strengthened your financial position. You may help people in a lot of other ways other by giving them money directly.

Establish Guidelines for Lending Money

Consider carefully before lending money to others, especially if it is done out of shame or pressure, just as you would when giving money to loved ones.

It’s dangerous to lend money to friends and family since it could strain your bonds. Conflicts may arise regarding the amount loaned, the terms of repayment, nonpayment, and other issues.

If you decide to lend money, be sure to establish ground rules that both parties understand and accept, such as the total amount and the timetable for payback.

Lending money should only be done so in amounts that you can afford to lose. You don’t want to find yourself unable to pay your own bills because you are reliant on the money you have been loaned.

Share Your Boundaries With Others

Establishing boundaries with friends, family, and significant others requires open communication.

58 percent of Millennials and 57 percent of Generation Z dispute with their spouses over money, per a Bread Financial survey conducted in February 2023. This isn’t always a terrible thing because a strong, long-term relationship requires having challenging money conversations.

When discussing your financial goals with a spouse, Wendy Wright, a finance and marriage therapist, previously advised CNBC Select to keep an open mind. “Just put them there without passing judgment on them or doing the math so that everyone is free to dream.”

Depending on who you are discussing your money with, you may or may not be more or less transparent about them. Talk openly and truthfully with your loved ones about money.

Make an effort to become more at ease with saying no. This might be as simple as declining to go out to dinner or as complex as paying for a trip.

Giving your loved ones context might make them more understanding of your viewpoint and tolerant of your boundaries.

In summary

Setting up sound financial limits is essential for long-term mental and financial wellbeing. Establishing and upholding financial boundaries can be made easier with open communication and well-defined, achievable goals.