Financial boundaries are indispensable for life, and your budget is no exception. Not only do finances limits help protect your wealth, but they can also help safeguard your relationships and mental health as well.
In this article, we are covering what boundaries are, why it’s important to set financial boundaries, and how to set up those boundaries with close friends, family members, and in real life in general.
What are boundaries?
Boundaries are limitations that we set for ourselves. They could take the form of physical boundaries and emotional barriers. Another type of boundary is a financial one.
Financial boundaries are the limits that are set for your wealth. Sometimes, they are the ones you set for yourself. In other places, they may serve as a barrier between you and others.
The importance of setting healthy boundaries with your finances
Why do we need smart spending limits? The data is clear that financial concerns have a considerable impact on mental health. A majority of people notice stress from finances, and more than 40% report feeling depressed around money. These sensations become even more difficult to handle when there are other patients to consider.
People find it extremely difficult to talk to family about finances. A recent survey found that 44% of respondents said that discussing money was the most difficult topic to speak about, including politics and religion. The fact that people are not necessarily comfortable with setting healthy boundaries makes them crucial.
Setting healthy financial limits can help you avoid financial problems. Financial limits allow you to allocate your personal funds instead of simply following the dictates of others.
Financial constraints may also strain your relationships and cause arguments with family members. One AARP survey showed that about 30% of adults over 40 provide regular financial support to their parents, and this number is likely to increase. In addition, they regularly provide financial support to their children.
Without the proper boundaries, these problems could quickly get out of control and produce animosity. Financial restrictions are even more important for women. In spite of earning less than men on average, women are often responsible for caring for family members, even financially.
How to set healthy boundaries for your finances
Now that we have figured out why financial boundaries are so important, let’s discuss how to set healthy monetary boundaries to safeguard your money, your mental health, and your relationships.
1. Set clear financial goals
One of the very first steps in setting personal financial limits is setting clear financial goals for yourself. Setting financial goals makes it much easier to prioritize your budget, since you know exactly how much you have to spend.
Short-term, mid-term, and long-term financial goals can help you reach your long-term goals much faster by working toward smaller goals. Setting healthy financial limits is easier if you have a clear picture of your goals.
2. Create a budget for yourself
Regardless of how you intend to spend your cash or any other obstacles you might face, it’s crucial to have a budget. A budget lets you direct your money where you want it to go, enabling you to be in control of your financial resources. Choose a budgeting method that works best for you and use it to establish healthy boundaries with your finances.
3. Prioritize your goals
When it comes to planning and allocating your budget, it is most important that you set your priorities first.
At times, these specific needs might conflict with each other. If you find yourself unable to prioritize your own objectives, remember you are your own best advocate, and if you don’t achieve them, no one else will.
4. Set ground rules around lending
One of the chief difficulties that many people have about finances and relationships is the risk of giving money to loved ones. It can be difficult to say no to a loved one who asks for a loan. The best way to respond to these challenges is to have clear ground rules in place.
For example, some people do not lend money to their friends or family. However, if they have room in their budget, they will simply donate the funds. It is important to set healthy financial boundaries with friends or family.
5. Decide how much money is available for gifting
If you enjoy helping loved ones and would like to leave extra money in your budget for this purpose, you should budget for gifting.
This money can be used to provide support to causes that are important to you, and if there’s a family member in need, it can be used to help them. But before giving out money, be sure that you’ve got enough space in your budget to do so.
6. Have the tough conversations
Setting healthy boundaries calls for having difficult conversations. But those conversations have a tremendous purpose in avoiding future conflict.
I mentioned that one of the factors making financial limitations challenging is the fact that so few people financially support parents. These difficulties could be made even more difficult if you are supporting relatives and you are put into a bad financial situation or if it seems to come as a surprise.
One important but tricky conversation to have with your parents is about their retirement account. Do they have enough money set aside to retire? Or do they expect you to help them? Such conversations are not comfortable but can help prevent more difficult conversations in the future.
7. Stand up for yourself
You are sure to be your own best advocate at times. Picture a scenario where you make plans to spend time with friends. But one of your acquaintances selects an expensive restaurant that you know that you cannot afford.
Too many of us are only too happy to just swipe our meal card in order to avoid an uncomfortable discussion. However, you could establish healthy and reasonable boundaries by asking the group to agree on an affordable restaurant.
A similar situation might occur when you are out to dinner with friends or family. You might have just been eating dinner and drinking water, while someone else had had an appetizer and a cocktail. But suddenly, the bill arrives, and your friends want to split the tab equally. To protect your money, you can advocate for yourself and pay only for what you ordered.
8. Set healthy boundaries for spending on family events
Many people often overspend on family gatherings. One way to avoid this is to set limits on spending. One financial boundary you can set with your family during the holidays is spending too much on food.
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 in which financial limitations make a lot of sense is in the case of a vacation.
If you’re going on a trip with your family, be upfront about your spending limit and how much you’re willing to spend. By doing so, you can avoid having to change your plans or having to back out altogether.
9. Communicate your boundaries clearly
People will only respect personal financial limits if they comprehend them. So it is important that we clearly communicate our financial boundaries.
It’s important to clearly establish financial limitations with your family members.
10. Expect resistance when you set healthy boundaries
Setting limits for yourself can be an unpleasant experience. When other people try to coerce you to do something that you do not want to do, they may resent it and even try to force you to back down.
It is important to prepare yourself for this resistance and stand by your principles. If your loved ones see that you’re serious about your financial limits, they will treat them as seriously as you do.
11. Offer non-financial help
Simply because an individual can’t or will not assist you financially does not mean you can’t offer some other type of assistance. If you’re concerned about helping others, find other ways to do this.
For example, you might be able to help a friend looking for a job by supplying to edit their resume and cover letter as they are applying.
12. Let go of guilt
If you set certain boundaries to protect your health, you may run into people who are not happy about them. You may face unsupportive family or friends who do not agree with your lifestyle choices. And when you care for your family members, it’s simple to feel guilt when you harm yourself.
Remember, you are in charge of your own finances and mental health, and there are no grounds for guilt.
13. Set healthy boundaries with yourself
It’s important to set up financial limits with others as well as yourself. These limitations can protect you from overspending, adding debt, and safeguarding your financial future.
14. Recognize others’ financial boundaries
Just as it’s critical to set your own financial boundaries, it’s equally important to respect and recognize other peoples’ financial boundaries.
Everybody has the right to advocate for their financial health. When you focus on your own finances, encourage others to do so as well.
Set healthy boundaries to improve your finances
Setting proper boundaries can be difficult. It takes courage to broach subjects that are tough to talk about. These restrictions are even harder to follow when we are confronted with opposition.
But budgetary boundaries are also critical for maintaining your financial and psychological wellbeing and the security of your loved ones. Obtain more aid setting healthy boundaries and improving your financial wellness with our free financial courses and worksheets!