Although setting boundaries around money can sometimes be a daunting task, it can help put you on the path to financial wellness.
If you struggle with setting (and sticking to) financial boundaries, there’s no better time than the start of the new year to get into the habit.
What are financial limits?
“Money boundaries are limits you put in place to protect how you feel and to protect your finances,” says Aya Evans, a licensed mental health counselor and financial therapist in New York.
Financial boundaries allow you to set clear expectations about how you handle money and how you allow money to affect your relationships.
Some examples of financial limits may include:
- Creating and sticking to a budget.
- Limiting how much you spend on wants versus needs.
- Say no to someone who frequently borrows money.
- Offering to cover a specific expense for someone, instead of handing over cash.
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Why are financial boundaries important?
Setting boundaries is an empowering skill. Sticking to healthy financial limits can be uncomfortable at times, but it can help you reach your financial goals.
“From a positive psychology standpoint, we should look at setting financial boundaries as a way to nurture our ability to say ‘yes,'” says Michael G. Thomas Jr., PhD Lecturer in Financial Planning at the University of Georgia and Certified Financial Advisor.
You can more easily say yes to things like saving for a house, taking a vacation, or paying off debt by learning to set boundaries with yourself—or with someone who is constantly draining your resources.
Financial boundaries can also help to positively change your attitude towards money.
“It’s important to know how you feel when you cross the line, and having monetary limits can help prevent you from feeling bad later,” says Evans. “For example, if you realize you have $400 in your budget to spend on eating out every month, that might feel really good, but if you blow more than that, you’ll probably end up feeling pretty bad.”
6 ways to set financial boundaries
Here are some strategies to get you started.
1. Discover what is outside your money comfort zone
Before you can put up any guardrail, you need to clarify what boundaries you need.
“Check yourself and recognize when you feel bad about spending money,” says Evans. “Say you go out to dinner with friends and you agree to split the bill, but you end up paying more than what you actually ate, and then you feel bad about what you spent.” That might be a good place for the money limit.”
Track when your money situation with others takes you outside of your comfort zone, which will allow you to identify the boundaries you need. And if you are setting a limit to yourself, leave some room for enjoyment. As with dieting, being too restrictive can make it difficult to stick to a plan.
2. Clarify what you want
Being clear about the specific aspirations or goals you have can further motivate you.
“Make a list of things you want to accomplish during the year, whether it’s more self-care or more travel,” says Thomas.
He adds that once you know what you’re trying to achieve with your money, you’ll have talking points that can help you communicate your boundaries.
3. Start early
It can be difficult to communicate in the heat of conflict.
“Start early and communicate money limits while things are going well,” says Thomas.
You may be more likely to have others hear you and respect your boundaries if you approach them during a time of peace (especially the first time) rather than when you’re in the middle of a disagreement.
4. Give context
When you communicate a boundary, the response can almost feel like you’re just saying “no” to something or someone.
But providing additional context for why you’re setting a financial limit can increase the chances that it will be respected.
“When you list all the things you want to do with your money this year, you can tell people what you’re excited about and what you’re hoping for,” says Thomas. “When you share that with people, people are less likely to bother you – you’re not just saying ‘no’, you’re saying, ‘Here’s what I want to achieve, which is to be more resourceful’.”
5. Rebrand yourself
People who are used to giving – or depend on friends, family or partners – may struggle to put themselves first when it comes to their financial needs.
If this sounds like you, Thomas suggests “rebranding” and changing the role you play in the relationship. You don’t have to extinguish your giving spirit, but you do have to be firm about how much money you can give.
6. Be prepared for rejection
Your guardrails can cause tension with others, even when you’ve provided context and communicated in a compassionate way. This can be especially true in relation to cultural expectations.
“As a black woman, the expectations of my white colleagues tend to be very different,” says Evans. “My peers from communities of color are often expected to contribute to their families.
It’s important to expect that your boundaries won’t always be respected and to have a plan when they won’t.
Try the following when you receive feedback:
- Offer in-kind support. Think of ways you can help others without directly giving money.
- Stand firm on your boundaries and reiterate your reasons for having them.
- Outline the consequences of not respecting your boundaries, which could mean less reaching out or even ending certain relationships.