How to Set Boundaries When Lending Money to Family

The financial problems of other people in your circle can become your problems, too. That's the issue that 46-year-old Grace (not her real name) is facing. After years of helping her siblings and parents with loans and gifts that never get paid back, she is trying to get her own financial house in order—and that has meant limiting the amount of help she provides.

"My brother and sister had already declared bankruptcy in their 20s and my parents had done twice," Grace says. "So a lot of my money picture, especially in the past few years, has been family borrowing from me and then not paying me back. And we're talking a lot of money that I can't afford. I've cried a lot about it because, you know, well, these are my family members, you know, and you want to support them."

Since Grace cut them off financially, there has been a lot of contention within her family. "I get a lot of backlash and anger," she says.

So how do you protect your finances—and preserve your relationships? That's the question Money Confidential host Stefanie O'Connell Rodriguez posed to Marsha Barnes, financial social worker and founder of the Finance Bar. And Barnes suggested that setting honest boundaries is the first big step. That means letting them know why you're suddenly unable to do the things you did in the past. "When we give our friends and families reasons behind why we're doing what we're doing, it allows us to then say that we're not just simply saying we don't want to go out with you, or we just don't have the money," Barnes says. "We have a reason behind it."

Barnes and O'Connell Rodriguez suggest seeking out other supportive circles—such as colleagues, social media groups, or friends—where Grace can share her thoughts and feelings and get support as she moves toward a stronger financial future, and hopefully, a solid relationship with her family that isn't based on her overstretching her budget to support them.

And Grace needs to make peace with the fact that she needs to make these boundaries to protect her financial future and her daughter's. "We have to be honest and willing to be our own host of our financial story, our journey, and our peace when it comes to our money," Barnes says.

Check out this week's episode of ­Money Confidential—"I can't afford to keep lending money to my family. How do I set boundaries?" —for more on how to balance family obligations with financial obligations. Money Confidential is available on Apple podcasts, Amazon, Spotify, Player FM, Stitcher, or wherever you listen to your favorite podcasts.

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Transcript

Cristina: Money wasn't really spoken about because at the time it was based on, do we have food on the table? Yes. Do we have our family together? Yes. are we all healthy? Yes.

Emily: I've always taken on too much responsibility. Part of my relationship evolving is me just trying to be better about being like, actually this is my money and I get to keep it and not always spend it on other people or spend it at all.

Stefanie O'Connell Rodriguez: This is Money Confidential, a podcast from Real Simple about our money stories, struggles, and secrets. I'm your host, Stefanie O'Connell Rodriguez and today we're talking to a 46-year-old single mother from Northern Arizona we're calling Grace —not her real name.

Grace: I grew up in a household that was pretty poor. So my father was a minister and also my parents are missionaries.

I was never taught about saving or looking towards the future. It was pretty much like you had to work until you couldn't work anymore. And then my father was sick when I turned 10 years old. And very quickly we went from probably lower middle class to poverty level.

So we lost our home, had to move. My mom had to work several different jobs. My dad went on disability and then they had to declare bankruptcy a couple of times. And through that process, I learned that no one's really gonna give anything to you.

You had to really try to save what you could, but I don't really think I knew what that meant other than work like five, six different jobs and try to save but I didn't have a good relationship with credit because they had credit cards that were maxed out as well.

And you know, my brother and sister did too. So it was a very fractious relationship with money.

Stefanie O'Connell Rodriguez: Despite that fractious relationship with money growing up, Grace had a turning point around three years ago.

Grace: I was just tired. I was over 40 and I'm like, I'm really tired of all of this. My brother and sister had already declared bankruptcy in their twenties and my parents had done twice. I said, you know, I really have got to figure out how to budget, how to save, how to get out of debt, how to be able to afford the things that I really wanted.

Stefanie O'Connell Rodriguez: And what resources did you find when you started making that pivot?

Grace: Oddly enough, I was on Instagram and was looking through just different types of sites about how to save.

When I first started I was extremely intimidated because I just didn't know where to start. And a lot of it was because of my age, because when I really started looking, you know, I was 42, 43 and I was scared because I'm like, okay, I'm in my forties and yes, I have some savings and yes, I have my 401k at work, but I'm like, oh my gosh, what if I die tomorrow?

I don't want to have all of this debt or anything like that. So yeah. I kind of went into a panic mode at the beginning.

I think the best decision I made was I went to my local credit union and I said, you know, I need to have a good financial future for myself and for my daughter, I need help.

And I'm not sure what to do. The financial advisor through the credit union he actually took a look at my 401k and things through my work. He sat me down and said, okay I want you to focus on the emergency savings first, and then I want you to start paying down your debt.

And it took me about a year after the panic mode to kind of calm down. I started creating a plan and ended up paying off my last credit card last month. I am just so excited about that.

I really didn't think I would be in this situation. I'm happy because I'm looking and I'm going, oh my gosh, I'm seeing zeros where I would see, you know, thousands of dollars or hundreds of dollars that I owed.

But there's still this shock of just like I'm becoming debt free. And I'm the only person in my family that has done this.

Like I said, we didn't come from money. And a lot of things that we had were either like the IOU credit we're going to borrow from this friend, things like that.

I didn't do that, but I would see that and would see relationships crumble as a result even within my own family.

So a lot of my money picture especially in the past few years has been family borrowing from me and then not paying me back.

And while it ends up being like a gift, I guess it's more like the, you know, hey, I owe you, I'm going to get ya, but then nothing ever happens. And we're talking a lot of money that I can't afford, which was part of the debt I was paying off too.

So when I was talking to them about my financial journey about really wanting to be debt free and that meant not getting fancy cars, not getting like this big place, not doing this, not going on these big trips.

It's become a huge bone of contention with my family they don't seem to understand why I'm on this journey.

When I tell them, hey, this is what I've had to do to do that. They don't understand that, you know, that I don't have credit card debt and they're angry about that.

And then when they want to borrow money and I'm like, well, you know, I can't do that right now because I don't want to get back into this bad situation.

I'm trying to take care of my daughter and things. Well, then I get a lot of backlash and anger about, you know, well, you're just a single mom and you have one daughter and you're fine. And so you should be able to just give us this. And so it just ends up being to where we don't talk a lot about where I'm at and it's very frustrating.

Stefanie O'Connell Rodriguez: A 2019 survey found that 60% of Americans have helped out a friend or family member by lending them money with the expectation of being paid back. But of that 60%, 37% reported losing money and 21% said their relationship with the borrower was harmed.

Grace: My mom is 77 and she's better about money. But she's in a similar boat that I was in that, you know, we've got family members, my brother and sister, especially that ask for, or borrow or just take, use our cards. Which is why I've had to change my cards and numbers and password several times so that way they don't have access.

So it primarily ends up being me having a money conversation with my mom and then just basically having it in secret.

Stefanie O'Connell Rodriguez: I wonder if when you're dealing with your family if you have come up with any specific kinds of boundaries or tried to communicate that with them and how that's been received.

Grace: This year in January 2021, I told my daughter and I told my mom, I said, okay, I need to have a boundary with my brother and sister, and with extended family members about money. I will not be so quick to be lending them money or gifting them money. We need to have a conversation about what it's for and why. And then I just told my family members that I wasn't going to be giving out loans anymore. I wasn't going to be co-signing for anything. I wasn't going to be depositing money into their bank. I wasn't going to be just leaving things in my place of residence for them to take, because sometimes they would just come and take stuff of mine and leave with it and say, well, I know that you don't need this and I need it more than you do. So I said that certain places were off limits. My money was off limits. And it's been tough. So that has not been a happy situation. There has been some anger. I've held firm because in the past, when that's happened and they've said it I've caved.

Stefanie O'Connell Rodriguez: How does it feel when they're personally attacking you?

Grace: It's hurtful. I've cried a lot about it because you know, well, these are my family members, you know, and you want to support them. You want them to support you on your vision to be that person you were meant to be. And I just am having a hard time trying to reconcile their response.

And so when I get those kinds of comments, my response usually is okay, go to eBay and look at stuff. And in the past that used to be, go look at stuff and buy something. Even if it's small to try to make myself feel better. And then I would feel worse because I'm like, oh my gosh, that money's gone.

And I really didn't need that. So now I go to eBay and I save it on like, hey, let me just look at this. But then it's now I don't really even do that. Most of the time I get that response and I'll go and I'll cry and then I'll go, you know what? I just need to do something else, whatever that something else is.

Stefanie O'Connell Rodriguez: You said your family doesn't buy into your vision and that's painful, but do you feel like you have other people in your life who do support this new vision?

Grace: Not really. So a lot of the way I feel the shame that I was in the situation to begin with, that I married a man that wasn't a good man. Come to find out he also was very bad about money and unfortunately, we were homeless as a result.

I have a hard time opening up to people about where I came from, where I am now with my money plus the backlash that I've had from my family, I have a hard time going well, I don't know if anybody else is gonna want to be on the same page as me about finances or money or saving or anything like that.

I have a couple friends that I've talked to a little bit about money, but when I get comments from family or when I'm in a hard place, I don't have anybody to call. Sometimes I just sit in a dark room and go, I don't know why I'm working so hard and then I like, okay, well, it really does have to do with my financial future and my daughter's future.

But sometimes I sit there and I go, 'Oh my goodness. I really wish I had somebody that else that I could just get, you know, what, I'm in a tough place. And I'm just really ready to just give up.'

Stefanie O'Connell Rodriguez: I'm wondering if you have sought or found any community online?

Grace: I don't like to post my questions because everybody seems to be not only younger than me, but also more financially savvy than I am. And so I don't even want to ask my questions. I don't want to make myself vulnerable because I just won't know what to do with that. And I don't want to shut down. I don't want to shut the education off. So I'll educate, educate, educate, and then I'll look things up and I'll write things down and I'll keep writing and listening to podcasts and things like that.

Stefanie O'Connell Rodriguez: That's a lot to bear alone, to feel like you have to always rely on yourself.

I wonder if there is even if it wasn't financially focused, if there was community to rely on in another way, just with the emotional aspect of this —if it would feel helpful?

Grace: I think it would, I mean, I feel like I want to cry right now because it's just like, I mean, yesterday I get this great news about my credit score, but then, you know, at the same time, it's kind of like, you know, I get news from my family about their wanting to plan this trip to California, and I can't do that because I have to work and I have to schedule the time off and their response is, 'Well, you just need to take the time off because you deserve it. And I'm like, but you don't understand. I have to budget this in. I can't just spontaneously do these things unless it's part of my budget because I'm budgeting vacation for a trip later on, not a trip like in the next month or two.

A lot of places, the response is treat yourself you know, get some good wine or, you know, go out and treat yourself to this, or buy this or whatever, and feel better. And I don't want to do that either.

I'd like to be debt-free in the next year. No cars. I'd like to have a tiny home before I turned 50.I'd like to be able to retire by the time I'm 55. And when I say retire, I may not completely stop working. I would like to be able to have the choice to work at some things that really have my vision.

I work in the healthcare community, so either street medicine or Doctors Without Borders, that's always been my vision. But it's hard to do that when I have financial responsibilities that I'm like, okay, I need to be able to understand if I need to take a pay cut or if I need to do this.

And I want to be able to have that opportunity at least by the time I turned 55 or somewhere in my early fifties and then be able to travel with my daughter and stuff. 'Cause she just turned 18 and she's going to be finishing high school in the next year and being able to do things with her and for her. So that's, that's my vision.

Stefanie O'Connell Rodriguez: And how do you think it would feel to be debt-free and to be traveling with your daughter and doing those things?

Grace: I'll probably be smiling and laughing all the time. I hardly do that anymore. I think just that sense of relief, that I'll be able to breathe. Finally, take a deep breath and let it out and go —this is what freedom feels like, is to be able to breathe. And stand here and breathe and not feel like I'm panting all the time. Or I'm like rush, rush, rush. I got to do this. I've gotta do this. I've gotta pay this. I've got to get this done. I want that.

Stefanie O'Connell Rodriguez: With her financial plan in place, her debt-free date in sight and her credit score on the rise, Grace is already well on her way to achieving her vision for her financial future. But it's hard to get to a place that's both financially and emotionally rewarding when your family doesn't support that vision or respect your money boundaries.

So after the break we'll talk to a personal finance expert about the complex relationships at the intersection of family, friends and finance —so that you and your loved ones can feel secure, both financially and emotionally, in the future of your relationship.

Marsha Barnes: With our family and with our friends, we often speak about money broadly, even on social media.

Stefanie O'Connell Rodriguez: That's Marsha Barnes, financial social worker and founder of the Finance Bar.

So we talk about things like, what is the government doing with money? Where are they lending money to, who gets money? We see memes on social. If you had $50,000. What would you do with it?

But we rarely talk about money in a frame of it being personal to us. We don't really open up to be really authentic and transparent when it comes to money.

We are accustomed to saying, you know, Stefanie, I can do this. Or Stefanie, I can go here with you. And so our friends begin to craft our money story of what they think we have, and then it becomes personal to them.

So when we begin to make changes and we're just not really forthright and honest about what we're doing, then it rips that relationship a bit because we often think of money in ways of, "I don't want to be the frugal one. I don't want to be the one considered as the cheapskate." When it comes to money, we place tags on ourself. How much money do we earn? It becomes part of my success story. What do I get to do? Where do I get to live? What do I get to experience? All like success check measures for ourselves. So in our mind, we think that that's how our friends and our family view us.

So we pull back a little bit on the things that they are so accustomed to seeing us having or doing, it can get really sketchy and that relationship can begin to feel a little bit of tension.

Stefanie O'Connell Rodriguez: So how can we make financial changes without jeopardizing those relationships?

Marsha Barnes: I definitely think that honesty is the answer. When we use the word friends —friendship and family —we are basically saying these are people that we trust or that we should trust. So if I had a moment in my life where maybe I'm not so proud of the financial choices I've made, or some of the things that I did, that's okay. That's my money story. However, now that I am on a journey to do better, it's something that I should want to share with people around me, because then it helps them. So I believe that the starting point is us just being open enough to say that it's okay for me to share my truth.

Maybe I just need to do some things differently and share with our friends and not have our own expectations of how they will respond.

Stefanie O'Connell Rodriguez: I also think sometimes we are open about what we're changing, but we're not necessarily open about why we're changing it.

So if it suddenly goes "Oh, I don't have going out to dinner with you in my budget" of course somebody could get offended by that, but if you take a step back and say, "Here's what's been going on in my life and here's why I'm trying to make these changes." Maybe that's a way to get people on board with that new vision for yourself.

Marsha Barnes: Right. Because then it changes the dialogue too. "I just don't want to go out to dinner with you" to "this is something that I really need to work on."

So I'm taking a step back from doing brunch every weekend, so I can pad my account more. Or, you know, I'm trying to move to a different state, so I need to save up money for moving costs. When we give our friends and families reasons behind why we're doing what we're doing, it allows us to then say that we're not just simply saying we don't want to go out with you, or we just don't have the money. We have a reason behind it.

Stefanie O'Connell Rodriguez: I think that that kind of communication requires vulnerability, but I think that vulnerability is especially difficult because so many of us already feel so much shame around our finances. So then adding vulnerability on top of that is just emotional overload. How can people grapple with that?

Marsha Barnes: When you identify what your money script is, how you think about money. Okay. That's how I think about money. If I understand what Stefanie thinks about money and how she was brought up to think about money, now I understand our relationship a little bit better?

So now moving forward that transparency allows us to have discussions around why is Stefanie reacting this way around? Well, I know why she is. Why does Marsha react this way? Why? I know, I know why she is. It begins to feel oppressive because we often don't know what each other's money scripts are, you know? How was I raised compared to how you were raised? Then it's easier for us to have conversations around money with more honesty, more transparency, a little bit more fluid where it doesn't feel tense and oppressive. And then we just, we continue to learn from another, you know, in our relationships with friends and family.

Stefanie O'Connell Rodriguez: Is there a good way to start that conversation or to do that exercise around figuring out your money script or your friend's money scripts or your family's money scripts?

Marsha Barnes: You know, ask a friend. Did you learn anything about money growing up? And if you did, what do you mind sharing with me? And then I can share in that same exchange.

Stefanie O'Connell Rodriguez: I think a lot of what's tricky for this particular listener story is that a lot of the tension is coming from within her family, specifically with her siblings. So there is a shared history and a shared understanding of where the ideas around money came from, but there's been a fracturing of how each person's relationship to money has evolved now that they're in their thirties and forties. And so what's really happening for this listener is that as she's been really working to get her financial life together and changing her money script. Her siblings are defaulting to the money script that they grew up with, and so I think a lot of this also comes into the question of setting some boundaries, some money boundaries without jeopardizing that relationship.

Marsha Barnes: It's two-fold, you know, I'm saving people, but now I'm also considered the outcast. So number one, if she continues to want to help her family, I do believe that it's very important for us to say that that's not such a bad thing, but maybe your boundary is I can only help to this extent. I can only help you with this amount of money. However let me show you some things. Let me teach you what I have learned because after this, I won't be able to do it anymore. And that's not going to feel good, especially when it's your family and it's your siblings that you want to help.

But if not, it becomes a repetitive circle over and over. And then what you'll deal with is the fact that while you gave, you also have a lot of guilt.

I want her to understand that it takes time if she and her siblings were raised to think the same way about money.

And now she's like, aha, I get it. I need to make changes and she does. It's okay now for her to say that I'm learning, I'm growing, but now I can look back a little bit and maybe laugh about things I learned like, oh, that was not the right way. And then she continues to share with her siblings because we all look back eventually.

Stefanie O'Connell Rodriguez: I like the way you framed it as being the hero and the outcast at the same time. I think it's really important to be able to have community, even if it's not your family community, having a chosen community and a broader community that can help support you, even if it's not about money specifically, but just being able to talk about the feelings of isolation or you know, how people are responding to you.

And so for somebody who is struggling to find that sense of community, where do you suggest they start?

Marsha Barnes: Maybe it's a coworker that you don't have to now become friends with, but it's easy to have those conversations with.

Um, is it someone online that you meet? Is it a community on social media that you can connect with? I think that is the easiest way to really build your own community maybe, not always friendships. Maybe it's not always a coworker and maybe it's not always in our family, but there is something, there is always someone that can relate to your story.

When someone can relate to our story, it immediately makes us feel better. And I can take that advice from them and then move forward.

So it's so important that when you, when you're looking for someone or community that you are willing to also just be open, because then your story helps someone else.

And I can just about guarantee and promise her that if she shares, someone else will then share their story as well to say, I can relate.

Marsha Barnes: For me personally money goes back to how I felt when I did work for a bank, how it felt when I did earn more money and I wanted like a luxury car because I felt the title I had at work should now match my outer appearance.

Stefanie O'Connell Rodriguez: How did you break that association?

Marsha Barnes: At the time it was around the moment when I was thinking about becoming an entrepreneur and starting my own business. So once I became an entrepreneur, I would constantly say to myself, I love this life.

I love this flexibility. I love the moments that I get to have with my son. At the time he was in college. I love to be able to go visit him in college and that outweighed anything that I could possibly drive. So I said, Marsha, what were you thinking? Like this is living! And I want anyone to listen to understand it wasn't about the car. I still love nice cars and luxury cars. There's a thing I still love, but it was the exchange of what I felt that living felt like for me, that's, what did it for me.

I'm telling you, when you identify, write down a list, sticky note, what truly brings me joy, and then you start listing out things and you'll see what a comparison between what you really want and what you may just be doing to impress others to fit in or whatever it may be.

Stefanie O'Connell Rodriguez: So when those roadblocks come. Is it just about checking in with that list?

Marsha Barnes: It is checking in with your list. And that list may change from year to year. It may stay the same for five years and then change again. It just depends on you, but 100% we have to check in with our list.

You know, at my age, I have one son and I can recall when people would ask, when are you having more kids? And it used to offend me, but then I would start sharing my story to say one, I can't have more kids.

Two, if I could, I probably couldn't afford them. I now know that it's not a shame story. It's like what is going to be my legacy of helping other women be transparent about their story? And money? And that goes back to our point earlier about community. That is how you build community.

Stefanie O'Connell Rodriguez: I really love that too, because [00:30:00] for this listener that the honesty and vulnerability felt like a roadblock to building community, but you're reframing it.

You're saying if we can lead with that honesty and that vulnerability, maybe not in every space, but in some spaces, that's how we're going to find the community.

Marsha Barnes: It is in more spaces than it's not in. Maybe you're in a room with people and they're having conversations around money and you don't quite fit in and you just kind of want to roll up under the table because you're so ashamed.

But you're at the table to learn. So if we can all open our eyes, open our minds and open our hearts to say that we're going into spaces to learn and to share our story, eventually things just become a little bit easier. And there the tension inside of you reduces just a bit, but allow it to take time. That's really important

We have to be the host to our own peace when it comes to money. That means that when we can honor our own financial story and our own financial journey, it gives others the permission to do the same.

So I think that anyone that's listening, we have to be honest and willing to be our own host of our financial story, our journey, and our peace when it comes to our money. And we can't compare that to anyone else's.

Stefanie O'Connell Rodriguez: If you've committed to changing your money story and practicing new financial habits in service of your goals, and your immediate social circle does not share that same commitment, it can become substantially more difficult to follow through. But leading with honesty around what you're changing and the reasons behind those changes can be a good place to start.

Of course, honesty is not a guarantee that you won't have to deal with pushback from friends and family

While we certainly don't have to abandon friends or family members with differing money scripts —as we grow, we may need to redefine how we interact with those people in our lives.

To be clear, wanting to help friends and family members financially is not necessarily a bad thing. But it's important to be honest with ourselves about how much assistance we can realistically accommodate within the parameters of our own financial plans, and not lend more money than we can afford to lose.

When loved ones continue to violate the terms and boundaries of the financial assistance you do offer, it can understandably become painful, demoralizing and even costly. So as you work to reshape those relationships, it's important to simultaneously build out and foster a network of supporters who share your vision and the new money story your working to put into practice. If you can't find those people in your immediate social circle, consider seeking out community in new places—at work, online, even on social media.

By connecting honestly over a shared experiences and even vulnerabilities, you can begin to surround yourself with people who understand and support the path you're on. And that emotional support can be just as powerful as the numbers on the page when building toward your desired financial future.

This has been Money Confidential from Real Simple. If, like Grace, you have a money story or question to share, you can send me an email at money dot confidential at real simple dot com. You can also leave us a voicemail at ‪(929) 352-4106.

Come back next week when we'll be talking to a 64-year-old marketing manager from New Jersey who was laid off during the pandemic and is worried she doesn't have enough saved for retirement.

Be sure to follow Money Confidential on Apple Podcasts, Spotify or wherever you listen so you don't miss an episode. And we'd love your feedback. If you're enjoying the show leave us a review, we'd really appreciate it. You can also find us online at realsimple.com/MoneyConfidentialPodcast.

Real Simple is based in New York City. Money Confidential is produced by Mickey O'Connor, Heather Morgan Shott and me, Stefanie O'Connell Rodriguez O'Connell Rodriguez. Thanks to our production team at Pod People: Rachael King, Matt Sav, Danielle Roth, Chris Browning and Trae [rhymes with ray] Budde [boo*dee].