One of the greatest challenges for people attempting to adopt or maintain a life of financial responsibility is the presence of financially irresponsible people in their lives. You have people who leverage social pressure to convince you to make bad spending choices or adopt bad financial habits. You have people who leverage their relationship with you in order to convince you to give them money. You have people who will ask to borrow money and never repay it. You might even have people who will directly access your funds and use them for unwanted things. This post originally appeared on The Simple Dollar.
Regardless of how diligent you are about your own good financial choices, these things can seriously disrupt your financial progress. That's because, in each and every case, financially irresponsible people can leverage aspects of your life beyond your finances to encourage you to make poor financial choices. They can leverage family, romantic, social and even professional areas of your life to subtly (and not-so-subtly) push you toward poor money behaviour.
The dilemma for many people in these situations is that they feel as though they have to choose between money and people and that it feels wrong to choose the money. Here's the thing: The money you have is almost always the result of your personal hard work and hard choices. You made a lot of sacrifices to earn that money. If you had spent it foolishly, you wouldn't have that money. By using it in a foolish way or giving it to someone who would spend it foolishly, you're not wasting your money, you're wasting your life. You're sacrificing all of the hard choices and hard work that it took to improve your financial state.
I should know -- I've made many of those kinds of mistakes. I've spent money to "keep up" with friends. I've given money to friends and family, knowing that it would never be paid back (and sometimes hoping that it would, only to be disappointed). I've had my spouse spend more than I expected (and, honestly, I've done the same to my spouse in the past, I'm sure). I've had people tap my personal relationship with them to ask for money or to invite my wife (it's always my wife) to a "party" where social pressure is used to convince her to buy overpriced goods.
Every single one of those things was a mistake. Every single one of those things happened as a result of letting financially irresponsible people have too much of a stake in my life.
So, I started limiting that stake. In general, I took one of two approaches: I either found ways to minimise the ability of financially irresponsible people to affect my finances or I gently minimised their role in my life. Here are some of the specific strategies I've used or that I recommend for people in those situations.
Financially Irresponsible Spouses
Many financially responsible people are stuck with financially irresponsible spouses. This can happen in several ways, but the most common routes include a person having a financial epiphany after marriage that isn't shared by the spouse or someone getting married while believing that he or she can change their spouse. Both are problematic and both require difficult solutions.
First and foremost, the two key elements to any rough edge in a marriage are communication and compromise. You have to be willing and able to talk about the subject and to do that without anger or personal attacks. If you can't have a civil discussion about a rough edge in your marriage without resorting to a screaming match with personal attacks being thrown back and forth, you need to seek a marriage counsellor who can help you reach a point where you can have civil conversations with the type of communication that a healthy marriage needs.
Once you're able to sit down and discuss the issue in a healthy fashion, the thing to realise is that this isn't an issue of "right" or "wrong", but differing values. A person who is financially minded simply values things in a different way than someone who is not, but that's not to say that either person is inherently wrong. The solution is to find a compromise that works well for both of you. One good solution is to set up a budget that allows each partner to have money that they can freely spend on personal things, gifts, hobbies -- whatever he or she wishes -- but said money has a monthly cap so that there can still be positive financial progress made.
The main issue that can undermine this is trust. If one partner or the other wilfully and repeatedly violates an agreement that the two of you have, then there is a deep trust issue in the relationship, one that is likely a sign of some deeper relationship issues. Again, I recommend speaking to a marriage counsellor before jumping to any further steps, but lack of trust between partners is something that needs to be fixed as soon as possible before it can completely corrode the relationship.
Financially Irresponsible Parents
Some people unfortunately find themselves in a situation where their parents are financially irresponsible. In some cases, the parents directly ask for financial assistance from their children; in many other cases, parents will overspend and just have an unspoken assumption that if the worst case results happen, their children will take care of them.
Many children go along with this out of a sense of not being ungrateful to their parents, who raised them and (hopefully) protected them through their childhood. Still, it places a real financial burden on the children as they have to deal with the financial demands of their parents while still keeping their own financial ship afloat.
Communication is absolutely vital here. If you don't communicate, both sides will continue to operate with unspoken assumptions and such assumptions will eventually come to bear, resulting in a very nasty conflict that can easily damage relationships. If your parents tell you to your face that they are not expecting to rely on you in any way, then follow through with it.
Even with that type of communication, however, many children face intense guilt if their parents are struggling financially. What do you do in that situation, where their struggles aren't just an imagined future, but today's reality?
First of all, look for non-financial ways to help. Help them with household chores. Help them with budgeting. Help them with running errands and shopping. You may even go further and help them by cohabiting. Those are ways you can help without simply throwing money at the problem.
If you decide that you do wish to help, budget for it. Figure out carefully how much you can afford to give them and then plan for it. Don't simply open your wallet on the spur of the moment unless that money is coming from the flexible spending part of your budget. If you're going to consistently help, you need to plan for it starting right now.
I also strongly discourage loans, which is something that's going to pop up a few more times in this article. Don't lend money to family members or friends, ever. If you're going to open your wallet and hand over money, do it as a gift, not as a loan. Acting as a lender to people in your life makes your relationship into a lender-borrower one and no one has warm feelings for their banker.
The most important thing to remember is that you do not have to help. Sometimes, relationships can become demanding and controlling and negative and those are things you never need in your life, even if it is your parents. Don't be afraid to walk away from a negative situation.
Financially Irresponsible Adult Children
What if it's your children that are financially irresponsible? Perhaps they ask for money constantly or even have a regular stipend from you. Maybe they even live at home without adequately contributing to the finances of your household. How can you handle this?
For starters, it's important to remember that they're the young ones with many years of life ahead of them. They're the ones with energy and with lots of earnings potential. They also have the capacity to take a low-wage job -- they don't have to keep holding out for some kind of perfect job. (I certainly didn't -- one of my first jobs was literally shovelling dirt.)
In other words, you can cut them off. Young people have the energy to find a way to make things work in their life. They can find an entry-level job or two. They can find an apartment for themselves. They can balance their own budget. They can find resources to help them make ends meet if needed. In fact, they need to do such things, as it's part of learning how to live.
I recommend giving your children a cut-off date. Let them know that financial changes are coming in the fairly near future and that they need to take action to deal with the changes. They need to find a job. They need to find an apartment. They need to adjust their budget to live without that deposit into their checking account.
At the same time, offer as much non-financial support as you can give. Ask them if they want help, and if they do, dive in. Help them find an apartment if they want that help. Help them seek a job if they want that help. Help them move out. Offer as much advice as you can if they ask and give them an open door for that advice. Some children will want this; others won't. Just make sure you're available.
Often, children need that final push to finally get out of the nest and find their own path to financial responsibility.
Financially Irresponsible Extended Family Members
What about the uncles and cousins and adult siblings and other people in your life that might have a financial impact on you? What do you do when your brother or your niece knock on your door, asking for a loan or some other help?
First of all, don't loan money to family members. Don't. Ever. Avoid it. You do not want a lender-borrower relationship with extended family members. For one, there's a good chance you won't be able to get them to pay you back. For another, that lack of payback is going to cause a family rift that will cause problems for many years to come. It's a story that happens over and over and over again, and it's never worth it. Don't lend money to extended family members. Don't.
Instead, openly offer non-financial help. Give that person a ride to work. Give that person some advice. Help that person find a job. Invite them over for dinner. Provide an ear for them to talk to and a shoulder for them to cry on.
What about when extended family members do things that encourage overspending, like maintaining an expensive gift-giving tradition or suggest expensive trips together? As is always the case, communicate, but do it outside of the framework of those expensive situations.
For example, if your family has an expensive summer holiday gift-giving tradition, the correct time to talk about it is in the autumn or winter, not in the late spring or summer. If you do it right on the precipice of that event, you're likely to cause hard feelings as people have already begun to plan for it. Instead, do it far away from any such planning. Similarly, if expensive trips happen in the winter, talk about it instead in the summer.
When you talk about such things, suggest a reasonable compromise. Instead of expensive gifts for everyone, do a gift drawing or perhaps put a cap on the cost of the gifts. Instead of expensive travel, do a more modest trip together (for example, I'm a huge fan of our national parks, so that's a modest holiday that I want to go on). Don't just say that you don't want to continue the tradition because that appears as though you're rejecting them and not rejecting the expensive routine.
Financially Irresponsible Romantic Interests
You're dating someone and you find that they're much looser with their spending than you are or have been that way in the recent past. That person spends money with almost frightening ease, particularly when that person's income seems to be unable to support it. You notice a lot of envelopes from banks in their apartment. Those are things you'll notice as you grow close. But, aside from that financial concern, the match seems great. What do you do?
My honest suggestion is to be very wary of this relationship. I don't mean that you should break it off immediately, but that you should apply more of a critical eye to the whole relationship. A drastically different view about spending can be something that becomes a major problem in marriage as you're combining your financial lives together (whether you keep accounts separate or not), and drastically different levels of financial responsibility is going to result in some issues down the road.
This is also a good opportunity to start to learn how to communicate about such issues. The key to a good marriage is good communication, and there are few issues that rely on good communication more than money issues. If you can have a healthy money discussion about your differences in spending and can come up with a good strategy that has some compromise in it for both of you, then that's a good sign for your long term relationship. If this conversation is difficult or impossible, then that's another strong negative sign.
Once you have a compromise in place, does your partner stick to it? This is a trust issue, as you're trusting your romantic partner to be able to stick to the things you've promised. Again, if you're able to talk about a compromise and then your partner doesn't stick with it, then there's a trust issue. (There's also a trust issue if you don't stick with it, too.)
Financially Irresponsible Friends
Let me be blunt here: There are many, many financially responsible people in the world that I could be friends with, so I don't really have the inclination to maintain friendships with people who encourage me to overspend. Period. I just don't put effort into maintaining friendships with people with whom it is expensive to maintain friendships.
That doesn't mean I don't have friends with expensive tastes. It just means that when I do things with those friends, there's no expectation whatsoever of spending money and that we do things together that are usually really low cost.
The vast majority of my close friends simply invite each other over for social things. We have dinner parties, game nights, movie nights and binge-watching marathons. When we do other things, we usually talk it over and have the two best bargain hunters (me and one other person in the group) search for discounts and coupons and plan out the cheapest way to do it.
What do you do if your friends seem to have expensive tastes? Suggest less expensive options at least some of the time, for starters. Very few people will object to sometimes doing things that don't require as much spending. If they do, then there's a deep value disconnect between you and that other person. It's OK to occasionally do something expensive with friends, but it should not be the norm.
You should also never accept negativity and criticism from "friends" because of your inexpensive tastes. If a "friend" is ridiculing your car that you bought out of an intentional strategy to save money, not only are you seeing a values difference, you're also seeing an abandonment of kindness between friends. That's a friendship that it's perfectly OK to walk away from.
Another strategy is to choose social events for yourself that are low-cost and try to meet people there. Many of my closest friends over the last few years have been ones I've met at community game nights and at volunteer events. Almost all of those friends are pretty frugal people and our social activities are usually really inexpensive. If you follow this strategy, you'll find that your social calendar becomes more and more filled with inexpensive events.
Financially Irresponsible Coworkers
In the workplace, you'll sometimes find social pressure to do things like go out for expensive lunches or dinners or to buy expensive things like watches or gadgets. That pressure to "fit in" at work and build strong relationships can cause you to spend a lot of money that you might not otherwise spend.
Here's the truth, though. The most lasting workplace relationships are built out of other things, like reliability and kindness and healthy candor. They aren't built out of spending $50 on lunch. They're built by being a great coworker, taking care of things that you promise to take care of, stepping up to challenges, not backstabbing people and being an active participant in workplace conversations.
Another strategy is to intentionally spread out your lunches across a lot of dining companions. Bring your lunch in some days and eat with people who stay in the office for lunch eating leftovers. Get to know them. Go out to eat sometimes with the expensive crowd, too, but sometimes grab a bite with the cheap lunch crowd. Not only does this cut down on your lunch spending, it lets you interact with a lot of people and perhaps get to know people you didn't know as well.
Simply going out with the expensive crowd isn't going to do much to secure your spot at work. Being a good coworker will secure that spot more than anything else.
The strategies in this thread all boil down to a few key principles. Don't lend money personally to people. Seek out lower-cost social activities and cherish the relationships with people who share those activities with you. Communicate clearly if you desire lower-cost obligations (and do it out of the context of the situation). Don't be afraid to update your social circle. Communicate, communicate, communicate with your loved ones.
It's only through those strategies that you'll be able to maintain healthy relationships with some less financially responsible people in your life without going down a financially irresponsible road yourself.
Handling Financially Irresponsible People [The Simple Dollar]