The Rachel Cruze Show - 3 Healthy Money Boundaries to Set With Family

Episode Date: December 16, 2024

💵 Start your free budget today. Download the EveryDollar app!   Have you ever lent money to a family member and later regretted it? In this episode, you’ll learn three important money boundaries for healthy relationships. Plus, we’ll talk about when it’s okay for family and money to mix.     Next Steps:  🎥 Watch my video 5 Frugal Habits to Cut Your Expenses in Half.   Connect With Our Sponsors:  🏥 Learn more about Christian Healthcare Ministries.  🔒 Get 20% off when you join DeleteMe.   Listen to More From Ramsey Network:  🍸 Smart Money Happy Hour  🎙️ The Ramsey Show   💸 The Ramsey Show Highlights  🧠 The Dr. John Delony Show  💰 George Kamel  💼 The Ken Coleman Show  📈 EntreLeadership    Ramsey Solutions Privacy Policy  Learn more about your ad choices. Visit megaphone.fm/adchoices

Well, hey you guys. So listen, family is one of those things in life that it is a gift. It really is. And in order to have that gift be a gift that keeps on giving, we want to make sure that things are in line and boundaries possibly have to be set. And I think the older we get, right? As you come into adulthood when it comes to your parents specifically and maybe your adult siblings, there are times that you have to create boundaries. And that could be for many different reasons. But let's talk about the money. side of it today. So today I want to talk about three important boundaries that you may want to set when it comes to your family and money, but stick around to the end because there is one time that I think money can definitely be in the mix when it comes to your family. But first, if you haven't subscribed to this channel, make sure you do so that you never miss another episode like this one. All right. First and foremost, let's talk about the negative effects when it comes to owing someone money, especially when you are related to them. So the idea of debt in general is something that is really difficult and a big stressor on people's lives. Like when you owe hundreds or thousands

of dollars of debt every single month, that's income that you could be using to, you know, spend, to give, to save, to do whatever you want with it. And so being able to have autonomy over your money is really crucial. But when you're in debt, that autonomy is taken from you because someone else is telling you where your paycheck has to go. And it does leave you in a powerless position when it comes to your money. So flipping the script and when you are out of debt and you don't owe anyone money, then it gives you the ability to probably have way more margin when it comes to your budget. But also this feeling of, yeah, I don't owe anyone anything. So if something happens and I don't have all these payments that I have to pay that people are waiting on, you are free and clear of that.

So debt in general can be a stressor. But when you owe you. money to your family, well, that makes it pretty complicated. So here are three rules that I live by when it comes to family and money. Number one, do not borrow from your family, period. Just never a good idea because we always see that the relationship suddenly changes. When you borrow money from an in-law, from a sibling, from a parent, things change in that relationship. There is something about it that all of a sudden, when you owe them money and you go down and you have holidays together, maybe you're spending money on Christmas gifts or you're spending money on an airline ticket to go somewhere with your family.

When you owe someone money, usually they're looking and being like, okay, well, that's nice, you did that, but you still owe us money. It changes the relationship. And when it goes south, if you're not able to pay, then all of a sudden so much conflict comes into the relationship as well. And we have heard countless stories of this. going sideways, so it's usually just a pretty clear rule. Just don't borrow money from family. Number two, don't lend money to family. So if you are actually the one that's being asked,

hey, can we borrow X, Y, and Z? I would say no. If you do not have the ability to give it, if you have to lend it and have them pay you back, I would not do the deal. Because, again, it's going to change the relationship. There is something about like, okay, yeah, you know, I gave my brother and sister-in-law. I'm making this stuff. I didn't do this. But, you know, $3,000 because they needed help in X, Y, and Z. And they said they pay it back, but they're terrible with money.

And they're not going to pay it back. But we actually need the money now. And I mean, I'm having to ask for it, but they don't have it. And it just becomes this, like, super awkward situation. So, again, it's not worth the relationship complications that come with it. So do not lend. And then number three, on that same vein, don't. co-sign either. When you have to co-sign a loan or when someone needs you to co-sign a loan,

that means the bank does not trust that person that's taking out the loan. When a bank gives someone money, they usually run a credit report, they look at their credit score, and they say, okay, are you a trustworthy person? And if they're not, the bank's going to say, okay, go find a trustworthy person to get on the loan because we don't trust that you're going to pay it back. And in good meaning and in good heart, people are like, oh, sure, I will help you out and co-sign. Well, if the bank can't even trust someone when it comes to their debt, it's probably going to be, you know, the conclusion is going to be that you're going to end up with the loan. And we see this time and time again, the person who needed the co-signing,

you know, they don't have the ability to pay. For whatever reason, they're terrible with money, they lost a job. And then you now owe the money as the co-signer. It is now your debt. And so what ended up being what you thought was possibly a good thing, ends up really harming you in the process. So do not co-signor. sign. Now, as I mentioned before, there is one exception to all of these rules. All right, here's the good news when it comes to family and money. If you have the ability and you have the money and someone needs help, give it. Yeah. Generosity is a powerful tool. And it trumps all the other rules of like, oh, I want to help, but I can't because I got to let them borrow it. They got to pay back. It's got to have this or that. This doesn't change the relationship. If you have the ability to pay and you have the ability to get, and you really do believe, yeah, I'm not enabling some sort of behavior or some kind of negative effect. Like, I'm genuinely able to help them in the situation. Then what a gift. What a gift.

And you can freely give, not expecting anything in return. And that is part of why building wealth is so crucial. Because we talk about this all the time, you guys, that when you live like no one else later, you get to live and give like no one else. And that once you're out of debt and you have an emergency funds and you're building a life for yourself and you have a really strong financial foundation. Like, you were able to do some amazing things. I was just talking to a lady today, actually, and she had two homes because she was renting one out and all this. And she's like, but I want to sell it, but she made insane equity. It was like, like $350,000 she was going to get an equity of one of the homes. And so she wants to pay off her primary home. And she was like, my parents have $60,000

left on their home. And I think I just want to write a check and pay it off for them. Do you think that's okay? And I was like, yeah, yeah. That's what you get. Like when you're wise with money and you have the situation, like, you're able to do that. And she was. She was able to afford it and she was fine with retirement and everything. And she had her bases covered, which means she could go above and beyond to do it. And what a gift, right? What a gift. Now, you do have to have some discernment in this because you don't want to make a situation awkward or odd, right? So it's going to be very dependent on your relationship with your family, what the situation is and all of it. But when you're discerning those situations and you can say, oh, yeah, this is absolutely a beautiful gift and a great thing that will help them, genuinely help them, then, and you're able to do it, do it. It is one of the best things that you can do with your monies to help the people around you that you love. So if the idea of being able to live and give generously feels impossible, then let me tell you, when you want to get started controlling your money, one of the best ways to start that is with a monthly budget.

And if you have not tried every dollar, you can actually download it and create a budget for free. I'll put a link in the description, but make sure you do that because budgeting is the first step to be able to know where you are financially so that you can be generous. And to hear more creative ideas on finding margin in your budget, check on my episode, Five Frugal Habits to Cut Your Expenses and Half Coming Up Next. And share this with a friend who might appreciate some tips on healthy financial boundaries. All right, remember to take control of your money and create a life you love.