Amid rising inflation, interest rate increases and recession worries, money is getting tighter for many people — and probably for you.
Yet, there may be charitable organisations you want to support, friends or family asking for financial help and things you want to buy for yourself. It is possible to do these things even on a limited budget.
But if you want to be responsible with your money, you have to know where to draw the line. When is it acceptable to put your own interests first? Use these criteria as guidance.
Why is everything so expensive right now?
When your finances are at risk
Think carefully before spending any amount of money on somebody else, whether it is $20 or $2,000.
Will it jeopardise your ability to pay bills or save for emergencies? Picking up the lunch tab for a friend or helping to put your child through college shouldn’t come at the cost of your own expenses and goals.
A crucial part of this assessment: assume you will never get the money back. There is no guarantee your loved ones will repay you, no matter how well-intentioned they may be.
“If you can’t afford to give it as a gift with no expectations on your end, then you can’t afford to help,” says Lacy Rogers, a financial planner in Texas.
Chicago-based financial planner Valerie Rivera says saving towards a “giving budget” in a designated account can create a clear separation for your spending.
If you don’t have enough funds in the account, that signals that you can’t spare the money.
You are under pressure to pay
You are not required to hand out money even if you have the means to be generous. You have the right to say no when you feel stressed or uncomfortable. Don’t let others talk you into something you will regret.
Saying no can be challenging, especially when dealing with family or a close-knit community.
A sense of guilt and obligation often clouds judgment. Your mother raised you, so the least you can do is pay her credit card debt, right? Not if it enables her to repeatedly overspend and turn to you for money.
Having conversations about finances with loved ones early and often helps to set expectations.
“It is totally OK to re-establish or establish for the first time what money looks like in discussion with friends or family,” says Kate Mielitz, a financial counsellor in Washington.
Take time to process each money request that comes your way. Consider passing if you are concerned about being taken advantage of or supporting harmful financial behaviour.
You can help in other ways
Supporting the people you care about does not always have to cost money. Your time, skills and knowledge are valuable, too.
Say you have an elderly neighbour you used to purchase groceries for. If you are unable to pitch in personally, point them in the direction of those who can.
“Familiarise yourself or help your friends and family familiarise themselves with resources in the area — if that is a food bank, second-hand clothing, job services or resume help — to help them move forward and get a stronger foot up,” Ms Mielitz says.
Set aside money to treat yourself
Taking care of your needs and goals (and giving to others) is important. But everyone deserves a little fun, too.
“We are human and we need balance. We can’t only save for later and not enjoy life today,” Ms Rivera says.
If you have discretionary money, don’t spend it all on others. Leave room for self-care, entertainment or whatever brings you joy.
“A lot of times, we use money to find ways to enhance our mood. Whether that is dining out or going out for a drink with a friend or buying a book,” Ms Mielitz says.
“But you have to put together a spending plan and know what you have access to, because there are times when we don’t have the money and we spend it anyway.”
Regularly setting aside funds or shuffling expenses around can give you the flexibility to splurge on yourself without hurting your finances.
“Life, in general, is a series of trade-offs,” Ms Rivera says. “So, it is picking and choosing what really is going to add value to your life.”
Associated Press
