How to give money to your family without going broke

Realize you can’t do it all

You’re a nice person. You want to help others. You love your family and friends. But let’s face it. You can’t do it all. You cannot put everyone else’s needs above your own. Although this is something we know, it can be hard to put into practice. You are successful. You’ve done well for yourself. And other people count on you. But you have to realize you can’t be everything to everyone. You cannot give all you have away leaving nothing for yourself. You cannot put the livelihood of yourself and your immediate family in jeopardy because of your generosity to more distant family members or friends. You cannot continue to give away endless amounts of money to others before paying off your own debts and obligations.  As the airplane stewards say “put your own oxygen mask on first before trying to help someone else”

Decide how much you can afford to GIVE away

There’s an old adage that says “Never loan money to family that you expect to get back.” In other words, when it comes to family, loaning money isn’t wise. Either give the money away with no strings attached or do nothing at all. Loaning money creates unnecessary tension that could destroy loving relationships and families. Give away what you can and make peace with the rest. While some people cannot fathom the thought of financing the livelihoods of their extended family, others consider it as natural as brushing their teeth. Whether you view it as an important tradition with tremendous value or a rare occurrence, decide what you are willing to give. Look at your monthly income and expenses. Decide a reasonable amount you can actually afford to give away each month. Is it $50 or $100 or perhaps $500?

Create a Family Savings Account

I find that having a set amount in your head may not be enough. When it comes to family many of us don’t stick to our boundaries or budgets as much. One way to avoid overspending is to create a family savings account. Deposit money into this account each month with the amount you can afford to give away. As family needs come up, you can pull money from this account to assist your family. This allows you to save for the financial needs of your family without having to assist with large purchases last minute. Make a rule that the money you give to your family will no longer come from your bank account directly. It will now come only from this family savings account. Each month you can make a deposit into this account to build up reserves for any financial requests/needs of your family may have in the future.

Set expectations and boundaries

Let your family know that this account cannot be over drafted. This means that once the money is out and the balance goes to zero, they must wait for the reserves to build up again before more money is given away. This allows you only give away what you can afford each month without being bombarded with last minute requests that you didn’t plan for. It creates boundaries and allows you to set expectations around what you can give away without jeopardizing your own financial goals and obligations. You get to be generous to your family and still take care of yourself. It’s a win-win.

6 Step Money Challenge for 2020

As we embark upon this new decade, many of us are committed improving our finances. We may have vowed to stick to a budget or have a general goal to live below our means. While these are noble goals, let’s challenge ourselves to do even more. Here’s my 6 step-money challenge for 2020:  

1. Buy 1 or 2 finance books to read. There are many different ways to consume information but I’m a firm believer in the benefit of books. While I enjoy blogs, books can be a one-stop-shop for the information you seek. Having books allows us to highlight certain passages and tips that make the material a consistent resource we can refer to throughout our journeys. Plus, it provides a single resource we can use to learn about a several different topics or go in depth on one particular area. There are plenty of good finance books but I think the white coat investor has a list of recommendations organized by various categories that can be useful. When I started on my personal finance journey my favorite books were Rich Dad Poor Dad, the White Coat Investor, and the Total Money Makeover. I’ve just purchased How to Think about Money and tend to refer to Ken McElroy’s The ABCs of Real Estate Investing as I’m thinking over new real estate deals. There’s always more to learn and books are a great way to do that. Pick a couple finance books to read this year.

2. Download a finance podcast. As someone who is intellectually curious and loves to be efficient during my “off” time, I consume a lot of finance information via podcast. Whether it’s the “Hippocratic Hustle” giving me insight into ways other female docs have increased their income, “Docs Outside the Box” giving me new ideas on ways to create additional revenue streams, or the “White Coat Investor” providing step-by-step instructions on how to do a backdoor Roth IRA, podcasts can be a great way to learn about various finance topics without requiring a huge sacrifice of your time. Most episodes are 30-45min or faster if you alter the playback speed. Whether you’re commuting to work, cooking dinner, or working out at the gym, there are plenty of good podcast options. As you continue along your journey of increased financial literacy, download a finance podcast and commit to listening to 1-2 episodes a week.

3.  Join an in-person or online group. Along with increasing your knowledge via books and podcasts, strive to be more active as well. Whether it’s participating in a finance-focused Facebook group, joining the Bogleheads F.I.R.E. (financial independence retire early) online community, or going to real estate investor meetup groups in your city, surrounding yourself with likeminded people can be beneficial. In fact, it’s this active engagement that can propel us even further along in our journey. These groups and online communities challenge us to share our goals with others and inundate us with people traveling a similar path. They also provide a slew of contacts that can keep us motivated and accountable. As you continue along your journey, commit to joining at least one finance or investor group.

4. Create a spending plan for the next month. There couldn’t be a money challenge without a point on living below your means. While many of us would like to increase our savings and invest more, this can be quite challenging to uphold. Sustainable change involves altering our behaviors and putting boundaries in place that keep us focused on our goals. One of the best ways to do this is by creating a spending plan for the next pay period. While most of us know where large chunks of our money are spent, there still may be things that go unnoticed. The challenge for this year is to create an active spending plan that outlines which things we will purchase, and which bills will be paid on certain dates. It also includes automating our payments so that a percentage of our income automatically goes to various savings accounts or investment funds. If you haven’t already done so, create a spending plan that automates payments and “forces” you to live below your means.

5. Pay off “bad debt” early. I’m a huge proponent of paying off consumer debt, especially when the interest rate is higher than 7%. Many of us understand the importance of getting the match to our retirement plans, but once that’s done, we are unsure on what to do next. The correct answer may vary from person to person but generally speaking, once you have at least a small amount of cash for emergencies, you should prioritize paying off consumer debt like high-interest credit cards or car loans. Although investing in the stock market is another great option, the guaranteed return from paying off debt cannot go unnoticed. Plus, paying off consumer debt faster will increase our monthly cash flow and allow us to invest even more towards retirement once the debt is paid off.

6. Give more to charity. Although we each have different priorities and plans for our money, one of the things I challenge you to do this year is think outside of yourself and give more. Even though it can be tempting to delay helping others until we have met all of our own individual goals, I challenge you to find ways to give in the midst of this journey. Oftentimes, we find the most happiness when we find ways to assist others. Giving has helped me stay grounded in the midst of success and allowed me to help others in a way that has increased my own quality of life in ways I never imagined. In 2020, I challenge you to find ways to give more. Doing so may impact your own life more than you may realize.

Tell me, what are some ways you will challenge yourself to improve your finances this year?