How we work
So, your mom invites you over and asks you to help her with her PC – she needs someone to update Windows for her. She’s willing to cook you your favourite food and make the time special in return for your help.
Now imagine your mom offered you R 30 to come in and fix her PC.
Money changes the relationship we have with things.
It is only appropriate that we define these relationships’ boundaries where money plays a role. If you don’t know who you will allow influencing your money decisions, you will be more broke than your broker.
What are boundaries?
In the great words of Google, the term boundaries refer to “a line which marks the limits of an area; a dividing line.” Within the context of money, boundaries can be seen in two ways:
- Who will you allow to influence your investment and money spending decisions
- To what extent can you allow yourself to spend money according to your budget (or spending plan or whatever)?
The financial story of our lives
I had a friend who recently tried to recruit me into a Ponzi scheme. So many people allow their money to be gifted to schemes and people – and then we lose our cool when the money disappears.
It is natural for us to distrust people. We’ve been lied to by so many people promising us returns and delivering less than a cup of coffee.
It makes sense that we trust people in personal finance gurus, celebs, friends and our spouses more than banks, insurance companies and other faceless organizations – Yet this is also very risky.
We need to start pinning down what we allow and what we don’t – especially when it comes to money. If we don’t, it will ruin our relationships, our lives, our assets and the ability to buy coffee.
Relationship and money boundaries
Let’s look at relationships with spouses, partners and nyatsies and how this relates to money boundaries for a short paragraph or two.
I recently came across a study showing that money is the biggest reason for divorce. It’s obvious that spouses do not know how to talk about money. It’s also obvious that people generally do not know how to communicate what they want to do with their money.
As a practical example, let’s look at the following scenario: Your spouse comes home with an aesthetically unpleasing wall clock. She spent R 100 on it. You’re not happy with it, as you find it revolting – but for the sake of peace you decide to swallow your pride and be okay with it.
The next day your spouse comes home with her new Bentley.
You lose it.
In-house money management
Generally, money is managed in a household in one of the following ways:
- There’s a single kitty/bank account that all the money goes in and all work from it
- All bills are split 50/50 and each one has his or her own account
- All bills are split according to each one’s earning capacity.
- One party pays everything.
Whichever one you choose, it’s important to decide who will pay what and what will happen when the financial landscape changes.
It’s vital to think about your savings/investing ratio – i.e. how much you are willing to save every month for retirement, holidays, children and other liabilities.
Talk and negotiate.
Boundaries for get-rich-quick schemes
My overnight success took 20 years – Eddie Cantor
Though we all want to earn big bucks quickly, we need to realise that no money that was earned quickly will stay long. The general rule is that this type of money disappears quickly due to people not working for it.
I find these schemes similar to gambling.
Like Bitcoin.
If you really want to put your money in high-risk investments – that’s really cool – as long as you know your boundaries. Here are some of my personal boundaries:
- I will not hand over my money to anyone without a good understanding of what will be done with my money
- I will write off the money as a sunk cost – the money is gone and if it makes loads of money babies, that’s an unexpected bonus.
- Be wary of getting others involved – you don’t want to be held responsible for losing people money.
Setting your own money boundaries
This is probably the most complex thing. Don’t worry, this section is not about budgets. If you hate budgets as much as I do, check my article here.
Rather than putting people down, let’s focus on what’s important to you. Will you be willing to spend R 500 on a coffee when you are okay with a R 10 coffee?
Would you find it permissible for someone to overcharge you for fixing up your car?
Where will you draw the line?
To what extent will you give away money to needy people? At what point is this negatively affecting you?
At what point does your job become financially unviable for the hours, stress and abuse?
It’s vital that we add boundaries in our financial lives, but also in relation to our with our personal beliefs, drives, talents and personality.
Conclusion
Money boundaries are like normal boundaries – only add money.
If you don’t control your money, someone else will.
Put boundaries in place and know the consequences someone will face when this will be crossed.
Happy boundary setting and happy investing.