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 to influence your money decisions, you will be more broke than your broker.
What are boundaries?
In the great words of Google, the term boundaries refers to “a line which marks the limits off 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
In the wise words of every single person in this world:
Don’t you dare talk to me about MY money.
We sit in this dichotomy – handing over our cash to people we don’t trust and screaming things like “You will pry this money from my dying fingers!”.
To elaborate on this, we allow financial advisers and money people to take our money to make more of it – and don’t really care what they do with it. This is the case until we retire – and then all hell breaks loose, as we only have enough money to buy a R 500 frappuccino from Starbucks. Only when we need it, we seem to become overly sensitive and freak out.
I recently had friend 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.
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.
Financial advice and boundaries
It seems to be the same story over and over again: You hear someone is retiring. They spoke to their financial adviser and discovered they will get R 20 per month from their retirement annuity. Sadly they did not check the 35% p.a. service charges that the financial adviser charges.
Let’s be honest – we just love blame-shifting after we’ve handed over our hard-earned cash. It’s fully understandable as we don’t like reading 500 000 000 000 page clauses.
We owe it to ourselves not to just hand money over.
When it comes to boundaries, we need to ask the relevant questions. We need to ask people what they will be doing for the cash that they are earning from us.
To set boundaries, you need to consider:
- What do you expect from your financial adviser?
- What is the responsibility of the person investing your money? You need to communicate this and make sure that they need to adhere to your terms – or you need to leave and find yourself a new FA.
- How much money are you willing to hand over on fees and costs to get your investments?
- What are your cut-offs and stop losses? Be realistic with the long term in mind!
- Do you require updates on your investments? Would you like your adviser to educate you about finances?
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.
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.
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.