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Personal finance: when being selfish with money is good

Amid rising inflation, interest rates and recession worries, money is getting tighter for many people – and probably for you. Still, there may be charities you want to support, friends or family members 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 need to know where to draw the line.

Think twice before spending any amount of money on someone else, whether it’s $20 or $2,000. Will it compromise your ability to pay bills or save for emergencies? Grabbing a friend’s lunch or helping your child get to college shouldn’t come at the expense of your own expenses and goals.

A crucial part of this assessment: assume you will never get the money back. There is no guarantee that your loved ones will reimburse you, no matter how well intentioned.

“If you can’t afford to give it as a gift without any expectation on your part, then you can’t afford to help out,” says Lacy Rogers, Certified Financial Planner in Fort Worth, Texas.

Saving toward a “donation budget” in a designated account can create a clear separation of your expenses, says Chicago-based CFP Valerie Rivera. If you don’t have enough funds in the account, it means you can’t save the money.

You don’t have to donate money even if you can afford to be generous. You have the right to say no when you feel stressed or uncomfortable. Don’t let others talk to you about something you’ll regret.

Saying no can be difficult, especially when it comes to a close-knit family or community. Feelings of guilt and obligation often cloud judgment. Your mom raised you, so the least you can do is pay off her credit card debt, right? Not if it allows him to spend repeatedly and turn to you for money.

Many people who are the first members of their families to come to this country or go to college “can very quickly become the financial safety nets of others,” Rivera says. It is a heavy burden to bear.

Having conversations about finances with loved ones early and often helps set expectations. “It’s completely normal to re-establish or establish for the first time what money looks like in a discussion with friends, a discussion with family,” says Kate Mielitz, Certified Financial Advisor.

Take the time to process every request for money that comes your way. Consider switching if you fear being taken advantage of or supporting harmful financial behavior.

Supporting the people you care about doesn’t always have to cost money. Your time, skills and knowledge are also valuable.

Suppose you have an elderly neighbor whom you were grocery shopping for. “Maybe you can’t buy groceries for them anymore, but you can help them with the gardening, and maybe that takes the load off them in a different way,” Rogers says.

If you are unable to participate personally, refer your loved ones to those who can. “Get acquainted or help your friends and family become acquainted with resources in the area – if it’s a food bank, if it’s second-hand clothes, if it’s it’s employment services or help recovery in the community – to help them move on and get a stronger footing,” says Mielitz.

Visiting is a way to find help with basic necessities like paying utility bills or accessing food. For people who want help managing their money, Mielitz recommends making a free virtual appointment with an AFC through the Association for Financial Counseling & Planning Education.

Taking care of your needs and goals (and giving to others) is important. But everyone also deserves a little fun.

“We are human and we need balance. We can’t just save for later and not enjoy life today,” says Rivera.

If you have discretionary money, don’t spend it entirely on others. Leave room for self-care, entertainment, or anything that brings you joy.

“Often we use money to find ways to improve our mood. Whether it’s dining out, going out for a drink with a friend, or buying a book,” says Mielitz. “But you need to make 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 redistributing expenses can give you the flexibility to splurge without hurting your finances. If you can’t find extra money, use resources such as the free session with an AFC. An expert can help steer your money in the right direction.

“Life in general is a series of compromises,” Rivera says. “So it’s choosing, what’s really going to add value to your life?”