Lending money to a friend or family member can put a strain on the relationship if you’re not careful.

Nearly a quarter of people who lent money or covered a group expense in hopes of being repaid say it had a negative impact on their relationship with the other party, Bankrate 2024 reports. investigation into financial taboos find.

While a common rule of thumb is simply not to expect to receive the money after lending it, there is another way to resolve this dilemma without breaking the bank: set limits and communicate them clearly.

“Decide if you can afford to give them money, and if you can’t, you might not really be able to help them,” Aja Evans, a certified therapist specializing in health, told CNBC Make It. in financial therapy. “You can’t potentially sink your own ship to bail out someone else.”

That doesn’t mean it’s easy to have this conversation, Evans says. Often, close friends or family members may be aware of the things you spend money on, such as clothes or vacations, and make judgments about what you can or cannot afford.

But it’s important to remember that no one knows your money better than you, says Evans. “Just because you have it in your account doesn’t mean you can give it away,” she says. “Especially if you know there are more bills coming.”

Here’s an example of a healthy boundary you can set when you’re asked to lend money and how to handle the potential guilt that may arise if you say no.

Give what you can afford

Directly saying no when a friend or family member asks for money can be difficult, especially if you’ve lent them money in the past. That’s why it’s okay to start small, says Evans.

One way to do this is to lend what you can afford, even if it’s less than they asked for, she says. Let’s say a friend asks to borrow $100, but you know that giving them the full amount would have a significant impact on your budget. Try coming up with an amount that works better for you, like $20 or $30.

And while you don’t necessarily owe it to them to explain why you can’t give them the full amount they asked for, it can be helpful to honestly communicate what other financial obligations you’re managing, Evans says.

“It’s a healthy boundary because, while you can’t give everything they want, you give what you can without sinking your own ship,” she says.

It’s okay to feel guilty

It’s common to feel guilty after refusing to lend money to a friend or family member, even if you’re proud of yourself for setting the limit, Evans says. To deal with guilt, it can help to write down your financial limits and why you set them.

Let’s say you want to increase your emergency savings by allocating any extra income to a high-yield savings account. When you write this goal down, you can easily come back to it when someone tries to make you feel guilty for not lending them money, Evans says.

“Remember what you’re trying to accomplish and why,” she says. “List your boundaries so that when they get pushed — and they will — you can go back and see your why.”

You won’t always be able to do this and you might give in to a demand for money, especially if it’s from a close family member, such as a parent or sibling. When this happens, it can be helpful to create a list of coping strategies that can help you feel better, says Evans.

“The list is endless. Take a bike ride, cook something, water your plants,” she says. “The list goes on, but it’s good to have something that you know will help reduce your stress after a potential confrontation.”

Ultimately, although it can be difficult to establish and maintain your financial limits in the short term, it can pay off in the long run and help you achieve your financial goals.

“It’s very difficult, but it’s very important,” Evans says. “Yes, you feel bad now, but you will feel good when you are able to pay for the things you need.”

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