Worry-Free Money

When it comes to your money, knowing when to say no to spending doesn’t always translate into putting that knowledge into action. Over the years I’ve noticed that most people are okay with saying no to spending on themselves, but they are far less likely to utter that word if their decision negatively affects someone else or what someone else thinks of them.

It’s not simply a matter of spoiling someone you love, either. Impossible spending decisions cover the gamut from once-in-a-lifetime events to routine day-to-day events. Things like going to a friend’s bachelor party. You’ll be happy to attend, but how much should you spend, and where will the money come from? Or heading to your niece’s first birthday party. Of course you want to go, but it all adds up.

So the question remains: Why don’t you say no sometimes when you know that you should? On a very basic level, you don’t want to be a jerk. Who wants to be seen as cheap or broke? And who wants to risk hurting someone’s feelings? I get it. And it’s good that you don’t want to be a jerk. But here’s the thing: you’re not a jerk for saying no to things you can’t afford.

A lot of my clients report that they are okay with saying no to things that are clearly big expenses they can’t afford, like a vacation with family or a weekend-long music festival with friends. “I can’t afford to right now” seems like an acceptable response.

But what do you do when things should be doable? If, for example, your friends from work are all comfortable with going out for drinks, it’s assumed that $30 or $40 should be affordable for you too. Well, sure, spending $40 won’t likely mean you can’t pay the rent or your property tax bill. But what if you shouldn’t spend it, or what if you don’t want to? Should you say yes anyway to avoid feeling like a jerk?

“I have to” is a line I hear over and over again about financial decisions my clients know aren’t wise or that they know to be Unhappy Spending but which feel unavoidable. “I’ll alienate my friends.” “I’ll hurt their feelings.” “Everyone will think I’m cheap.”

Here’s the secret to saying no without the guilt—start talking about money.

Yep, that’s right. Talking about money in a real way with family and friends will give you the strength and permission you need to say no without offending anyone. Talking realistically about money with your peers and family is one of the most important things you can do to end the cycle of overspending and save more money. It’s critical to achieving Worry-Free Money.

Sadly, money is still the last taboo, a dirty little secret we keep to ourselves. It’s time to break the silence. Time to be open and honest about when we can or cannot afford something. Knowing how our friends and family are faring financially will help us all save money. Trust me.

Yes, You Can Talk about Money

Years ago I had a life-altering night out with my girlfriends. Shortly after my IKEA meltdown, I was still actively afraid that I would never have enough money to keep up with my Life Checklist, which included things like buying a house and raising a family. I was so worried all the time. Then I received a text message from my friend Renee: “My bday dinner out on Wednesday. You in?”

Renee is a good friend. She was turning 30 and wanted to go somewhere special, somewhere really nice. Read: expensive.

I responded immediately. “Yup! Count me in.”

Interesting. This was likely going to be an $80-plus night for sure. I was feeling broke and worried about my financial future and yet I had agreed to go without even batting an eye. What was I thinking?

Going out for dinner didn’t mean I wouldn’t be able to buy groceries that week, but I definitely felt guilty and frustrated about it. I shouldn’t be spending money on dinner out. Or should I? Was it safe spending? I wasn’t sure. Was it Happy Spending? I wasn’t sure.

My husband and I had just got married and we were desperately trying to save up for a down payment on a house. An $80 night out would mean that I either had to cut back my regular Spending Money or eat into my Short-Term Savings that month, which I didn’t want to do, since I was going to be a bridesmaid at three weddings that summer (legit) and had been saving up.

For purely financial reasons I wanted to cancel my RSVP. I knew I shouldn’t go, but I also knew that if I didn’t go I’d be riddled with guilt that I’d missed Renee’s special birthday. Of course, if I went, I’d feel equally guilty about spending money I shouldn’t have on an expensive night out. Not to mention the frustration I’d feel knowing I had to make unrealistic cuts to my spending that week to make up for it.

Now, my friend is important to me and I didn’t want to miss her birthday, so I didn’t cancel that RSVP. But I was bothered by the fact that it was going to be such an expensive night. Excitement, resentment, frustration, guilt, happiness—so many complex and ugly feelings over a simple RSVP. I love my girlfriends and I love having a social life, but I hated how social outings kept me feeling broke, perpetuating my financial worries. Because I wanted to save more money for other goals, every social outing decision felt complex and fraught with danger.

But that’s just it, isn’t it? Every financial decision we make is complex, and we make those decisions every day. No wonder it’s hard to say no. Hosting friends for the hockey game. Heading out for a Mother’s Day brunch. A housewarming gift for my best friend.

In an ideal world I would have texted Renee and said: Hey, Renee, I’m saving up right now. Any chance we can choose a less expensive restaurant? It would have been such a relief to be honest. To tell her I wanted to celebrate her birthday but shouldn’t spend $80 right now. Ask if there was something we could do to keep the cost down. But I didn’t.

Why didn’t I talk openly about the money? A few reasons:

• I didn’t want hurt her feelings. I didn’t want to make her feel as though she wasn’t important to me or that she was a jerk for picking an expensive restaurant.

• Technically I could afford it. I could fit this dinner into my Hard Limit and it wasn’t going to make or break our overall money plan or sit on my credit card for more than six months.

• I was afraid my friends would judge me. If I said I couldn’t afford it, maybe they’d think that we were hard up (this was my insecurity over quitting my Bay Street job to head out on my own), or that I was being cheap, which felt worse.

• FOMO. I didn’t want to miss out on the fun! I love these women and enjoy their company.

Like I said, I didn’t cancel, but on the way to the party I did something I normally wouldn’t have. I broached the subject of money with a friend who was taking the subway with me. “I wish we were going somewhere a bit cheaper,” I said.

She immediately agreed. “Oh my god, I feel the same way!” Which I understood, as she had just bought a house.

Another girlfriend met us as we are walking into the restaurant. I brought up the subject again. “I wish we were going somewhere a bit cheaper,” I said. “I’m really trying to save.”

She was a little taken aback by my bluntness, but then she said, “Oh man, me too. We have two weddings this month. Ugh, life is so expensive.”

Now this was interesting; so far I was batting three for three. While we were all stoked for Renee and wanted to go out for her birthday, we all wished we were spending less money. Yet no one had said anything about it.

I decided to conduct an experiment. For the record, I’ve known these women for a while, some of them for more than 18 years, and we hang out a lot. Everyone at the table was between the ages of 28 and 45. We laughed, ordered food and had a great time. Then, when we’d ordered another bottle of wine for the table, I asked if anyone was feeling worried or guilty about the money they knew they’d be spending on the dinner. (That’s what you get for hanging out with a financial planner.)

Everyone was kind of awkward at first, as people usually are when we get real about money. No one said anything, so I opened up about my own situation. I explained that I loved going out and said what a great time I was having. Then I admitted that I should have said no because I was trying to save, but I was afraid of missing out and I wanted to celebrate Renee’s birthday. So instead of being honest from the start, there I was about to spend more than $80 on dinner and wine, knowing that I’d either have to say no to something else important that week or forget about saving money—again.

“Are you upset that you came?” Renee asked tentatively.

“No, not at all,” I said and squeezed her hand. “I’m just wondering if I’m the only one feeling this way.” I told them I felt like I was in a vicious spending cycle that I couldn’t stop. Like there was always something coming up. I explained that I was frustrated because my personal goals kept getting pushed farther and farther away but I couldn’t say no when important things, like that dinner, came up.

Once I had opened up and showed my own vulnerability, they all started sharing. Brené Brown would have been so proud of us. It was like the floodgates had opened, and it was amazing. Everyone was feeling frustrated and guilty, even the birthday girl, and they felt a lot of relief talking openly about it. I took a chance and asked if I could record the conversation. With everyone willing, I plunked my phone in the middle of the table and let the conversation unfold. It was wild.

Turns out that we were all afraid of not having enough money. Some of us owned a house, some paid rent. Some were single, some married, and some had kids. Some were barely scraping by and others had well-paying jobs. But we agreed on one point: we were all worried about money.

There we were, eight women out for dinner, spending too much money on wine and beautiful food, and talking about how frustrated we were that there was never enough money. Oh, the irony. Why was that? Because we still don’t like talking about money with our people.

Clients lay out the details of their finances for me day in and day out, but those same clients don’t share that information with the people closest to them, because they don’t want to be judged. Where we spend our money shows how we prioritize our values. If you tell someone how much you spend on rent and they say it’s too much, they’ve just called you financially irresponsible. If you admit how big your mortgage is and you can see in their face that they think you overspent, you’ll feel like an ass. And if you tell someone how much money you make, you risk making your peer feel inadequate, or you could end up feeling inadequate because perhaps it’s not as much as they earn.

When we talk about money, the emotional stakes are high. So we don’t. We prefer to keep things private. That’s why it remains the final taboo and the cycle of guilt and fear keeps going round and round. It perpetuates feeling broke.

We’re fine with general comments like “Oh man, that’s expensive” or “Yeah, we spent too much,” and the old catchall “They make good money”—vague references to our finances that evoke nothing more than a nod of agreement from whomever you’re talking to—when what we need is real money talk. The nitty-gritty numerical details that I have the privilege of seeing every day in my job as a financial planner. Exactly the kind of earnest and honest discussion we had at the birthday dinner that night.

That discussion was groundbreaking and had all of us very excited. “Bring another bottle of wine!” we called, and my friend Kristy laughed, saying that now she would have to wait till her next paycheque to buy a toilet for her new house. We all died laughing. It was funny because it was true.

I took another chance and asked the women to fess up about how much they really made a year. We went around the table one by one, admitting how much money we made and, for those who were in relationships, how much their partners made. It felt great to get it all out.

When I said how much I made, Renee was surprised. She had thought I made a lot more, an assumption she’d made because I worked in finance.

“Yeah, but I work for myself now,” I said. “It’s different. I don’t make as much as I used to.” It was wonderful to be able to set the record straight. If only we had done that a long time ago! Then I could have said I love you but I don’t want to spend $80 on Wednesday. Can we go somewhere else? without hurting her feelings. Being open about what I earned, complete with the numerical details, would have allowed me to suggest a change of plan without guilt, because she wouldn’t think I was sitting there earning megabucks and nit-picking about her dinner venue. Once she knew what I made, she got it. I could say no without being judged.

The profound effect that night had on our lives is still evident to this day. These many years later, we still make plans differently. When birthday parties, get-togethers, weddings, even our kids’ birthdays come up, my girlfriends can say “I shouldn’t be spending that money right now since I’m saving for _______. Can we make another plan?” or “Congrats on the house. I didn’t get you a housewarming gift because I’m trying to save for my own house” without feeling guilty, cheap or judged. We can sit things out without feeling shame. We have permission to say no to overspending. And, most important, the person hosting the event or receiving that information doesn’t take it personally. Everyone wins.

In addition, knowing how much each of us earns allows us to celebrate raises and new jobs without comparing ourselves to one another or assuming that some people really have it going on when truly they don’t. It sets realistic expectations for the entire group. Talking about money has made it possible for us to say no to spending that isn’t safe and happy at the same time, which means we can live within our means without hating our lives. It’s helped us all worry much less about money.

Spreading the Word

After seeing the profound effect that money honesty had on my own group of friends, I made up my mind to share this strategy with my clients too. I started with Beena.

Beena was frustrated. She and her husband had been trying to save up for a family vacation for two years, yet they kept dipping into their savings to cover the cost of daily life and putting off the holiday.

After going through their finances, here’s where Beena and her husband stood:

Monthly after-tax income	$7,915
Fixed Expenses: Money You Cannot Spend	$4,800	(61% of after-tax income; too high!)
Meaningful Savings: Money You Cannot Spend	$800	(10% of after-tax income)
Short-Term Savings: Money You Cannot Spend	$315	(4% of after-tax income)
SPENDING MONEY: Hard Limit	$2,000	(25% of after-tax income)

Their Short-Term Savings broke down as follows:

	Per Year	Per Month
Vacation fund	$1,980	$165
Gifts and birthdays	$1,200	$100
Car repairs	$600	$50
Totals	$3,780	$315

One of the key problem spots Beena identified was the spike in spending for birthday parties for her kids and their friends. You’ll note that the amount they set aside was $1,200 per year.

“These parties are relentless,” she said. “My kids are invited to so many. And we end up shelling out $25 a pop for the gift and card and wrapping paper. It adds up!”

“What about the parties for your own kids?” I asked.

“We try to keep the costs down, but by the time you add in the cake, a gift and an activity for everyone to take part in, you’re looking at $350 per kid. And our parties are considered low-key.” She shook her head. “I feel like a bad parent for not renting blow-up castles or video game systems. It’s wild.” (Here’s the Inadequacy Influence rearing its ugly head.)

Beena’s annual spending on birthday parties for her kids and their friends looked like this on the Happy Spending spectrum:

Cost per Year

EROI

Birthday parties for her kids

$700

($350 each)

(Will try to reduce)

Gifts for other kids

$500 ($25 each)

(It’s too much)

Beena and her partner could technically afford this. But spending money on these parties ate directly into the money she wanted to use for purchases with a much higher Emotional Return on Investment. For Beena, the parties were Unhappy Spending. Was the expense safe? Yes. Was it happy? No, neither in the short term or the long term.

Beena should have said no to these parties. But that was not so easy. It was a matter of social obligation and fear that her kids would be shunned if they went to a birthday party without a gift. So she and her partner continued to shell out $500 a year on Unhappy Spending and resented it when they couldn’t take a family vacation, making them feel broke.

After identifying the problem, I suggested that she try talking with the other parents about the money spent on these parties. “Just try it,” I told her. “I bet you’re not the only parent who feels like this. I hear this complaint a lot.”

After a bit of thought, Beena was willing to try. That year she resolved to prioritize her family vacation (true Happy Spending) over other kids’ birthday parties and have the guts to explain to the other parents what she was doing—a birthday-gift boycott. “If they don’t like it, too bad. My family comes first,” she said. We high-fived (literally).

A few months later, Beena touched base by email to let me know what had happened with the birthday-gift boycott.

Thank you so much for suggesting that I talk about money with the parents of my kids’ friends. It’s been a game-changer. I was terrified at first, but the next time my daughter was invited to a party, I bit the bullet. I called her friend’s mom and told her that Nina was really excited to go to Olivia’s party, and while she might kill me for this, I was calling to see if there was something we could do about gift expectations.

Olivia’s mom, Nancy, asked me what I meant, and I told her honestly that we have been trying to save for a family vacation for some time but we keep dipping into our short-term savings for social events—things like birthdays, showers, etc.—and I just had to draw a line in the sand. I told her I’d like to brainstorm some creative ideas so that Olivia would have a great party and Nina wouldn’t show up empty-handed and Nancy wouldn’t end up thinking I’m a jerk.

Once I’d opened up about it, Nancy was all over it. She said she felt the same way and was even feeling guilty about throwing the party, because she so gets it. “It’s $25 here, $40 there,” she said, “plus the time spent shopping and wrapping. It’s exhausting.” She was so excited to discuss alternatives. We came up with a plan that each parent would contribute $10 and Olivia would get one awesome gift that came from everyone.

All the parents were so into it. Shannon, it’s a birthday-gift revolution. Now all of us do it. Everyone is saving time and money, plus the kids get something really special, so they don’t feel hard done by (First World problem). Some parents are even using the $10 gifts towards their kid’s education fund! It’s become the norm within the group. We like to think we are fighting the consumerism mentality with our kids, but really we are just trying not to go broke one-upping each other with more crap to give our kids. This will save us hundreds a year, as well as so much anxiety and worry. Thank you!

At our financial check-in a year later, I found out that Beena had implemented the birthday-gift boycott with as many of her children’s friends as possible. “Ninety-five percent of them are so excited about it,” she told me. “Those who aren’t are judging me for sure, but hey, I know this is the right decision for my family and my finances.”

I asked her why she thought that talking about money was directly linked to the success of the boycott. “Because everyone knows we aren’t trying to be cheap or jerks. We don’t want to hurt feelings, but we are also so tired of spending so much. The big thing is that every family who implemented this idea is relieved to be spending less money and having more breathing room.”

I asked her if she ever felt guilty about asking a parent to participate. “Not at all. I just tell them that we aren’t able to afford things that are important to us as a family if we keep shelling out hundreds each year for birthday gifts. The fact that I’m so honest about it makes it impossible to call me a jerk. Who would?”

Amazing, I thought. This is how we start change. This is how we make change. If more of us were honest and open about our finances, it would become the norm. It’s all about being willing to be vulnerable.

The key is not just to say “I can’t afford this.” The key is to explain the effect that spending money has on your overall finances and what’s not happening because of it, and then to suggest that there might be an alternative. That’s how you say no effectively without hurting the other person’s feelings.

If you ask what’s possible, it also leaves room for discussion and new possible solutions. Rather than bailing at the last minute (which does hurt feelings) or spending and resenting it (which makes you feel broke), there is a solution that works for everyone.

Try it. Next time you have to say no to a bachelor party or a reunion or a Father’s Day event because of the cost, try talking about your finances in a real way so that you can explain why you’re saying no, without hurting anyone’s feelings or feeling guilty about it yourself.

How to Say No without Guilt (How to Talk about Money)

1. Take a big breath.

2. Explain the negative effect that spending money on this particular item/event will have on your overall finances.

3. Outline what is not happening because of it.

4. Ask if other alternatives are possible so that everyone wins.

5. Accept that someone may not agree.

Talking about Money: A Family Affair

Talking about money is important not only when dealing with your peers but also with your own family—parents, siblings and especially children.

Kids cost money. There’s no two ways about it. I used to make the joke that my job was the best form of birth control in the world after I’d seen just how much children can mess with the household finances.

While parents love their kids and wouldn’t change a thing about them, there’s no denying the fact that children heighten the financial fears and pressure to overspend that modern life has brought us, because we care so much about them. Raising a human is an expensive adventure that comes with so much social and cultural pressure. The most broke-feeling clients I have are parents or those who want to be parents one day.

The parents I meet want to give their kids what they believe is their best shot at life and raise them the way they were raised, or preferably better. Now, if you’re reading this and thinking, I don’t have kids. Why should I read on? I urge you to. If you do want kids one day, this will help. If you don’t want kids one day, perhaps you can relate because there’s someone in your life who depends on you financially, someone you love fiercely who requires you to spend money. When you love someone like that, it makes it very hard to say no.

There’s a lot of pressure to spend money on your kids: class trips, hot-lunch programs, a new phone, back-to-school shopping—the list goes on. Modern life has made what’s considered “normal” more expensive than ever. I remember when only drug dealers and Zack Morris had mobile phones or pagers (ahh, the good old days). But now a personal cellphone is considered normal for an 11-year-old.

Yet even as all this pressure to spend mounts, wages are being squeezed and the cost of housing continues to rise for so many of us. These days I’m meeting more and more parents who are literally going broke trying to keep up with their kids. The problem is that the kids don’t know what’s happening financially behind the scenes, because there’s still a lot of stigma around talking openly and honestly about money with our kids. I don’t want them to worry. I don’t want them to think we’re unsuccessful. I don’t want them to tell other kids’ parents.

Getting real about money with your kids is scary. The very person who’s costing you money is the exact person you’re trying to protect from knowing there is a problem. It’s complex. But too often I see parents throwing themselves into financial peril in order to support their kids’ lifestyle expectations. That’s not okay.

Parents need to get financially real with their kids in order to stop overspending and feeling broke. Saying no does not make you a bad parent. You need to learn how to say no without feeling guilty. The only way to do this is by talking about money and making your kids part of the household financial discussions.

Meet Andy and Max

Andy and Max

Ages: 45 and 48

Relationship status: married

Kids: 1, age 14

Annual gross household income: $120,000 ($70,000 + $50,000)

Assets: house valued at $650,000

Liabilities: $25,000 line of credit; $515,000 mortgage

My clients Andy and Max are a perfect example of this. They have a daughter, Chloe, who is involved in competitive dance. Chloe is a gifted athlete. Her dance career began when she was young and it wasn’t long before she excelled far beyond her peers. This girl has it. She loves to dance. It makes her happy, it keeps her active and, because she’s so dedicated, it takes up most of her time. As a result, her dance teammates are her best friends, her community. Without them her entire social network would collapse. The problem: Chloe’s dance training and competitions cost $12,000 a year.

Max and Andy were in my office because they were sinking. They were using their home equity line of credit like an ATM and had nothing going towards retirement savings. They kept on borrowing an average of $5,000 every year with plans to roll it into the mortgage at renewal. They felt like they were going broke—because they were.

“Our finances are a house of cards,” Andy said. “At any moment the whole thing could come down. One significant rise in interest rates or a job loss would devastate us financially.”

Here’s a shakedown of their finances:

Monthly after-tax income	$7,920
FIXED EXPENSES: Money You Cannot Spend
Mortgage	$2,400
Utilities	$300
Cable/Internet	$100
Phone	$160
Subscriptions	$20
Property tax	$350
Home insurance	$100
Line of credit minimum payment	$175
Car payment	$275
Car insurance	$120
Total	$4,000	(51% of after-tax income)
MEANINGFUL SAVINGS: Money You Cannot Spend
Retirement savings	$0
Line of credit above-minimum payment	$0
Total	$0	(0% of after-tax income)
SHORT-TERM SAVINGS: Money You Cannot Spend
Home repair fund	$0
Car repairs	$0
Total	$0	(0% of after-tax income)
SPENDING MONEY: Hard Limit	$3,920	(49% of after-tax income)
Spending Money	Per Year	Monthly Average
Andy and Max
Groceries		$930
Dining out/lunch out/coffees		$600
Gas		$300
Dog		$70
Grooming ($600 + $360)	$960	$80
Clothes ($720 each)	$1,440	$120
Family outings/entertainment ($100/week)		$400
Total Andy and Max		$2,500
Chloe
Phone		$100
Dance	$12,000	$1,000
Christmas	$600	$50
Summer camps	$480	$40
Clothes	$1,020	$85
Grooming	$240	$20
Birthday	$300	$25
Outings/vacations with friends (4 × $225)	$900	$75
Sleepovers	$300	$25
Total Chloe		$1,420
Total Spending Money		$3,920

As we looked over the numbers, the most glaringly obvious thing for me to ask was “Are you willing to give up dance?” But Max beat me to the punch. “Dance is nonnegotiable. We know it’s too expensive, but it’s her life.”

I asked them to rate dance for Happy Spending. “It’s a 5 out of 5 for us both,” Andy said.

“And like a 6 out of 5 for Chloe.”

As you can see, there was not a whole lot of wiggle room there. Dance would cost them $12,000 a year for another three years. Something had to give. The first thing to do was stop the bleeding. That was Step 1.

“The first goal this year,” I told them, “is to stop going into debt by $5,000 every year and using the line of credit. If you can get through the year without using the line of credit, you’ll be winning.”

Now, you may be judging me for not telling them to sell their house, or rip their kid out of dance, but why would I waste their time and money on a plan they wouldn’t put into action? It would be shame-y and gross and wouldn’t move them forward at all. I wanted to design a plan that made sense for them, one that was realistic and that they would actually embrace. I’d rather they agreed to save $100 and then did it than have them agree to save $1,000 and just give up because it was so far-fetched, given their financial reality and Life Checklist.

They needed a way to reduce annual spending by about $5,000 (the amount they kept borrowing on the line of credit) so that they stopped going into debt. They told me that they usually dipped into the line of credit to pay for unexpected things, like $1,000 on car repairs and usually about $4,000 on home repairs. Therefore they needed to build up a Short-Term Savings account with about $5,000 per year ($416 per month) to stop the cycle of debt.

We went through their monthly Spending Money to identify possible places where they could realistically cut back.

Most of the things were already Happy Spending. The only things Max and Andy were willing to reduce were excessive convenience groceries and their takeout lunches, which were lower on the EROI spectrum at 3 out of 5. Cutting anything else would be unrealistic, they thought. As far as they could tell, there was no more room for reductions.

The new mindful spending goals were to go out for lunch only twice a week and to buy a premade dinner once a week. By reducing this spending they had raised approximately $210 per month. This would mean annual savings of $2,520 ($210 × 12 months), but that wasn’t enough. They still needed to come up with $2,480 ($5,000 – $2,520) a year to hit their goal of $5,000.

You’ll note that the $2,520 they were willing to reduce by were all things that affected only Max and Andy, not Chloe—a perfect example of how they were sacrificing their own happiness to keep from having to adjust their spending on their daughter. But at this point it had to happen. Something had to give.

“Do you think Chloe would be open to reducing any of her expenses?” I asked.

“She’s 14. Probably not,” Andy joked.

“Well, do you see any other places to reduce besides her expenses?”

“No, I actually don’t,” Andy replied.

	Monthly	EROI	New Goal
Andy and Max
Groceries	$930	3	$900
Dining out/lunch out/coffees	$600	3	$420
Gas	$300	MUST	$300
Dog	$70	5	$70
Grooming ($600 + $360 per year)	$80	5	$80
Clothing ($720 each per year)	$120	5	$ 120
Family outings/entertainment ($100/week)	$400	5	$400
Total Andy and Max	$2,500		$2,290
Chloe
Phone	$100	?
Dance ($12,000/year)	$1,000	?
Christmas ($600/year)	$50	?
Summer camps ($480/year)	$40	?
Clothes ($1,020/year)	$85	?
Grooming ($240/year)	$20	?
Birthday ($300/year)	$25	?
Outings/vacations with friends ($900/year)	$75	?
Sleepovers ($300/year)	$25	?
Total Chloe	$1,420
Total Spending	$3,920

“Me neither,” I said. “I think it’s time we brought Chloe into the conversation.” I could see that this comment made both Max and Andy uncomfortable. So I said, “You don’t want to. Why is that?”

“I don’t want her to worry or feel guilty about the things she wants to do. It’s not her fault that we don’t make enough money,” Andy said, holding back tears.

“Whoa, whoa, whoa,” I said. “This is not a personal failure. You both have solid incomes; you are not bad parents. The expectations you are putting on yourselves are unrealistic. That’s the problem.” (Sounded like a Life Checklist item to me.)

They stared at me but said nothing, so I pushed on. “Chloe’s expenses are $17,040 a year. That’s $1,420 a month—18 percent of your take-home income! That’s very high. Do you think she would relish the idea of her parents being in tears and sacrificing their retirement in order to pay for her dancing?”

“Of course not. She’d be devastated,” Andy said.

“Exactly. Right now she has no idea that you can’t afford this, so of course she wants everything. We need to try to reduce her annual spending by $2,480, to $14,560 a year, so you can hit your financial goal of saving $5,000 to Short-Term Savings. We’ll find out if we can reduce her spending in a way that feels good for everyone. No guilt, no shame.”

I gave them an activity to do at home:

1. Sit down with Chloe, letting her know in advance that it’s a talk about money and finances and that it’s a family meeting, so she knows it’s a serious conversation. Blame it on me.

2. Show her the list of her expenses.

3. Explain that her expenses come to 18 percent of the family budget.

4. Explain what’s being given up in order to continue spending so much, that you’re not putting away enough for retirement.

5. Explain that she has to get her annual spending down from $17,040 to $14,560—her Hard Limit.

6. Explain what Happy Spending is.

7. Have her rate her spending happiness on a scale of 1 to 5.

8. Then ask if she would be willing to reduce the expenditures that have a lower happiness rating. Go through the list of her expenses line by line and ask what she thinks is possible. Every decision should be hers.

9. Add up the total costs and promise that every year she’ll get to decide what her Happy Spending is. Her life will change as she grows, and the demands will change.

Andy and Max did exactly that. Here was Chloe’s Happy Spending list:

	Annual Cost	EROI	What’s Possible
Phone	$1,200	5	$1,200
Dance	$12,000	5	$12,000
Christmas	$600	3	$100
Summer camps	$480	1	$0
Clothes	$1,020	4	$410
Grooming	$240	4	$50
Birthday	$300	1	$50
Outings/vacations with friends	$900	3	$450
Sleepovers	$300	5	$300
Total Chloe	$17,040		$14,560

For the next two years, Chloe would have $2,560 above the $12,000 for dance ($14,560 total) to spend however she’d like. So the plan was to sit down as a team and Chloe would map out how she wanted to spend the money that year. By doing this, her parents managed her expectations. She was involved and understood the reasons for the cuts. As a plus, she was able to make her own financial choices. She was part of the discussion.

One year later, Max and Andy came for their check-in. “How did it all play out?” I asked.

“Brilliant! Chloe is the coolest. We talk about finances now in a way we never did before. She is so mindful of the cost of things, and it’s helped make us more mindful too. Back-to-school shopping was such a breeze because she knew she had $210 to work with, so it wasn’t really a stressful thing for us. And the holidays were totally changed. We didn’t have a credit card hangover after Christmas because we had set a limit and Chloe’s expectations were managed. We all just worked within the plan.”

“Did you feel guilty about the reductions?”

“No, because I would never have made those cuts for her, but she made them for herself. Her Christmas budget was so low and she didn’t care at all. I could never have made that decision before without feeling tremendous guilt,” Max said.

“I thought that maybe it would be awkward,” Andy said. “And I worried that maybe she’d feel bad about dance, but that didn’t happen. Because she understands why there are boundaries and gets to choose how she spends her portion, she’s satisfied. She totally gets it.”

Financially, Max and Andy were getting back on track. They hadn’t tapped the line of credit once in a whole year, so the payments they were making were actually going towards the principal. They felt empowered and excited again, full of hope. Their goal for the next year was to use the additional money coming in from their expected raises towards the line of credit. Slowly they would get to where they needed to be financially.

“Only two more years of dance,” Max said. “Then we will be able to live life like kings.”

“Not so fast,” I said. “Once the dancing is over, all that money is earmarked for retirement. We have to make up for lost time.”

“We know,” Andy said. “Maybe Chloe will use some of her student loan to take us on a trip?”

I laughed with them. “Tell her to come in for an appointment when she’s finished school. I’ll help work that in,” I joked.

Empowering your kids to be part of the financial discussion is crucial if you don’t want to go broke trying to keep up with their lifestyle. Not only will you be improving your own financial life, you’ll also be teaching your kids that they can’t have everything and empowering them to make trade-offs themselves. This will not only help you live within your means, it will also help your kids become financially responsible adults.

Introducing Hard Limits and Happy Spending to your kids is the best way to help them feel like they have control over their own finances. And they still get to enjoy life, so you don’t have to feel guilty about saying no to them and reducing spending. Remember, when the plane is going down, you have to put the oxygen mask on yourself first and then you help the babies. It’s the same with your money.

How to Say No to Your Kids about Spending Money Beyond Your Means

1. Have a family meeting.

2. Show them a list of annual expenses.

3. Explain what’s not happening in the family finances because of overspending. Is it a vacation? Is it repairs for the house? Is it retirement? What’s at stake?

4. Outline the reduced annual goal for their spending.

5. Explain what Happy Spending is.

6. Have them rate their spending on a scale of 1 to 5.

7. Ask them to reduce their Unhappy (or less Happy) Spending so that their annual spending is in line with their own Hard Limit.

8. Allow them to decide each year how their annual Hard Limit is spent.