Financial Planning for Geeks

To the Limit: Financial Dependency and Enabling

- Potpourri

If last month’s blog about Lifestyle Creep wasn’t squirm-worthy enough for you, maybe this month’s will be. Let’s talk about boundaries, my friends. Financial boundaries.

Children gathered around Santa Claus and his treasure chest.
The gravy train arrives!

Psychologist Henry Cloud wrote, “Boundaries define us. They define what is me and what is not me. A boundary shows me where I end and someone else begins, leading me to a sense of ownership. Knowing what I am to own and take responsibility for gives me freedom.”

On the other hand, when we don’t have proper financial boundaries with friends and family, we may find ourselves in the position of enabling someone or becoming dependent. Financial enabling is a vicious cycle in which a dependent person receives financial support from an enabler to the extent that their own development is stunted. Enabling can also create havoc in the enabler’s own financial life and relationships.

Unfortunately, I have observed financial enabling and dependency in the lives of some of my clients. “Gina,” a divorced woman in her late 50’s, found through financial life planning that she would need to work for about 10 more years to make sure she had enough savings for the retirement she wanted. She proposed working for her daughter as the caregiver for her granddaughter, for about 1/3 of what she needed to make her plan work. And her daughter was in no financial position to support Gina when she ran out of money.

The “Partridges” wrote large checks to their 40-ish son every couple of years so he could start another new business after the previous one had failed. They had a lot more assets than Gina…but they didn’t have long-term care coverage and they were eroding their savings by continuing to bankroll Junior’s ideas. They were one failed business and a long-term-care stay away from dire financial consequences.  

I’ve also seen financial enabling on a smaller scale, with the parents of my employed, financially stable, 30-something clients still paying for their cell phones and trips home. This is a bit easier to address, since the financial outlay is usually smaller and thus less damaging. Not all of this support may need to go; I’m simply suggesting that you review it and know when it is OK for you and when it is not.

The consequences of enabling and dependency can get pretty extreme. As you saw above, financial enabling can have a disastrous effect on the enabler’s financial stability. It can also be emotionally draining and cause shame to the enabler, since they can’t find a way to say “no” even if they feel they should. The enabler may also feel angry or resentful toward the enablee for “taking advantage.”

For the enablee, financial support can keep them from learning from their own mistakes. It can also stifle the development of good financial habits, reduce the motivation to work, and hinder personal growth. The enablee may also feel shame and resentment toward the enabler: “Why do they think I’m so incompetent”?

I wish I could tell you that as soon as I pointed out the consequences of financial enabling to my clients, they set boundaries and made some changes. Oh yes, I pointed out the financial consequences but I’m no counseling psychologist. I could get my clients to an intellectual understanding of the issue but, to my sorrow, I couldn’t get them to act. This is deep, complicated stuff and the level of behavioral therapy needed to address it was beyond my skills as a coach. No happy endings there but stick with me.

I hope you realize by now that I don’t mean to judge people for helping their family members and friends, or for accepting help when they need it. I am not saying we should never give or receive help. What I’m suggesting is if we are helping someone to the detriment of our own financial health, or to the detriment of their growth, we need to set some healthy boundaries. If we are accepting help from someone to the detriment of our own growth, or to the detriment of their financial health, we need to set some healthy boundaries. If we fell asleep on ourselves and are paying for (or receiving payment for) expenses that can be reasonably handled by the owner of that expense, we may need to set some healthy boundaries.

So how do we do that? Ay, there’s the rub. If it were easy, I could have helped my clients make other choices. But here’s my summary of the Three Basics of Boundaries:

1.       Set Limits/Rules/Boundaries: it can be hard to set a boundary without making it into some kind of threat or ultimatum. A boundary is a clear limit with a clear outcome. It gives the other person options and lays out the consequences for crossing the boundary. Here are some examples which might help:

    a. Threat: if you don’t join us at Ewing Oil as VP of Sales, you’re out of the will.

    b. Ultimatum: if you don’t have a six-figure job by Halloween, you’re cut off.

    c. Boundary: as long as you are actively looking for full-time work (insert criteria here), we will keep supporting you at the current level. After the six months are up, if you don’t yet have a full-time job, we will reduce your support to 60% of the current level (and so on).

2.       Implement Consequences: this is the hard part. If you are the enabler, you actually have to follow through on the consequences. If the enablee doesn’t do their part, the enabler MUST enforce the consequences so that the enablee knows the boundary is real. Here’s a non-financial example: if your kid throws a tantrum in the grocery store and you go ahead and buy them the toy, they learn that your rules around public behavior are bullshit. They learn to throw the tantrum every time, and is that really good for you OR the kid? Again, I’m not saying it’s easy.

3.       Consistently Enforce Boundaries: this is the even harder part. Don’t expect that once you set a boundary and keep it once, that will be the end of it. What if the situation comes up again? What if the enablee loses or quits that full-time job? Then we go back to the 60% support while they are actively looking for work, or whatever boundary we want to set there. Again with the non-financial example: if your kid throws a tantrum in the grocery store and you buy them the toy 1 time out of 10, they learn that your rules around public behavior are inconsistent. They learn to throw the tantrum every time, because at least they got the toy once. Maybe THIS is that time! Again, is that really good for either of you? It’s definitely not good for me, the mean lady behind you in line.

How about some resources to help you set, enforce, and maintain good boundaries?

1.       Read: there are plenty of good books out there about setting boundaries. You can try Setting True Boundaries: How to Create Respect, Safety, and Freedom in Relationships by Dave Jetson or Daring Greatly by Brené Brown.

2.       Assess: the doctors Klontz (Brad and Ted) maintain a website called “Your Mental Wealth,” and have created a Money Disorder Assessment to help you learn more about your relationship with money.

3.       Get help from a pro: there is an emerging cohort of financial therapists who have the skills and training to help you work on financial boundaries.

4.       Enlist a gatekeeper: If you have a financial advisor, sometimes they are willing to play enforcer for you. Your advisor might be willing take on the bad guy role in your financial life so you can tell an enablee, “I can’t help you out this time; my advisor tells me it would do irreversible harm to my retirement plan.” Some advisors might even be willing to speak with the enablee directly to enforce boundaries or get them going on their own financial life plan.

In other cases, if you do want to help someone but don’t want to just hand over cash to a potential enablee, you can pay bills for them directly. For example, you could send money directly from one of your accounts to pay a medical bill, student loan installment, or tuition.

I hope this post has helped you examine financial dependency and enabling in your own life, as relevant. Either way, I hope this post can help you stay safe and happy, with boundaries intact and ready to deploy whenever you need them.

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Penny Farthing

I, Penny Farthing (non-wizarding name Kerry Read ), actually have a day job in the world of finance. This blog came into being because of my deep and abiding love for geeks and Personal Finance.