Financial therapist offers advice on how to say 'no' to family and friends when they ask to borrow money.

Be cautious when lending money to friends or family members to avoid straining your relationship.

According to Bankrate's 2024 financial taboos survey, nearly a quarter of people who lent money or covered a group expense with the expectation of being paid back reported that doing so negatively impacted their relationship with the other party.

To avoid going bankrupt while loaning out money, it's important to establish limits and make them clear.

"Aja Evans, a board-certified therapist who specializes in financial therapy, advises CNBC Make It that before giving money to someone, one should determine if they can afford it. If not, they may not be in a position to help. Evans emphasizes that one should not sacrifice their own financial stability to save someone else."

Having a conversation about money with close friends or family members can be challenging, as they may have preconceived notions about what you can and cannot afford based on your spending habits, such as clothing or vacations.

Evans advises that just because you have money in your account, it doesn't mean you can give it away. It's important to remember that you know your money best and to be mindful of other bills that may be coming.

When asked to loan money, it's important to establish a healthy boundary and navigate any potential guilt that may arise by saying no.

Give what you can afford

It can be difficult to say no when a friend or family member asks for money, especially if you've lent them money in the past. However, Evans suggests starting small as a way to handle the situation.

If a friend asks to borrow $100 but giving them the full amount would significantly impact your budget, consider offering an amount that is more feasible for you, such as $20 or $30.

It's not necessary to explain why you can't give them the full amount they've requested, but it can be helpful to communicate your other financial obligations, advises Evans.

She explains that setting boundaries is beneficial because, even though you may not be able to fulfill all of their expectations, you're still able to provide what you can without jeopardizing your own well-being.

It's OK to feel guilty

It can be helpful to write down your financial boundaries and the reasons you're setting them when feeling guilty after refusing to lend money to a friend or family member, even if you're proud of yourself for setting the boundary, Evans suggests.

By putting any additional income into a high-yield savings account, you can increase your emergency savings, which you can easily refer to when someone tries to pressure you into lending them money, according to Evans.

""To achieve your goals, remember why you started and establish boundaries to protect them," she advises."

If you find yourself giving in to a request for money from a close family member, it can be helpful to create a list of coping strategies to help you feel better, advises Evans.

"The list is extensive. Try going for a bike ride, preparing a meal, or watering your plants," she suggests. "The list continues, but it's important to have something that can reduce stress after a confrontation."

In the long run, adhering to and maintaining your financial limits can lead to achieving your financial objectives, despite the initial challenges.

"Although it's challenging, it's crucial," Evans remarks. "You may feel down now, but you'll be thrilled when you can afford the necessities."

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