4 tips to keep your financial plan on track when financially supporting loved ones (2024)

When it comes to your money, it's critical to know your limits.

This is where the financial planning process can be so valuable. It allows you a deeper look into your financial situation, with clear steps to get you from where you are now to where you want to go. But, for many, supporting loved ones financially can derail even the most well-laid financial plan.

Whether it be your kids, parents, siblings, or even friends, there may come a time when you want, or need, to help support them.

But, when supporting loved ones financially, it is essential to avoid derailing your financial plan. It's not always easy to do, and it may require saying no in certain situations, but it is worth it. Because ultimately, if you derail your financial plan to support loved ones, you perpetuate the cycle and one day you may be asking your loved ones to support you.

Instead, here are four tips to financially support your loved ones while keeping your financial plan on track.

First, know where you stand financially.

The first step when deciding to support loved ones financially is to know where you stand.

Often, this involves a detailed look at your financial statements—from cash flow to net worth and everything in between. But, most importantly, it's critical to understand how you are progressing towards your financial goals.

• Are you on track for a secure retirement?
• Will you be able to live the lifestyle you're aiming for?
• Are you in a position to help?

By answering these questions and reviewing your financial situation, you'll begin to get a clear understanding of whether you're in a position to help.

Because ultimately, financially supporting loved ones is a lot like the safety training before flight take-off: You must put on your oxygen mask first before helping others.

Second, determine what you're willing to provide.

After reviewing your financial situation and understanding your position, you can determine what you're willing to provide.

There are a couple of things to consider here. First, just because you can help your loved ones doesn't mean you're obligated to. And, you don't have to offer everything extra that you have. It's up to you to decide what you're willing to provide.

And, if you're married, it's also essential to consider your spouse's viewpoints.

Often, spouses can disagree about how much help they can offer their loved ones. This can cause a rift in the relationship, creating a misalignment of financial goals, hopes, and dreams.

Instead, do your best to be on the same page with your spouse. Understand that you both have different money experiences and behaviors but work together to reach an agreement that allows you to feel heard and understood. Often, this is where a financial planning professional can be invaluable.

An experienced financial planner will be able to help you navigate the conversation with your spouse, offering you both the reassurance that your financial plan will remain intact while also coming to a decision that works for both you and your partner.

Third, communicate clearly and set boundaries with your loved ones.

Once you've decided what you want to provide, it's time to communicate that with your loved ones.

In many families and cultures, talking about money is considered taboo. But, when providing financial support to loved ones, it is essential to communicate clearly and openly. This will help avoid any surprises or misaligned expectations.

Here are some things to discuss when providing financial support:

• Make sure your loved one understands whether the support is one-time or ongoing.
• Discuss whether you expect them to pay you back or not. In other words, is this a financial gift or a loan?
• Make sure they understand that you and your spouse have agreed to this to avoid feelings of shame or guilt around your partner.
• Discuss whether you'll be able to help them out again in the future. They may need it, they may not, but if you don't discuss the future, then they may turn to you again in a time of need.

Lastly, remember that conversations around money can be sensitive and complex.

But, if you approach the conversation with a genuine desire to listen and be heard, things should go well. And in the end, remember that your goal is to keep your financial plan on track while keeping your relationships healthy and intact.

Fourth, stick to your plan—exceptions should be rare.

Lastly, stick to your plan—exceptions should be rare.

When supporting loved ones, it's almost guaranteed that something will change or come up. Because ultimately, if your loved one found themselves in a situation where they need your support, it's possible they could end up in that situation again. But, once you've determined how much you can help and communicated that clearly, it can be best to stick to your plan.

By sticking to your plan, you're communicating to your loved ones that you are here for them but that they also need to support themselves.

This can help you avoid a situation where you offer chronic financial support, often to the detriment of your financial plan.

But be open to changing circ*mstances and avoid becoming too rigid. Remember that when someone is down on their luck and needs help, they're in a vulnerable state. Even small life changes can push them into a position where they need additional assistance, so be sensitive to that possibility.

The goal should be to find a healthy balance of sticking to your plan while being open to changes.

Lastly, remember that there is a difference between helping someone and enabling someone. Don't enable. However, there are a host of circ*mstances that are possible where stepping in and offering love and help, even financial help, is the right thing to do. If you find yourself inclined to help and it's not enabling the person, then help. It will be an experience you will not forget, and the donee will not forget either. Don't miss those opportunities if you can afford to help.

In the end, one of the best ways to determine how much you can afford to help your loved ones while keeping your financial plan on track is to consult with a trusted financial professional. They will be able to consult your entire balance sheet and help you determine what is sensible.

TrueNorth Wealth is here to help.

If you're interested in working with a fiduciary CFP® professional to help outline your unique investment plan, complete with a custom investment portfolio to deliver your financial goals, then TrueNorth Wealth is here to help.

TrueNorth Wealth is among the top Wealth Management firms in Utah and Idaho, with offices in Salt Lake City, Logan, St. George, and Boise. At TrueNorth Wealth, we focus on helping our clients build long-term wealth while maximizing the enjoyment they receive from their money. We do this by pairing our clients with a dedicated CFP® professional backed by an incredible team.

For our team at TrueNorth, it's about so much more than money. It's about serving families all across Utah and helping them achieve freedom and flexibility in their lives. To learn more or schedule a no-cost consultation, visit our website at TrueNorth Wealth or call (801) 316-1875.

The information offered in this article is opinion, not professional advice. To take charge of your own finances, pleases consult with a licensed financial advisor.