Money (or the lack of it) has such an impact on our quality of life that not having your finances in order can cause problems for your mental health. In fact, according to a study conducted by Northwestern Mutual in 2018, 28% of Americans feel depressed at least once a month because of financial anxiety.

However, young adults often feel immense pressure to spend their money a certain way because of what their friends, loved ones and the media tell them to do.

“We know that peer pressure can get a bad rap about spiraling out of hand and causing you to lose control of your financial goals,” said Lindsay Bryan-Podvin, a Michigan-based financial therapist and the author of The Financial Anxiety Solution. “But what we also know is that when we’re in [a] community with others and working toward a similar goal, you’re more likely to achieve that goal and stick to your habits.”

In other words, group behavior can be a major indicator of financial success, and if you’re not around like-minded people, you can easily find yourself with negative consequences to your mental health, and your account balance. To stay in control, you’ll need to set boundaries with those in your circle, even though having money conversations can often be difficult and awkward. 

Here, we’ll take a look at some common scenarios and offer some advice on how to navigate them. 

How to talk about money when…

People criticize your financial decisions

Setting boundaries in your relationships may seem difficult to do, especially for those who are afraid of confrontation. However, boundaries are needed in all healthy relationships — especially when you consider the alternative.

In the Friends Again Report published by Bank of America in 2017, nearly half of the survey participants said that money issues have placed stress on their friendships while 53% have experienced a fallout over money owed.  

Setting healthy boundaries helps you to determine which people are good to have in your life and which ones are potentially toxic. 

“It’s about protecting your mental, emotional, and financial peace by saying no to these people,” said Bryan-Podvin. “It doesn’t mean that that boundary can’t change over time, but if someone is making you feel bad about the way you are or aren’t spending your money, they absolutely don’t need to take up a ton of space in your life.”

Those who truly care about you will understand your well-meaning intentions and support you, and you may find that they’ll even help you in additional ways in your journey to financial wellness. On the other hand, if you experience pushback, it might be time to take stock of this relationship and determine if it’s one worth keeping.

You can’t afford to join a group activity

It’s easy to focus on the immediate social benefits of going out to brunch with a friend instead of thinking about how these decisions can affect your future funds. But if you’re working on improving your financial situation, you may not be able to join your friends at every opportunity. Instead, make the effort to spend time with them in other ways to show that you still care about your relationship with them.

Consider setting aside a little bit of money every month for entertainment purposes, or be proactive and plan low-cost or free alternatives that won’t strain your budget. After all, you shouldn’t have to go into debt to spend quality time with the people you care about. 

If you can’t attend an event and people are pressuring you to go anyway, be gentle but firm in your response. “If they keep pressing you, say a little bit about what’s going on,” Bryan-Podvin explained. 

“You could say, ‘Hey, right now I’m working on paying down student loan debt or bulking up my emergency fund. I’d be happy to join you after that, but right now if you want to hang out, we’re going to have to do something different.’”

People ask to borrow money 

A recent study found that 41% of Americans have lended money to someone in their close circle over the past year, and that 27% of those people regret that decision.

In many cases, because there isn’t a formal agreement in place, those that lend money to friends and family members never see that money again. “If you are planning on loaning somebody money, you need to be treating it like a gift,” said Bryan-Podvin firmly. “You need to be treating it as though you might not get paid back.”

This can be a hard pill to swallow. You may want to do everything in your power to help a loved one out, but you may not be in the best financial position to do so.

If you do decide to lend someone money, Bryan-Podvin stressed the importance of drawing up a formal contract with information like the date, your signatures, the terms and whether or not you’re going to charge interest. It’s best to know exactly how you will be paid back and when the loan will be paid in full. 

If you can’t help out financially, know that there are still other ways to lend your support. 

“If a friend is in between jobs, you can take a look at their resume or reach out to your network to see if people are hiring,” said Bryan-Podvin. “You can offer support in ways that can lead to financial stability for somebody else, but you don’t have to put yourself in financial hardship to do so.”

You need to borrow money

On the other hand, you may very well find yourself in the position of needing to borrow money instead. 

If this is the case, first ask yourself if you really need the money — or if you just really want it instead. Consider how your life will change, if it does at all, if you don’t get the money for this purpose. Are there any other options available to you? Can you save up for it instead? Will not acting on this opportunity hurt you in any way?

On the other hand, you may find yourself turning to your loved ones for a loan because your credit history is thin or needs improvement. If you are comfortable with the thought of asking for money outright, instead you may want to consider asking them to help you build your credit by adding you as an authorized user on their credit card. 

When done by someone who is responsible with their finances, this alternative helps you build up your credit score. Their credit activity — including making regular on-time payments and keeping credit usage low — helps to boost your credit as well. 

Of course, if you use the card yourself and rack up debt that you can’t afford in the process, the responsibility to pay it back will fall on them. 

Whether you decide to borrow money outright or build credit as an authorized user on someone else’s account, putting a formal agreement in place will assure your loved one that you will act responsibly with the financial assistance they have provided you with.