How to Talk Money With Friends and Family

Everyone has a unique relationship with money and how they manage it. Some of us are natural-born scrimpers and savers. Others have a hereditary flair for spending and spilling red ink. Most of us fall somewhere in between, relying on a personal approach to finances that we've forged over a lifetime of trial and error.

Things get tricky, though, when our relationship with money differs from that of our closest friends and loved ones. To avoid hurt feelings and heated clashes, here are some time-tested tips for defusing potential financial conflicts before they happen...and keeping the peace with everyone involved.

Money Matters Among Friends and Family

Shakespeare wrote "neither a borrower nor a lender be," and many think that's especially true for friends and family. Others take a more charitable view: If you lend close friends and loved ones money, consider it gone; if you get it back, consider yourself lucky. Before mixing money matters with friends or family, consider these important steps:

1. Ask tough questions. Does the borrower have other options? If a bank won't lend them money, find out why. If unmanageable debt is the issue, personal finance expert Suze Orman suggests you tactfully recommend they get some credit counseling.

2. Eliminate guesswork. If you do provide the money, decide first whether it's a gift or a loan. If it's a loan, DailyFinance.com says you should put the terms in writing. You might even want to get an impartial third party involved in the negotiations, especially if you're handing over a large sum. Keep track of repayments made in installments using records and receipts.

3. Avoid flash points. Around some dinner tables, money can be a touchy subject. A wealthy parent or more successful sibling, for instance, can shift the power balance in a family and become the one others turn to in times of financial need. But if borrowing threatens to create a family rift, Bankrate.com suggests being discreet about who lends what to whom; sometimes, mum's the word. When the transaction is between friends, don't attach strings to the deal or let the loan strain your personal relationship.

Financial Heart-to-Heart Between Couples

In money matters, spouses and partners face unique challenges requiring extra diplomacy. When couples function as a financial team, they stand a better chance of negotiating the money minefield with greater success, and the relationship reaps dividends, too. In a recent Forbes.com article finance writer Emma Johnson notes that "shared goals will bring you closer." No matter what happens, deep emotions are bound to get stirred, so it's best to take a step back and (as hard as it sounds) try to be objective. Here are some pointers:

4. Communication is key. Think your partner is stubbornly stingy or far too loose in his or her spending habits? Say so, and see if you can meet each other halfway. Talk openly, honestly, and non-confrontationally. When financial disputes flare up, Dr. Phil says you should ask yourselves if money is really the root of the problem.

5. Be transparent. Don't hide money or credit cards from your partner. You can maintain separate accounts; just don't keep secrets about debts and expenses. While Dr. Phil advocates keeping your finances separate, other experts suggest sharing one joint fund while maintaining individual accounts.

6. Create a plan. Set realistic goals for savings and investments with your partner. In a recent online interview, so-called "Money Couple Bethany and Scott Palmer (authors of "First Comes Love, Then Comes Money") recommend meeting regularly (once a month, say) to see if you're both sticking to the agreed plan. If not, be honest when certain targets haven't been met. Remember that nothing's set in stone. You can be flexible, and adjust your objectives if they don't seem to be working.

Like you, GEICO takes pleasure and pride in maintaining a balanced bottom line. To read what independent analysts have to say about our exceptional corporate financial strength, visit geico.com.

Originally posted on GEICO.

Opinions expressed by the author are not necessarily those of WITI.