How To Gracefully Back Out of a Financial Commitment

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Many people have second thoughts about all kinds of financial commitments. Some financial commitments, like taking out a loan and repaying it, require people to follow through on these commitments or face hefty penalties. 

Other financial commitments are not so much governed by laws as they are verbal agreements. You may agree to be in the wedding party for a friend or are planning to go on an overseas family trip. Suddenly, you must back out of these plans. You might not have enough money to travel overseas with family or you rushed into saying yes to the friend’s wedding without fully considering the nature of everything that is expected of you. How can you gracefully back out of a financial commitment and stay in good standing?

Why Can’t We Say No?

Before we explore how to gracefully back out of financial commitments, why, exactly, do we agree to these commitments? Can’t we just say no upfront?

Usually, the answer to this question is no. Michael Sullivan, personal financial consultant at Take Charge America, said the problem with many commitments is that they are based on the inability to say no. 

“Most consumers are quite aware of their inability to take on new financial commitments but find it difficult to say I can’t, which seems to reflect a personal failure, or I won’t, which seems to be uncaring,” Sullivan said.

When a person cannot decline a financial commitment, they agree to spend money they don’t have. Later on, they may reflect back on the decision and realize it was a bad one. Sullivan uses the example of flying to a destination wedding for a best friend or close relative. It sounds like a great idea, but adding up the costs may be enlightening and frightening. In some cases, it simply may not be financially possible no matter how badly you want to do it. 

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Would you still be OK with going to the wedding if it meant making major credit card payments for months afterward and potentially being unable to afford your own assets, like your car, because of this expense? Probably not. 

Sullivan said desirability is not the same as capability and people must make appropriate decisions based on all circumstances. In many ways, money commitments are like relationship commitments. They may often be ill-stated or not fully considered and result in hurt feelings and even harm. The best way to resolve these commitments, in relationships and money alike, is to do so quickly and honestly.

Tips for Gracefully Backing Out of Financial Commitments

Moving forward, here’s how you can gently back out of an existing financial commitment and practice caution before accepting any future commitments. 

Be Honest

You do not need to be over the top apologetic, but you do need to be honest. Part of what leads to a poor commitment is dishonesty. Additional dishonesty is unlikely to make the situation better.

“This is a ‘ripping off the Band-Aid’ situation where it is best to admit to making a poor decision,” Sullivan said. 

The best reason, Sullivan said, is always a personal one like admitting that the commitment is unaffordable. Do not choose a reason that involves the other person or entity. It may be interpreted as an insult and further damage that relationship. 

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Delay Your Response

We often respond to everything, from a text message to an email, as quickly as we receive it and usually in an agreeable manner. Chloe Elise, certified financial coach and founder of Deeper Than Money, recommends delaying your response until you have been able to put some thought into the decision. 

Let’s use the example of a friend who asks you to go out to a concert with them. Elise said you can politely tell your friend “Thanks so much for the invite! I will get back to you tomorrow morning!” This gives you a defined amount of time in which you can decide if you can go out to the concert with your friend or if you need to prioritize other outstanding commitments.

Don’t Make Up Excuses

If you don’t want to agree to a financial commitment, you can also simply say no. There’s no need to make up an excuse or provide an explanation either.

“A lot of times, we make it a bigger deal in our head when in reality the person inviting you to do whatever it is probably doesn’t care as much as we think,” Elise said.  

Set Boundaries With Family and Friends

Let’s go back to the example of the friend who asked you to go to the concert. You delayed your response and realized you are unable to go because you’re trying to focus on paying off your debt. Thank your friend for asking you to go and let them know you are really trying to focus on other financial goals at the moment. Elise said a good friend will respect that.

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Setting boundaries with family and friends may also encourage those within a friend group or close family members to talk about money collectively. For future financial commitments, like planning a vacation, Elise said you can outline all the anticipated costs so everyone knows what they’re getting into before they agree to go along for the ride. Hopefully, it allows everyone to enjoy the commitment, whether it’s a trip, concert or a destination wedding, and prevents anyone from having to back out at the last minute. 

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