Hi L.,
Based on what you've said here, you are NOT LYING when you tell her you don't have the money. Everything you spend is part of your budget. If all you have is an extra $20 after that, you should be working on getting an emergency reserve fund for your family, not handing out money to anyone who asks.....even if it's family.
I'm saying this with kindness.....somehow, you have to get to a place where you get over your guilt. You may have to keep working on this until it becomes more second-nature to you. Say it out loud over and over, every day until you are comfortable saying it and letting it be: "I don't have any money to spare." No additional explanations...just plain and simple.
Some things to remember that may help you with this:
Your sister is responsible for her choices and her family.
You are responsible for yours.
They are not starving. They may not have a lot, but they are surviving and have their basic needs met.
Nothing bad will happen if you don't give her that $10 or $20.
You and your husband have a lot more years of child-rearing and related expenses ahead of you since you have school-age children. She, on the other hand, has one high-school age child left at home. Her daughter can certainly get a part-time job or a babysitting job if she's under 16 to earn her own spending money.
If you continue to hand your sister what you don't have to spare, you will eventually find yourself in a situation where YOU need that extra cash and won't have it. And, your sister will never learn to live within her means.
You said it yourself, "I don't really have extra to spare." That's all there is to it. If all you have is the $20 she wants, YOU DO NOT have money to lend out! How can you possibly hand that over knowing that you should be creating an emergency reserve for your own family? What if your refrigerator goes out? What if your car needs to be repaired? What if you or your husband should become ill and cannot work for some extended time?
You must stop and think of your family and get your own financial matters in order, and your sister must do the same for herself.
I haven't read the books myself, but I hear many good things about Dave Ramsey's works. Go to his website, or check out some of his books at the library, and have your sister do the same.
If you don't, not only will your sister remain a financial disaster forever, but you'll be teetering on the edge yourself.
Hope I didn't sound mean. Just really want to convey to you that it's okay to say "NO!" It always worries me when I hear someone say that they have a hard time saying no to people who continually ask for money.
I really wish you the best with this. It is hard when it's family, but you'll be doing everyone a big favor when you learn to say no and follow through with it.
J. F.