Most people will face financial pressure at some point in their lives. With growing unemployment, the rise of technology, and global market conditions, stretching your money is becoming increasingly difficult.
There is no shame in admitting that you need help, but if you are on the other side of the conversation, it can be daunting to try and help a family member who has come to you for help and advice to deal with money problems.
While every circumstance is different and difficult, there are certain steps that you can apply to try and turn the situation around for family members who are struggling.
When a family member comes to you admitting that they have a financial problem, it’s important to remain calm and to listen. You might be tempted to lash out – especially when you hear how serious the problem is – but shame and anger are not your best option.
Remember, it takes tremendous courage to admit that money is tight, so your relative is probably feeling a lot of shame. Instead, do some research and borrow advice from financial psychologists who can help you coach your loved ones through their feelings about money.
By listening and trying to understand, you set the foundation for honesty in the future, and show that you can be trusted as a confidant.
Analyze the Situation
Many people lack the basic understanding of finance and debt needed to gauge how bad their financial situation is. Once a loved one has approached you saying that they need help sorting out their money matters, you need to understand just how serious the problem is.
Start by going through bank statements for every card and account. Remember that banks charge different interest rates and that there may be penalties for late payments. Asking your relatives to tell you what they think their debt is just isn’t enough. Go to the bank (or log in online) and print statements.
Once you have all the information, use a debt calculator like this one so that you can structure a plan to change the situation.
Build a Better Budget
Once you know how much money is owed, you need to restructure the household budget to see how long it’s going to take to pay off outstanding amounts. Again, online debt tools like budget calculators can really help if budgeting doesn’t come naturally.
See what areas you can cut down on, such as food and utilities, and which you can reduce completely. Work out what is realistic, and then do everything in your power to stick to the new budget.
As a guide, it’s always better to pay off debts that incur the most interest first. For example, if you have a credit card that’s getting out of control, focus on paying that off before a loan taken at lower interest.
Don’t give debt the chance to grow more than it already has.
There is a reason your relative has come to you, and once they have, you need to work together as a team to help them out. This doesn’t necessarily mean that you give them a handout or treat them like charity cases.
Respect your family enough to work with them to find a sustainable, long-term solution. This could mean helping them find a loan to deal with their immediate money issues.
Or help them look for a second job or simply offering encouragement, it is far more likely that they will turn their debt around if you offer support.
Seek Professional Help
In some instances, a working knowledge of household finance might not be enough. Visiting a debt specialist can give you a good indication of how to turn financial troubles around depending on your personal circumstance.
In general, they can advise you on whether you should consolidate debt, sell assets, try to find a second job, or even renegotiate repayment terms with your bank. Professional help comes at a price, although there are free educational and advice resources available, but it can be essential if there is a serious problem that needs to be addressed.
Try Tough Love
Even though you are family, dealing with money problems can call for tough love. If your relatives look like they are straying off their budget, be firm and remind them why they are where they are – it will pay off eventually.
Jody Mitchell says
My wife is the responsible one in the family. She is always trying to help her sisters manage their money better. They don’t always listen. I think there should be a class in high school that covers money issues.
I strongly support that notion, we should have some basic lessons on money in high schools. simple things like spending less than income and delay gratifications are such essential lessons for today’s young people who’ll run tomorrow’s economy
Prempal Singh says
My husband and I have a relative that is in terrible financial shape. Unfortunately, she only wants to borrow more money from her relatives to pay off debts (which to date she has not paid back). She is not ready to curb her spending habits. It is hard to watch. Now that we have banded together (agreed no more borrowing money…Robbing Peter to pay Paul), hopefully she will see the light. Then, we can apply your tips.
Take her to a financial counselor, she needs some professional help looks like