Have A Friend Or Family Member In Money Trouble? Take These 7 Steps

Apr 29 2014, 8:04am CDT | by

Up until a few years ago, I was terrible with money (as I touched upon here).

In my 20s, I loaned someone thousands of dollars on my credit card, and then, while I was carrying a balance for that person, amassed my own debt.

I eventually had to go into credit counseling which required closing down my cards and committing to a payment plan to get out of the Ponzi-like scheme I had created with my credit card balances.

And who showed me the way out? One of my best college friends.

Looking back, I realize how awkward it must have been for her to suggest I enter credit counseling, so I called her up this week to ask what it was like to watch me (mis)handle my money while knowing better.

“One of the big red flags was you went into credit card debt to loan your friend something like $10,000,” she says. (Actually, I think it was more, though I don’t remember the exact amount.) “The fact that you were loaning money that you didn’t have was a big red flag.”

But she didn’t say anything at that time even though, as she describes it, I was a “train wreck” with money. At one point, I remember she loaned me something like $700, which I then didn’t pay back for at least a year.

Finally, a few years later, when the situation had become completely untenable, she suggested the credit counseling. I asked her why she didn’t say anything until then, a few years after I’d loaned the $10,000+.

“It’s a weird and sensitive thing, but even though we’re really good friends, there’s this strange barrier when it comes to money,” she says. “You always hear, ‘Don’t lend money to really, really good friends,’ and even lending money to your family members can be a potential problem down the line if you expect to get paid back and they don’t pay you back. So, there’s this taboo.”

My friend is right. Jacquette Timmons,  a financial behaviorist and the author of “Financial Intimacy: How to Create a Healthy Relationship with Your Money and Your Mate,” says, “The reason [trying to help your friend with money] is tricky is because — whether directly or by implication — there’s a lot of of judgment and shame attached to it. There can also be a sense of ‘I know more than you.’”

And any time you have more money than a friend or handle it better makes for some awkward money situations, as these stories from people who have more money than their friends demonstrate.

Odds are good that you have a friend in money trouble. According to Nerd Wallet, in December 2012, 47% of American households had credit card debt. As of April 2014, households with credit card debt have a balance of $15,191. And credit card debt isn’t the only kind of financial problem people have. Some people are underwater with their mortgages, some aren’t saving for retirement, some don’t have an emergency cushion, and others have gambling addictions.

“None of us are immune from bumping up against a financial challenge — sometimes of our own own creation other times for reasons we are not prepared for,” says Timmons. “Sometimes you have to rely on friends and family to help you out. I don’t know of someone who hasn’t asked for help at one time. That’s why it’s necessary to be able to broach the conversation about it because you never know when you’ll need to ask or when someone you love and care for will need help.”

Here are seven steps to take when a friend or family member is in financial trouble.

1. Be fairly certain a problem really exists.

Because money is a taboo topic, don’t create an awkward situation by jumping to conclusions too quickly. If you suspect your friend has money problems, gather enough evidence first./>/>

“If there’s just one red flag, then I don’t think you should jump the gun and have a serious conversation about one little something that came up,” says Anthony Saccaro, president of Providence Financial in Woodland Hills, Calif. Then again, he adds that since you probably know roughly what he or she makes and spends, “You kind of know with your friend, what financial position they’re in.” So if you feel like things just aren’t adding up, don’t ignore your intuition.

2. See if they bring it up first.

“You’re having to listen to tip-offs — things that people that say that warn you there could be a problem,” Saccaro says. “If people mention something to the effect that they’re living check to check, or that they’re behind on their mortgage, or that they’re running up credit card debt, or if you’re inviting a friend to the movies and they don’t have the money to go, then I think that is a red flag.”

If they bring up money worries, it could be their way of asking for help. That opens the door for you to say something, says Timmons.

3. Try reaching out yourself.

“I would apply what I call the three-touch-point rule,” says Timmons. “Make overtures to help out either through inquiries or sharing your own story. After the third time, if they’re not listening to you or not expressing any openness to what you have to say, then you just leave it alone.” The third time, you could be more direct, she suggests. You could try saying, “I’ve noticed you do X and I’m really concerned that you’ve been going out a lot and buying this and that, but I also have a good sense of how much you earn and what your overhead is, and I’m concerned you’re putting yourself in a bad situation. Is there anything I can do to help?” And if they say no, just leave it at that, because if you keep pushing, you run the risk of that person shutting down.

4. Start with your own story.

If it seems your friend is ready to talk, then show them that you empathize. “Talk about when you struggled financially yourself,” says Saccaro. “That makes the conversation. Say, ’It wasn’t always like this for me.’”

Timmons suggests you also explain how you turned things around for yourself. You can tell them either your current habits or steps you’ve taken to get to your current situation. “I would share the top three things you do to stay on top of your own money…. Share what you do that keeps you, on a day-to-day, week-to-week, month-to-month basis, in a healthy situation.”

5. Be clear that your intention is to help, not judge, them.

Tone is really important here. “It’s not what you ask so much as how you ask it,” says Saccaro.

“It’s your responsibility if you see a friend doing something not healthy for them, to pull their coattail or tap them on the shoulder and say, ‘Hey,’” says Timmons. “I think the issue becomes less so about whether to do it, and more about the intention behind it — are you doing it to help this person or because you’re coming from a space of, ‘I know it all, and you should be doing it this way’?” (This last scenario is more likely to occur between siblings.)

6. Offer to be their accountability partner.

And offer to help them get on the right path, says Timmons. Set up a goal, schedule check-ins and commit to keeping the other motivated. During your check-in, you could say, ‘You said you would do X and you didn’t do X. What’s going on?’”

7. Determine whether help will be best received from yourself, another friend or family member, or a professional. 

But sometimes you won’t be the best person to offer help. In those situations, consider whether your friend might be more open to receiving help from someone besides you./>/>

Timmons even offers to act as a go-between for her friends with their children. “One of the things I’ve said to my friends with children is, ‘What do you want me to tell your child?’ They may not go to their parents but to their parents’ close friends, so I could pass along what their friends would want them to be told.”

If you decide the best person for your friend to talk with would be a professional, refer him or her to someone you work with. Say, “This is what I do. This is what works for me. I work with a professional, and I know so-and-so,” suggests Timmons. “It would be same as if you referred your doctor to someone or your hair dresser. It should feel that comfortable and organic,” she says.

 
 

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