Thinking of helping a family member with debt? Tread carefully
It’s hard watching a family member struggle under the pressure of debt. You want to help but aren’t sure where to begin. I’ve been coaching and counselling people on money matters for more than 16 years, and the very best support you can offer a family member struggling with debt is encouragement. Remember: debt is fixable.
Tone is everything
Your love, support, guidance, money mindset and influence might be the precise thing that helps spark positive financial change for your struggling family member. If your loved one has confided in you about their debt, wrap them in care, empathy and accountability. This doesn’t mean bailing them out or that you need to be responsible for getting them out of debt — there are professionals who do this work and those folks have tools and systems to properly deal with debt — but, it means you’re here to support.
If they ask, you may proceed
Confiding in you is a tad different than asking for help. If the family member wants you to help them, they will say so. You may also explicitly ask them if they want your help. If they reject your offer to help, respect it and back off.
If you’re all clear to help, you can start by understanding more about what specifically they are dealing with. Are there credit card balances? Have collection agencies started phoning? Was their consolidation loan application declined? Are they suffering from panic attacks when the bills are due? It can be hugely helpful to draw from your own experience dealing with debt as you explore their unique situation.
It’s very difficult to see a family member suffer or make “mistakes” with their money. I know that I have personally felt very upset and at times angry when I’ve learned the details of how the person got into a precarious financial position. But, your number one priority is to park any judgment and really focus on the task at hand; getting your family member in a better financial position.
Chances are that your loved one might not know what to do next. They may have tried going on a spending detox,applying for a consolidation loan, following debt masters on Instagram, reading articles about debt reduction, seeing a therapist about their impulsive spending. They are where they are because these attempts to decrease debt haven’t worked. There are a few next steps you can guide them toward.
Helpful scenario 1: If the debt is literally out of control and the family member is close to bankruptcy (can’t keep up with payments and creditors are calling), provide them the names and numbers of local licensed insolvency trustees. These professionals can explore if a consumer proposal is possible (the step before bankruptcy).
Helpful scenario 2: If the debt is high, but is able to be managed, the family member could benefit from the services of a professional credit counselling agency. From better budgeting to preparing a debt management plan (sometimes consolidating among lenders) to offering tips and advice on debt, these counsellors can start developing a plan. Many of these organizations are non-profits.
Helpful scenario 3: If the debt is high but the person does have some savings, and they don’t know how to organize their financial priorities and shift their financial behaviours, a money coach can help. Money coaches can help with budgeting, coming up with a debt-reduction strategy like the snowball method (pay a little extra on the highest interest balance until it is fully eliminated, and then the next highest balance and so on … ultimately working toward a consolidation loan and then full repayment), and making a longer-term plan for saving. More importantly, they are like an accountability partner. Pull together a list of a few money coaches (even ask for a referral), and provide this information to your family member.
Helpful scenario 4: If the debt isn’t too high and you have sufficient knowledge, and are really familiar with the snowball method of reducing debt, you may offer to assist in teaching them this method and potentially hold them accountable. If you’ve found a successful budgeting method, offer to share that information with them as well. Just remember to be respectful of boundaries.
Helpful scenario 5: If there are no issues keeping up with the debt, online learning and in-person debt reduction classes are widely available. Talk with your loved one if they would prefer more of a self-directed approach to organizing and paying down their debt. I highly recommend that the program being considered has an accountability component where actual progress can be monitored, supported and celebrated in a group environment.
Your loved one needs to know there is a path forward. They need to know you’re cheering them on, and they also probably need to know that as holidays approach, the whole family wants to see them pay off their debt rather than splurge on anything for anyone.
This article was originally published in The Star. Lesley-Anne Scorgie is a Toronto-based personal finance columnist and a freelance contributing columnist for the Star.
