I’ve never been that great with money and investing, and fortunately I’ve never been that bad at it either. I have absolutely no interest in buying LV bags or Christian Louboutin shoes, and I think the most I’ve ever spent on a single piece of clothing was $200 for a winter coat, and even that made me feel guilty.
Even though I’ve always managed to keep my expenses low and stay out of money trouble, my parent’s finances have been very rocky in comparison. My parents divorced more than a decade ago and I think one of the big reasons was because money problems and stress drove them apart. Even after they separated though, their money problems didn’t go away. They finally started opening up to me about the details of their individual money troubles last year, and since then I’ve spent a lot of time helping steer their finances towards a better track.
It has certainly been a challenge helping them, mostly due to emotions like frustration and impatience, but it’s been worth it so far and I’ve learned a lot in the process. I wish they’d been more responsible over the years and not gotten themselves into such a mess, but life happens and what’s done is done. They’ve done a lot for me over the years and it feels good to be able to give back. If you’re thinking about helping someone in your family with financial troubles, here are 10 things I’ve learned from helping my parents that will help you get started on the right foot.
1. Just because someone hasn’t asked for help doesn’t mean things are good
I had no idea my dad was living off of food stamps until he accidentally mentioned it in conversation when he called me one day last year. Talk about being shocked. He’d been stuck between a rock and a hard place for months but was too uncomfortable to talk openly about it. I had no idea how bad things had been for him and wished I could have helped him sooner. Make sure your family is prepared for retirement and unexpected expenses.
2. Change is hard and people are stubborn
Not everybody who is in serious need of a budget and some debt relief actually wants to be helped. Change makes a lot of people uneasy and denial can trick them into thinking their problems will go away if they just ignore them. That’s how my mom was for years – in total denial. She thought that not knowing how bad her finances were made it ok for her to rack up her debt. Help your family member realize they have to be willing to make adjustments to their lifestyle and spending habits if they want to get in control of their debt.
3. Don’t lend out ANY money if you want it back
You can help someone budget and offer financial advice without actually lending any money, and I think this is best. I ended up sending each of my parents a few checks as gifts because 1) they really needed some help and 2) I knew I’d never get the money back if I lent it and didn’t want to end up disappointed. If you want to avoid tension and straining your relationship, steer clear of loaning any money and don’t believe the words “I’ll pay you back.”
4. Get the details if you want to help them plan
It’s impossible to make a useful budget for someone if they’re not willing to give you the details of their outstanding debt, monthly expenses, and income. My mom gave me general guesses when I first tried to help her and it was pretty much useless information. Once she finally gave me actual figures though I was able to clearly explain why she wasn’t making any progress reducing her debt and show her exactly how much she was overspending each month.
5. Respect their privacy and confidentiality
Money is a touchy subject, especially when you’re struggling to make ends meet. Don’t go blabbing to your neighbors and relatives about any financial details that are revealed to you in confidence.
6. Lay out some ground rules
If you’re going to get highly involved with building a budget for someone and helping them with any kind of investing, it’s a good idea to lay out some ground rules. Clarify up front what you are and are not willing to do, how much time you have available, and what information you need from them before getting started.
7. Set a time limit
Helping someone figure out his or her finances can be very time consuming. I spent hours and hours going through my mom’s papers and putting together spreadsheets to help her budget and keep track of expenses. Because I put in so much of my own time trying to help, I got really angry at her when she went and blew $400 on clothes she didn’t need. Pace yourself and set a time limit for how many hours you’re willing to put in so you won’t burn out or feel like you wasted your time.
8. Manage stress and don’t take things personally
I let myself get way too stressed out when I was first crunching numbers for my parents. I got angry at my mom’s stubbornness and overspending when I should have kept my emotions out of it. Now I try to put myself in her shoes when I start to feel frustrated to calm my nerves and better understand where she’s coming from.
9. Analyze + Action Plan
Your mission should you choose to accept it is to help your loved one identify their financial weaknesses and overspending habits. Put together an action plan for cutting out unnecessary expenses, reducing costs of essential ones, and tackling the most expensive debt first. They’re unlikely to make changes without a clear plan.
10. Friendly Follow up
Laughter is free and one of my favorite therapies. I check in on my parent’s financial progress every few months and always talk about something fun before and after I ask how they’re budgeting is going to help keep their spirits up and stay up to speed on what they’re up to besides money stuff. Helping someone turn their finances around takes a fair amount of time, and it’s good to have a friendly follow up on a regular basis.
Updated for 2015