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.
Related Post:
Personal Capital Review With The CEO
Updated for 2015
I’ve observed that when people lend money to family members, it’s hard not to have strings attached. Usually those strings are along the lines of “since I lent you money I now have a say in how you spend money.” This inevitably causes conflict.
Hi Sydney
You’re right, helping family and friends is so much more difficult than helping strangers, great article!
Kate
I will lend money to my sister/parents in a heart beat, but, I also don’t mind giving it to them as gifts. We already send money to our parents and fully realize their retirement is on us. We are happy to take that responsibility.
I do have a very bad experience lending money to a friend though. Never again!
That’s really nice your sister is on board to help your parents too. Definitely helps to have siblings!
Sound advice. Money and family is always a delicate mix. I agree, lending money is not within my comfort zone either. Gifting is a better way to go if it is absolutely necessary. This saves embarrassment down the road.
It really does, and avoids some awkward conversations!
It’s great to see you helping family and sharing lessons learned.
It sounds like your parent’s have spent many years learning the financial behaviors responsible for their difficulties. Don’t be surprised or disappointed if you find they are giving lip service to your attempts to help and aren’t really changing.
Sometimes the issue isn’t with understanding how to stay in a budget, it is something much more deeply rooted – something that may require a lot of time and potentially some counseling to change.
Yeah, unfortunately I know they’re not going to magically become PF masters by any means. My dad has done a great job adapting to frugal living though but my mom on the other hand has had a much harder time and is much slower to embrace being frugal. Both of them could crack at any moment and go splurge on something expensive that they have no need for, but at least they’re learning to think much harder before handing over a credit card. I also have kept my monetary gifts small and infrequent so they won’t start to think I’m going to support their bad spending habits.
Pushing rarely works. If people see you as an expert or someone worth coming to for advice, they’ll find you.
So true. Pushing tends to just drive people away.
Lending out money to family members is tough, however we should do it if they are really in need and NOT expect anything back.
I will give my parents any amount of money they wish b/c they supported me growing up. There’s no greater honor than to help my parents if they need help.
Rgds, Sam
It was a tough for me emotionally at first to start giving my parents money, but it feels good helping them especially when they are really struggling. It’s also so rewarding helping them improve their spending and investing habits too. Your parents are lucky that you care for them so much and that’s great they were so supportive of you while you were growing up!
Very good piece of advice Sydney. I do send money to my parents as gifts. I always try to avoid sending monetary help to everyone else. Instead of giving fish teach fishing. Nice post
Thanks SB. That’s good you send your parents money as gifts and not as loans. It feels good giving back to our parents.
“Don’t lend out ANY money if you want it back”. Can’t stress this enough! Applicable not just to family, but friends as well!
Definitely!! The receiving party always ends up convincing him/herself that the giver has forgotten about the loan in order to help justify not paying it back, but the giver will always remember.