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How to Help a Loved One Manage Debt

iCrowdNewswire   Nov 18, 2020  2:04 AM ET

There’s a lot of advice out there on how to get yourself out of debt, but how do you help a friend or a family member? This can be a tricky process because it requires you to be both financially and emotionally savvy. However, it can also be devastating to watch your child, parent, partner or best friend struggle with the stress of mounting debt, and working with them to make a plan can help.

Don’t Judge

Whether your loved one has panic attacks when they think about money or they seem unconcerned about their debt, this isn’t the time to lecture them about it. For one thing, people can fall into debt because of situations that are entirely outside of their control, and even if you think you know all the details, you might not. Even if their own irresponsibility put them in this position, if you can’t keep your judgmental thoughts to yourself, you won’t be able to help.

Set Boundaries

It can actually be harder to help someone with their debt if you have money than if you don’t, because you may be tempted to simply wipe it all away. There are circumstances in which this might be appropriate–your elderly parent is struggling, or you are getting married and you make several times more annually than your future spouse–but if this is the approach you take, it is usually best to make it a gift instead of a loan. The latter can destroy relationships if the person is never able to pay it back. You may also need to set boundaries around your time and emotional energy. This will all depend on the specific situation and your relationship to the person. The boundaries you set for your 19-year-old college student son will be different from those you might set with a sibling or a friend. This also applies to your offers to help in the first place. If your offer is rejected, you need to accept that.

Explore Solutions

Because financial matters can be so stressful, your loved one might not have done much research into potential solutions, and there might be plenty of them. For example, perhaps they are overwhelmed with multiple student loans that all have different interest rates and due dates. You might be able to consolidate these into a single monthly payment. In other situations, it may help to call creditors and negotiate with them although you should do your research first. Certain types of canceled debt could be taxable. In other cases, a creditor might encourage cashing out a retirement account to pay off a bill when a payment plan or even filing for bankruptcy could be a better solution.

Make Long-Term Plans

The first step should be to triage and figure out ways to fix your loved ones most pressing issues, but it’s also important to take steps to ensure that the person doesn’t fall into unmanageable debt again. This is another area where you will have to tread particularly carefully depending on your relationship with the person and respect their autonomy. You might help with creating a budget or recommend books, podcasts or personal finance apps.


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