How To Help A Family Member Hooked Up In Debt
Posted July 22nd, 2009 and last modified November 21st, 2011
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Giving debt advice to family is often very hard because it’s like stepping onto eggshells and hoping they don’t crush in the process. Despite this, you can give debt help in your family. Financial trouble happens to more people than we care to think about and the sooner we can spot the signs, the better for all involved.
But before you can step in with debt help advice you need to spot the signs first.
How to diagnose a family member in financial trouble?
A first indication of trouble is when the person in question refuses all manners to spend money in your presence. Another symptom of financial trouble is when the family member has x-amount of credit cards but never any cash. Further indications could be:
- Consistent arguments about money with others.
- Refusal to take the car because they can’t afford petrol.
- A sudden move from car enthusiast to public transport worshipper.
- Swapping of mobile phone carriers several times in a row.
- No credit on their mobile phone.
- An empty fridge.
- Kids running around in rags without seeming to be nourished.
- An overflowing letterbox of overdue bill statements and hounding phone calls from service providers.
- A court appearance and more.
Truth be, unless the person calls out for help it is often very hard to spot someone in trouble, even a member of your family. Financial trouble can often appear to be non-existent when in fact it is very much a reality.
If you do suspect someone to be in a financial difficulty, ask and offer your help in a tactful way.
How to approach a person you suspect to be in financial trouble?
If you dare, then just ask them. It isn’t always easy though depending on the relationship you have with that person. At the very least you can start a discussion about financial difficulties and the rising debt problem with many young people and then finish saying something like “if I would ever hear of a friend of family member in financial trouble I’d love to help however much or little I can.” Then drop the subject, hoping the person will actually ask for help.
Debt help in practice
If you are in a position to help, then you can do so with the following tips.
A transfer to a lower rate credit card: By helping your family member to switch cards they can often save a lot of money in the process because of their lower interest rate. Instead of paying off several credit card debts at once it might also be a good idea to consolidate these into the one, low fee, low interest card altogether.
Do a balance transfer: If you can afford it then you can offer to do a balance transfer on their existing debt. Even if you can only pay down a fraction of it will save the person a lot of compound interest.
Consolidate into a personal loan: This option might be of interest if your loan interest is lesser than the interest paid on the existing debt. If you are not sure it certainly helps to speak to a professional advisor. Before you sign any papers on someone else’s behalf ask for advice from a tax accountant because there might be some tax implications for loans between family members.
Use a credit card / loan repayment calculator: These help you to determine when the loan or debt can be paid off in full. It is also a good idea to print out any payment schedules to help pay off the debt as soon as possible.
Gift cash: This is often not the best idea because chances are the person in debt is not very good at handling cash in the first place.
Help them create a budget: If you want to give debt advice and debt help only do this step if you really understand budgets. Otherwise let an accountant do this for you. You might elect to pay the bill for the service to help out.
Organise a free appointment with a financial counsellor: A financial counsellor is the educated to provide advise that will help determine the key financial problems and ways to get out of the current debt situation. See the FIDO website for a complete list of financial counselling services around Australia
What would you do for debt help? Please provide your suggestions by leaving a comment below
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