When your loved ones or close friends are in trouble, you are naturally inclined to help. However, finances are a tricky issue that should be dealt with caution. Loaning them money isn’t always the right option. Perhaps you have a brother or friend who is suffering from crushing debt. This usually comes in the form of loan debt, old medical bills, and student loans that give your loved one financial problems.
Recognize the signs of debt
Financial troubles tend to show symptoms that you should look out for. Here are signs that your loved one is suffering from debt problems:
- Your loved one states that they have no savings account or are unable to save a dollar a month.
- A continuous number of declined credit cards show they are even unaware of their general account balance. When you see a family member going through several cards at the cashier, you should be concerned about their financial well-being.
- If you learn that your friend is regularly cutting off on basic medical plans, it signifies that they have significant medical bills.
Identify their emotional relationship to debt
After noticing the signs that a loved one is struggling financially, you can express your concern if you genuinely care about them. Your friend will not change his spending habits just because you pointed out the problem to them. Here are the stages the person will potentially go through:
- First, they will be ignorant. Your loved one will not see the declined credit cards as a problem.
- When they come to grips with their overspending habits, they might be in the denial stage. Their ego will not be ready to admit fault.
- A person in debt will then go into the resistance stage. This is because they will recognize the problem, but still trust their capability in solving the problem due to lack of identifying an acceptable solution.
- Finally, your loved one will accept the problem and the available solutions.
Understand the ways of getting out of debt
Before approaching a loved one who is crushing in debt, review the following basic ways of getting out of debt:
- Repay debts on their own
Your loved one should repay their debts on their own instead of debt consolidation. Debt consolidation is not ideal because it only addresses the signs of debt but not its source. They can repay debt on their own through Debt Snowball and Debt Avalanche, among others.
- Use a not for profit credit counseling agency
Clients in non-profit credit counseling agencies benefit from low-interest rates and will be able to repay their debts in less than five years. These credit counseling agencies will work with your loved one’s creditors to lower their interest rates and create a new repayment schedule.
- Consider settling their debt in a lump sum for less than what they owe
In some instances, debt settlement is the best available option. What this means is that the creditor will agree to receive less than what they are owed and stop collecting from your loved one.
- Hire a bankruptcy lawyer
Bankruptcy is a financially difficult process for your loved one to go through. Bankruptcy is there to protect your loved one’s assets, such as home from creditors. When filing for bankruptcy in Ontario or your particular locale, find a bankruptcy lawyer to guide them through the process.
Have a serious conversation with your loved one
Your loved one needs to realize the magnitude of the problem. Therefore you should not approach the discussion with them lightheartedly. Invite your loved one to a sit-down meal at a restaurant to create a formal environment.
Help your loved one have a debt-free future
To effect real change in their spending habits, your loved one must find purpose and motivation within. To assist them, help them visualize a future with no debt. Help them identify essential goals that will require substantial savings. Don’t give the solution yourself. Instead, act as a resource by presenting available solutions with various pros and cons.
Takeaway
After seeing your loved one struggling with debt, it is time to offer them support and encouragement. Debt can never solve itself. If a loved one is in a lot of debt, intervene with love and sincerity to get them back on track to being financially healthy.
