We all know how much of a struggle it can be to stay on top of your finances. That has been especially true during the last year or so, as we have all found our employment and our health at risk.
We have done our very best to weather the various storms that the pandemic has thrown at us, from partial to full unemployment, other loss of income, and expensive medical bills either for ourselves or for our loved ones.
We also know that, when you are really struggling with debt, it can be difficult to feel like you have anyone who you can talk to.
On the other hand, it can sometimes be difficult to know how to help someone with financial problems.
How do you know what to say when a friend or family member comes to you and tells you that they are struggling financially? You don’t want to overstep the bounds of your relationship, but you don’t want them to feel like you don’t hear and understand their worries either.
The most important thing to establish early on is how exactly they would like you to help.
If you are in the position to offer them a loan or other financial support, then that’s great. However, as we mentioned, the last year has not exactly been good to anyone.
Helping family members financially is a position that many of us simply aren’t able to do especially when we have so many difficulties of our own.
If they are looking for advice on how to better control their expenses and debts, here are a few steps that you can take with them to help them understand how to deal with financial problems.
Sit Down With Them And View Their Finances
Now, the first step may require a little trust on their part, but it is really important. You cannot get a clear idea of how money can be saved if you don’t have a clear idea of where it has been going.
Some people are very private about their spending habits and there is often some pride (or shame) involved so it is vital that you be patient and understanding through this process. Remind them that there is no shame in asking for help and that this is an essential step in their journey.
Now, you can either take the ripping off the band-aid approach or start smaller. The former would entail finding out exactly how much debt they have (more on that in just a second) and what their big payments are every month.
The latter would be to start with smaller expenses such as weekly grocery shopping, utility bills and so on. You will need to go through all of these with them eventually, but you may need to tread lightly in sensing what they are ready for at the start.
Get To Grips With Their Debts
Once you have a clear idea of what they are paying in repayments every month, then it’s time to look at what their interest rates are and how long their terms are. Once you start racking up several different debts, they can start to become overwhelming and indistinguishable from each other.
You can lose track of which are the higher priority, which are the very high-interest rate loans, and which ones could be paid off relatively quickly if you just got a little more organized. This is one of the areas where you can really help as a second pair of eyes, an objective observer.
You don’t have any of the emotional complications of the loan or the debt, and you can illustrate opportunities or problems with greater ease.
Tell them about ways to start paying off these debts more efficiently and sooner. One way to do this is through refinancing. If they have student loans, for instance, it would be wise to compare student loan refinance rates to find the one that’s right for them. Identifying which of these repayments are the highest priority is a step in the right direction, and you could talk to them about whether they could pick up a side hustle to help get to those savings goals more quickly.
If you want to learn more about how to stay out of debt, a credit card repayment app like Tally could show you how you can make your payments faster and more effective. The app sorts your debts by interest rate, making sure that the more expensive high-interest debts get prioritized.
Talk Them Through Ideas For Saving
Some people are born with a gift for organization. For these people, the idea of putting a monthly budget spreadsheet together is barely an issue at all. But for others, the idea of working with numbers throws them into something of a blind panic.
Coming up with a saving strategy can feel overwhelming if you feel like you don’t have a handle on what’s involved, and this is an area where you can be really helpful. If you have created a working monthly budget of your own and you have been through the process of looking for ways to make savings and cuts, you can be a guiding voice for them.
If the person that you are creating for does find this kind of thing very stressful, then you should start by reassuring them that this isn’t something that they have got wrong, necessarily. What you are suggesting are ways to make their lives simpler and easier, rather than rubbing their nose in a series of mistakes.
You can start small by talking to them about those small changes to their routine that can add up to a surprisingly large amount. Taking a packed lunch rather than buying one, bringing a thermos with them instead of picking up a hot drink on the way to work, and so on.
Talk them through how they can make savings while doing their grocery shopping by switching to a cheaper brand and buying in bulk. Explain how planning meals and using leftovers can really impact their weekly spending.
Find Out If Their Money Is Going Somewhere That It Shouldn’t
This point is especially important if your friend or family member is really lacking confidence or competence when it comes to their money.
We have seen an awful lot of crooks trying to take advantage during the pandemic, as people found themselves in real trouble, in need of help, and spending a lot more time online. Cybercrime statistics went through the roof during the pandemic but online theft does not begin and end with someone hacking into your bank account and stealing money.
There have been a lot of scams and con artists claiming to have the answer to a range of difficulties, whether it’s through investment schemes, real estate, or guided meditation. They have promised help in exchange for cash, and if the person you are helping is vulnerable in this way, they may have fallen prey to one of these schemes.
The good news is that they should be relatively easy for you to identify if you are looking at their monthly bank statement. However, this is another area that should be approached with tact as it can be very sensitive, especially if your friend or family member feels like they have been duped.