Watch for other signs. I remember walking into my dads house and seeing a list of dunning credit card notices and bills next to his computer. Worry is difficult to hide.
2. Using credit to pay for credit
When your loved one uses one credit card to make minimum payments on another, or takes a cash advance on a card to make a payment, there are multiple problems. Making minimum payments usually doesnt reduce a cards balance significantly; the lions share just whittles interest and adds to the total debt.
3. Frequently borrowing money – sometimes from you
The request always sounds like a great chance to help. The loan will solve all problems and take the pressure off, allowing him or her to consolidate bills into one payment. Problem is, it rarely works out that way.
I once lent my dad $8,000 to help him pay off debt. Not only did he run up new debt as fast as he paid off the old, but when he realised that he couldnt pay me back, he took out a life insurance policy with me as the beneficiary. Instead of eliminating debt, he added another monthly payment.
If a close friend or relative shows the above symptoms, there are a few things you can do:
STEPS YOU CAN TAKE TO HELP
1. Gently yet clearly express concerns
Do your best to keep from sounding judgmental; emphasise that you are worried about the stress that the persons financial habits put on your relationship, and, more importantly, the health dangers. Be honest.
2. Stop enabling debt
When my grandmother died, both dad and I inherited money. True to form, dad wanted to borrow my share to pay off his debts and planned to pay me back in monthly installments.
My girlfriend – later my wife – confronted me as I knew I needed to confront my dad. It wont help him, and it wont help you, she said bluntly. She was right, and I knew it.
That was the first time I ever told dad no – the hardest thing I ever had to do. I had to say it for his sake and for mine.
Learn to say no. Dont even co-sign a loan: Youll only add to the problem.
3. Offer real help
This might be as involved as helping organise bills or developing a detailed plan to reduce debt (and getting that person to stick to it). At the very least, you can introduce a financial adviser to help get things under control.
Dont wait or sit back silently, hoping something will change. Above all, offer encouragement and support.
I wish Id spoken to my dad early on. I never did, but I do believe that I learned from both our mistakes.
- Jeff Rose is a US-based financial advisor and founder of the website Good Financial Cents and Life Insurance by Jeff.
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