It’s something we’re all likely to experience at some point. Few people make enough money to live truly free of financial stress, and some people aren’t as well-practiced at managing their finances as others are. There may come a time when you recognize that someone you love is in genuine financial distress and in danger of sinking. You might want to reach out and help, but what is really the best way of doing that? If someone confides in you about money troubles that they are having, then you might want to think carefully about what solutions you propose.
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Give them some cash
There are some people who will flat out warn against either giving a cash gift to a loved one or making a personal loan to them. There is no denying that there’s some risk that you might never get a loan back (which is why it’s wise to lend on the principle of understanding that risk.) However, when it comes to financial emergencies, there is no denying that it can be the most effective way to solve them, especially for people that you know are otherwise financially responsible. If you don’t know that, then you might lend it to them with the stipulation that you get to help them better manage their finances, too.
Sign a loan for them
You can help a loved one get access to money without having to give it or lend it to them yourself, as well. A co-signer on a loan effectively takes some of the responsibility of that loan. If the individual receiving it is not able to pay it back fully, then you might be on the hook for paying the rest, as shown by The Balance.com. This inherent risk does mean that you need to take seriously any decisions to co-sign a loan, but it doesn’t mean that it will always end in disaster. Once more, you can help your loved one get their finances on track to make sure that they’re better able to repay that loan.
Help them get their finances on track
One of the single best ways to get on top of any financial trouble is to start building a better understanding of where your money is going in the process. For instance, putting together a budget allows you to see how much money you should have going towards your financial goals, rather than how you’re actually currently spending your money. This can then make you a lot more cognizant of your own spending, which can help you control it. Offer to go over your loved one’s finances with them with the help of an app like Pigly.Com. If they’re willing, you can probably find them some wiggle room for the cash that they might need.
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Track their expenses with them
Creating a budget is one thing. It can help us have a much better set of expectations when it comes to our own spending and how much we should be paying towards what. However, the case of how much we should be paying and how much we end up paying can be very different. For that reason, it’s a good idea to work with them to track their expenses in real-time using apps that offer those functions as well as budgeting. This way, they can start to better understand the financial habits that they might have that could undermine their attempts to save. Once they’re more cognizant of those habits, it can become a lot easier to break them.
Offer non-financial help
If they need help putting together the money they need to manage their debt or simply to get into a more financially secure position, then there are ways that you can help them that can help them reduce their expenses without outright giving them money. After all, you might not be in a position to do that, yourself. One way to do that is to offer them services that can stop them from having to pay. If they’re parents, for instance, you can help babysit for them. If they’re looking for a job, you can help them network. If they’re having trouble putting food on the table, you can invite them over for dinner. Every one of these gestures helps them end the day with more money in their pocket than they would have otherwise.
Help them find the solutions near them
There may be others that, aside from you, can lend much more direct financial assistance, if only they knew to ask. For instance, if your loved one is having trouble finding employment and you can’t help them directly, you can help them find employment agencies. There are also welfare agencies and other resources as shown at CNBC.com that can help them pay their bills, including some non-profits that can offer a limited amount of cash in an emergency. If they’re looking at things like large debt, then you can help them explore options like consolidation and settlement, working with them to better understand the pros and cons so they don’t make any rash decisions.
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Measure your expectations
You might not be able to help your loved ones as much as you would like to. There are sometimes that they may not need anything other than cash and you’re not able to help. You should also measure your expectations of how willing they are to accept your help. When it comes to budgeting, tracking expenses, and reducing bills, people can get defensive about any implications that they need any help. A good way to break the ice is to show an example in yourself. For instance, if you’re recommending that they make use of a budget, then it’s a good idea to show them your budget and explain how it helps you make better decisions financially.
Sometimes, a small loan can help a loved one get on their feet, but you need to carefully consider whether a handout is safe or viable in each case. Hopefully, the tips above make it clear there are other solutions, too.
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