When someone you care about has money problems and is facing financial stress on an ongoing basis, you may find yourself overwhelmed and unsure how to help. Often, money problems come from a wide range of concerns – a lack of financial literacy, facing a significant amount of sudden debt, or misuse of funds can all impact financial stability. When your family member is struggling, and you want to help, you may be unsure what options you can offer to “fix” these concerns.
The good news is that there are a lot of financial resources that can help, and with a bit of support and guidance, most people can turn around their personal finances to create a much stronger, healthier financial future. To do that, they may need some guidance and support throughout the process.
One of the first things to remember is that a person with money problems often needs more than just money to fix those concerns. Money concerns often lead to or stem from emotional turmoil, stress, and even trauma. If you are planning to offer help to build a stronger financial future, you have to spend some time focused on giving them the support they need emotionally as well.
There are two key steps to take to help a loved one facing financial strain. Start by helping them to get their finances organized and enable them to have the education they need to use and manage money wisely. Second, help them understand the impact of financial distress and to get help for it.
Are you wondering if you should get involved? You could point your loved one in the direction of financial professionals and allow them to work on the problem themselves.
However, before you discredit their situation, consider more about why financial stability is so important, no matter who you are or what your past is.
Let’s break down some key areas of financial well-being and their impact on life. Here’s why being financially savvy is so critical.
How do I Comfort Someone with Money Troubles?
Whether your parents lost all their savings in a pyramid scheme, or a friend is fried by credit card debt, here are a few ways you can help someone deal with their money woes.
Understand Financial Distress and Its Impact
Many people worry about money. It makes sense to do so when you need enough financial stability to pay for your rent or mortgage, keep your utilities running, and have food on the table. Yet, for some people, financial stress can be far more impactful than not being able to afford movie tickets or a dinner out.
For those who are facing uncertainty in a difficult time, it is pretty difficult to be able to stop worrying. That stress seeps into other areas of their lifetime and often can impact health.
If you want to help comfort someone that has financial stress, it is critical to understand this impact and where it is coming from. Often, it is a series of concerns:
The loss of a job
Sudden or unexpected medical debt
Unexpected expenses like car repairs or home repairs
Increasing credit card debt
Increasing expenses without increasing income
There are a lot of stressors that can cause a person to struggle today, and oftentimes, it is a combination of many of these that create the underlying turmoil a person experiences.
One of the key things to know about this feeling is that it’s so overwhelming that it can seem impossible to fix. Where do you start? How do you dig out from it all?
That fear of being unable to improve financial concerns and gain financial freedom impacts people in many ways, even further than just being limited in what a person can buy or pay for when it comes to living expenses. Overwhelming stress like this takes a toll on mental health and physical health.
It can impact a person’s quality of life. It may even lead to problems with relationships, especially within couples who may be facing this type of struggle together.
It may impact a person’s self-esteem and could lead to trouble sleeping. Sometimes, a person may become depressed or face anxiety, so much so that it makes it hard to focus on their job.
That can lead to poor performance and even the loss of a job. In some situations, the impact of financial stress is so much so that a person may even think about dying or other negative thoughts.
Because of how impactful financial stress is, you, as a friend or a loved one, may feel it is quite necessary to reach out and help. Even if you’re not sure they want help right away, understanding just how worrisome money problems are can give you a new perspective on what they may be facing.
See Related: Sustainable Finance: Different Types of Green Financing
Talk About How Financial Distress Can Impact Health
One of the first things you can talk about with your friend or loved one about their financial situation is how money is impacting them right now. In some situations, a person is on auto-pilot – going through the day trying to just get through it. They know how limited they are, but they are unsure how to fix it, so they keep doing what they are able to do, hoping for change.
Take a few minutes to sit and talk to them about what’s happening and the true impact of financial stress on a person’s health and well-being. They may be so overwhelmed they’re unsure what to talk bout or how to deal with it. It’s up to you, then, to offer some guidance.
Take a look at what financial stress can cause in a person’s life. Ask them if they are experiencing these things. If so, seek out the best level of professional help when possible to do so.
Depression: Many who are struggling with money problems feel hopeless and helpless. They may struggle to concentrate or even feel like they can make any good decisions. Sometimes they may even feel like giving up as if they do not have the ability to change things around for the better.
Insomnia: Without a doubt, it’s common for a person to struggle to sleep. A lack of sleep is not just an uncomfortable situation but also can play a big role in a person’s ability to focus and make good decisions.
Physical problems: Some people also struggle with the physical impacts of stress. This could include high blood pressure, diabetes, gastro-related complications, headaches, and even heart disease, all from stress. Some of these can be very impactful to a person’s well-being and may put a person at risk for numerous complications. Not addressing the financial problems could lead to sudden illness and life-threatening conditions in some who are already at risk.
Anxiety: Anxiety is more than depression. It is a constant feeling of being vulnerable and at risk. Some people may feel physical symptoms of anxiety as well, such as feeling a rapid heartbeat or a panic attack. This may include shaking and difficulty breathing. Anxiety isn’t something to ignore, as it can lead to health complications over time as well.
Unhealthy coping methods: Unfortunately, this is another common situation for people who are facing financial stress. They turn to alcohol, drugs, or even gambling as a way to relieve some of the tension and frustration they feel. In many situations, this can lead to further complications – increasing debt, complicated health problems, and even worsening anxiety. Over time, a person can develop dependency and require professional treatment for addiction as well.
Difficulty in relationships: Relationships become strained within the home of those who are financially limited, but they can also become a concern at work and with friendships. A person may find it hard to participate in social activities and interactions. Financial frustration can lead to irritability. It may make it hard to engage in the holidays, spend time with loved ones who you do not wish to disappoint, and have a loss of interest in sex or intimate relationships.
There are many ways in which money can impact a person’s life. When speaking to your loved one about these areas, ask them honestly if they need help.
A person who is depressed or anxious may need medication and therapy to improve the situation, not just money to pay off their bills. These are often chemical changes that warrant treatment. The same applies to addiction and physical ailments.
Seeking medical care and mental health treatment is always the first step. If your loved one does not first focus on their mental and physical health, it will be difficult for them to fix their financial problems.
See Related: How to Refinance a PACE Loan [Step-By-Step Guide]
Encourage Them to Open Up to You
Not everyone will feel like they can open up. It is very common for poor financial health and mental health to be linked:
Financial problems impact a person’s mental health. This leads to stress.
As managing money becomes more challenging, it makes it harder for a person to manage their mental health needs.
The lack of mental health care, often causing depression and anxiety, lead to trouble managing money further.
This cycle can continue until a person works through it. That’s why it is so important to get your friend or loved one to open up to you about what is happening.
That in itself is so difficult to do because, often, financial problems are considered personal and hard to talk about. People with financial distress do not want to be judged for what is happening in their lives, and as a result of that, they may not feel as though they can open up.
You may feel awkward through that process. Yet, you can start the conversation with a few simple statements.
For example, let your loved one or friend know from the start that you want to help. Give them reassurance that you will always keep any information they provide to you private. Then, let them know you want to see them through to the other side where you are confident life could be a bit better for them.
Then, talk about the benefits of opening up and allowing you to help.
Let them know you want to help them fix their problems, but you are not going to just pay off their bills. Often, people will hold back because they do not want this type of help.
Encourage them to just talk to you. Sometimes just opening up can be a stress reliever and help them to gain new focus. Your job is to listen and not tell them what to do.
Having someone to talk to about what they are facing could help them make better decisions. Often, just talking through financial problems can help them realize what they need to do. You may also be able to offer some ideas.
What is most important when speaking to and comforting someone about financial problems is that you allow them to work through the concerns and frustrations at their own pace and without you telling them what to do. You can offer ideas and educate, but don’t try to overstep. They may never really gain the support and education they need if they do that.
See Related: Different Things That Money Can’t Buy
Support Them in Seeking a Therapist to Discuss Their Stress
Family members battling stress may need professional support. While financial difficulties are in many ways something that can be corrected, depression, anxiety, and other mental health needs require the support of a professional. Even with strong family relationships and extended family support, a person may still need to turn to a therapist for help.
Therapy provides a wide range of benefits. Most often, a health care insurance plan may cover the cost of it, if they have it, or there may be low-cost solutions available. Turn to therapy if:
A person’s actions and behaviors are worsening their financial problems
You know they are suffering from depression or anxiety that’s impacting their decision making
They are in denial about the impact of job loss, medical expenses, or other financial struggles
Their physical health is being impacted by their mental health
They are engaging in coping mechanisms that are unhealthy, like using substances or gambling
The stress has been going on for a long time, and spending patterns have not improved
Mental health is often a big part of the reason why a person may be struggling financially. By getting them in to see a therapist, you may be providing them with the tools they need to work through the difficulties they are facing. This will help them learn how to better manage stress levels and improve their overall well-being.
With family relationships, encouraging therapy can be a struggle. Start by finding out if they have health insurance and, if so, if it offers mental health coverage.
Most plans do. Then, ask them to see a therapist for a single counseling session to see if it can help.
Offer Help – Based on Their Needs
With the focus on their mental health, the next step for family members or friends to take is to offer help for their financial concerns. A person facing economic hardship may not be able or willing to simply take money.
During tough economic times, such as temporary situations where monthly income is down due to a unique event, like losing a job, making the car payment, or meeting their basic needs may seem like a good idea. It could be if this is a single situation that is not likely to continue.
However, for a person that seems to be constantly facing those tough economic times, it may be more important to provide tools and resources to help them move beyond their financial limitations and to develop an effective money strategy.
Have a frank conversation about what is occurring with your family members. Talk about why these financial difficulties are occurring. Then, consider a few different ways you can help in a hands-on manner that is going to strengthen family relationships and provide them with the ability to achieve better financial well-being.
See Related: How Much Money Do You Save With a Tesla?
Talk About Why They are Facing Financial Distress
As you comfort and aim to support your family member or friend, one of the first things to do is to better understand the reason behind their financial difficulties. The type of support you offer to them is often dependent on what is causing this financial difficulty. Consider the following:
Is there a unique financial situation occurring, such as from the loss of a job or a single bill that is pushing them outside of their financial comfort zone? In this case, they may need help with developing an emergency fund to handle those concerns or a way to earn a bit more.
Do they have poor spending habits? Sometimes this is a concern in relation to mental health concerns. They may not be able to save money because they do not spend wisely. Financial education could be a big part of this process.
Do they need more income? Not enough income could be a concern for some people. This could be because they need better training, a new job, help with child care so that they can work, or help to find a new job. Job security could be a concern, too.
Do they have credit card debt that is out of control? In some situations, making minimum payments on credit card debt does not help a person to get out of debt, and over time, this can create a financial hole that’s had to get out of. They may need help with a better plan for paying down credit card debt.
Sometimes people may just need someone to help them to organize their finances and help them to create a monthly budget. They may need financial education to help them to get beyond where they are right now so they can build financial stability over time.
Once you both have a good understanding of what is causing the financial situation, it is then possible to start working on creating financial goals and taking action to get out of that place.
Take a Closer Look at Current Financial Health – Do a Financial Inventory
The next step is to take a closer look at where things stand financially. That means taking a financial inventory of the current situation. You cannot create a monthly budget or build a successful financial future without knowing what’s happening. Here’s how to do that.
How much income is coming in each month? Is it the same amount each month or is it dependent on how much they work (hourly, for example)? You’ll want to consider all sources of income including paychecks, bonuses, child support payments, and other benefits received.
The best way to know how much is being spent is to track expenses over the course of a month. Outline what each bill is, such as utility bills, eating out, gifts, food, and even credit card debt payments. Be sure to include all loans, the interest rates for them, and the minimum payments. Track everything being spent throughout the month to know where their spending goals are.
List out all debts
This should include all loans, the minimum payments on them, and the interest rate. When possible, make a phone call to lenders.
Ask for a lower monthly payment. Think about the benefits of debt consolidation, if that is an option for the individual, or concern other ways to reduce these costs.
There are two plans for debts to consider. The first is to pay off the smallest balance first, and then the next smallest, and so on. In this situation, you will be applying the minimum payment and anything extra to one debt until it is paid off before moving on to the next.
The second option is to tackle the highest interest rate credit card with the biggest payment over and above the minimum payment. Always make minimum payments. You may need to increase your income to be able to do this.
Discuss spending trackers
Where are they spending money beyond where they could or should? In this step, you want to identify ways they can save money. This could be in cutting out stops at the coffee shop or going to the grocery store and then still eating out. The key is to look at where it is possible to reduce costs.
See Related: Best Impact Investing Apps | ESG Investing Options
Eliminate any impulse spending
These are situations in which a person sees something they want and buys it, even though it may be contributing to their debt. One way to work around this is to ensure they put a hold on any purchase that is outside of their budget for at least 24 hours.
This gives them time to think about whether spending is a good idea or not. Remember, it is not always more money but better use of the income they have.
Make a cash-based budget
It may be possible to reduce financial stress by creating a monthly budget. Financial security comes from having a plan for paying back debt and having enough money to meet all goals during the month.
One of the best ways you can help is by helping them to create a budget that is based on their monthly income. This allows your loved one to have a clear path to follow. When you base the monthly budget on income, it is better able to minimize the use of credit.
Implement apps and tools that can help build financial health
Financial education often focuses heavily on gaining knowledge and having the right tools to support a person’s needs. There are many apps available that may be able to help a person to achieve these goals.
Chime: Chime is a type of digital banking tool. It can help with a wide range of needs a person has for financial stability such as helping to build credit, reducing debt, and offering no monthly fees on traditional checking and savings accounts. It is not a bank itself but works with various other banks as a partner.
Ally: Another option is to consider Ally, a type of bank that can help with investing, retirement accounts, home loans, car loans, and much more. It also allows a person to set up financial goals and then work towards those goals.
Both of these tools are beneficial because they provide low-cost or free financial tools to help a person to work to build their financial stability.
Talk About Options for Managing Too Much Debt
One of the most common problems people have is dealing with debt. This could include credit card debt, student loan debt, or economic hardship for medical debt (sometimes due to not having health insurance in place or an emergency fund).
What can be done with this type of debt?
Include debt repayment – above the minimum required payments – in the monthly budget.
Talk to banks and lenders about student loan debt, such as putting it into forbearance or refinancing it to be more affordable.
Reduce financial strain by no longer contributing to debt – don’t use credit cards and focus on using only a monthly income to pay for expenses.
Be sure the whole family unit is working together when it comes to reducing spending. This is not just a problem for one person in the family.
Work to increase income. This may be necessary for many people because it may help to alleviate financial stress from expenses such as high bills and a too-high mortgage payment.
Work to reduce expenses where possible. Make phone calls to find ways to reduce costs. Look for other resources locally that can offer help.
As you work to support your family member to save money, pay down credit card debt, and build their self-esteem, remember that there is only so much you can do for them.
See Related: Best Banks for Low-Income Earners
Rules for Protecting Your Well-Being
“My friend is in financial trouble. I want to help.” This is a common situation for many people when a friend or family member is struggling with financial security. Comforting someone with money issues is important and well worth it, but you also have to work to protect yourself during this process, too.
That is, you may wish to provide financial assistance, but you cannot do the work for them. Rather, it is best to help you teach them better money management skills so that they can, over time, build financial well-being. You can set up some financial goals for them, and give them the tools and social support they need, but you cannot do it for them. Here are a few things to remember.
Learning when to help someone financially is hard. Know your limits. You do not want to ignore a family member’s needs, but you do not want to put your finances at risk either. For example, do not get behind on your mortgage because of their debts.
Don’t keep giving them money. Instead, talk to them about ways to resolve the financial strain such as earning more so they get paid more, making a budget they stick with, and offering your friends resources to help them build financial well-being.
Many families need more than just money, they need mental health support. Tell your loved one you will help them if they get in to see a therapist. That’s often a big part of the recovery process.
Knowing What to Tell Them
Even if you want to do everything you can for your loved one or family member, realize you are not a professional. There may be times in the coming months when they need professional support. Offer resources and guidance to them.
Job help: If they are not paid enough for their work, talk about the benefits of finding a new job. Sometimes it is hard to realize that a new job is a must (or just getting a job is critical).
Too much debt: In some situations, a person is in so much debt that there is little to no chance that they will overcome these financial burdens due to that debt. In some cases, bankruptcy may be the best option for them. Encourage them to turn to a bankruptcy attorney to find out if it is the right choice for their needs.
Gambling or poor spending: If this is a big concern for your friends or family member, it may be necessary to think about behavioral counseling. These are often signs of a mental health disorder that could make it hard for anyone to recoup on their own.
Training and education: If you have a loved one that is stuck in a job that does not pay the bills but they cannot get another job, look for local resources for added training and education. There could be free programs available that could help them. Many families may qualify for financial aid in these situations.
Medical bills and medical problems: Not everyone has health insurance, but there are often resources available to help. Turn to state-funded programs like Medicaid for help. Or, work with hospitals to set up monthly payments.
Remember that you may not always be able to help. Recognize your own limitations. It is always a good idea to spend a few extra minutes offering support and asking what you can do, but there are limits to your own abilities.
Find Ways to Reduce Stress
While managing money is such a big part of the process of helping someone, it is also helpful to find ways to reduce their frustrations now. That is, look for ways to encourage stress relief. Here are some ideas to help with that process.
Spend time outdoors. It does not cost anything to go to a park or spend some time relaxing on a warm day on a hike. These types of activities help to reduce stress hormones in the body and help to improve mental clarity.
Encourage exercise. Not only is exercise good for the body, but it also helps to encourage better mental health balance. You may also find this can help a person dealing with the physical effects of stress to feel a bit better.
Provide social support resources. This could include going to therapy groups or even finding local support groups that can help people. Sometimes, even if you help your family, they may need to be around others who are facing the same types of limitations and struggles they are.
Do not be afraid to reach out to someone who is facing financial concerns. Many families can work to support each other with a bit more education and creating goals. In many situations, taking the first step for you in comforting someone is the hardest part.
It is an uncomfortable conversation at first, but once you start to help and results start to happen, you may find that it feels really good to help others. Take a few minutes now to create a plan for that first conversation.
How do I know when to approach a family member with financial issues?
Not everyone wants financial assistance. Bring up the concern with them when you notice its impact on their health, mental well-being, or their overall quality of life. If their stress is very high, that could mean they are at risk for health complications.
How can I find resources for budgeting and money management?
There are a number of programs available to help. Consider turning to Consumer.gov for guidance on budgeting and management of money. The Consumer Financial Protection Bureau offers fantastic financial education tools as well.
Can I help a family member with their financial problems even if I have debt?
Providing guidance and support to a family member is always worthwhile. Encourage people to get the type of professional support they need. It is good for them and good for you as well.