We all know someone who, at some point in their life, has fallen on hard times and found themselves in financial trouble.
Sometimes it’s the result of an illness, a divorce, or a job loss. Sometimes it’s due to irresponsible spending habits. Sometimes, the need to keep up with the Joneses puts people into financial ruin.
If you have a family member struggling with finances, it’s reasonable to want to step in and provide some help.
Not sure how to do so?
Here are seven ways to help family members in financial trouble.
1. Give Your Relative a Personal Loan
If you have the means, consider giving your relative a personal loan. Regardless of the amount, have them sign a promissory note that states the total amount of the loan as well as a payment schedule for how and when you want to be repaid.
2. Pay Their Bills Directly
Don’t expect people with poor spending habits to all of a sudden start making wise financial decisions. To be sure that a relative is using your money in a responsible way, consider paying their bills or utilities directly.
Keep track of every payment you make and when you make it. Make it clear to your relative if the money is a gift or a loan. If you expect repayment, put it in writing and make them sign the agreement.
3. Create a Budget and a Strategy
Many people get into financial trouble simply for the fact that they don’t know how to budget. If your family member is struggling because of poor financial planning, arrange a consultation with a financial advisor that can help them create a budget and establish a realistic spending plan for their future.
4. Provide Your Family Member With a Source of Income
Do you own a business and need to hire a new employee? If your cash-strapped relative is capable of doing the job, offer them the position as a way to increase or supplement their income.
If you don’t own a business, consider hiring your relative to do work at your home. Offer them cash for cleaning your bathroom, mowing your lawn, or organizing your closets.
5. Give a Cash Gift
There are varying degrees of financial trouble. Some people may have the means to pay their monthly bills but come up short when it’s time to buy food or put gas in their vehicle. Others may have no source of income whatsoever, be unable to work or find work, or be bogged down with massive amounts of credit card debt.
For a family member with a minor degree of financial instability, a small cash gift or a gift card to buy food or fill up their tank for the month may be all they need to get back on their feet.
6. Co-Sign a Loan
Rather than giving a relative a personal loan, consider co-signing a personal loan for them. This is one of the easiest ways to help someone in financial trouble, as the burden for paying back that loan lies with the primary signer. However, if you co-sign a loan and the primary signer defaults on that loan, you will be held responsible for that debt.
Before you agree to co-sign a loan, make sure that your own financial future is secure by building a solid savings, making wise investments, and protecting your future income with disability insurance.
If you do not have your own safety net and financial security, you can put yourself at risk by co-signing a loan to help someone else.
7. Provide Non-Financial Help
Combining family matters and money matters makes a lot of people uncomfortable. If you don’t feel comfortable giving cash, giving a loan, or co-signing for one, there are ways to provide non-financial help.
Offer to provide your family member with a few rides to and from work throughout the week. Cook dinner and invite them over so they don’t have to spend money on food. Host a movie night or a game night to offer some free entertainment.
Providing resources and information about financial planning is another great way to help that can get a relative out of trouble and help them build a more stable future.
Helping a family member in financial need is a generous and considerate thing to do. Just keep in mind that helping can easily become enabling.
Before you give financial assistance to anyone, have a direct conversation about why you’re doing it. Set boundaries, monetary limits, and expectations. Protect yourself by putting some terms and conditions in place.
The last thing you want to do is put yourself in financial trouble because you chose to help someone else out.