How to Help Someone Out of Debt

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We have all been in debt to one degree or another. For some, it may be brief, for others it may be long lasting; for many in today's economy it has gotten out of control. While the hard decisions have to be made by the person in debt, there are simple things friends and family can do to help the debtor begin the road of financial freedom.

Things You'll Need

  • Pen and Paper
  • Calculator
  • Time and patience

Managing Life by Controlling Debt

  • Talk to your friend or family member that is in entangled or may become entangled in debt. Today, unwise overspending can be seen as a sickness. And it can be just as destructive as any prominent form of addiction. So, talk to the debtor and tell them about your concern.

  • Share personal stories with them about financial struggles overcome. These can be stories from your own life or stories from the lives of family members or friends. This will let them know you understand their struggles. They are not alone.

  • Ask how you can help. This may be all that is needed. They may have a list of ideas for you. If so, follow through. It may be as simple as cutting up their credit cards.

  • If you do not have the financial background or understanding, find someone who does. If you ask around, you can find someone who has the experience without having to pay a service (remember we are trying to stop spending here). Explaining to them the fiscal dangers of high interest loans, minimum payments, and the pleasure now vs. needs later mentality can be eye opening.

  • Find a time to sit down (over pizza or something--your treat) and go over in detail their financial income. Then ask "why" for the out-goings. This will begin to help them start thinking in terms of necessary and not-necessary. in addition to that, ask how much extra they think they need to be "happy".

  • On a piece of paper, make 3 columns; one for necessary, one for pleasure, and one for things they need but don't have money for. Then itemize, itemize, itemize. Go back over the spending reports and put each item into one column or the other. If they say that dinner out was necessary, try to help them discover that the dinner was not necessary, but rather the time spent with their spouse or family was.

  • Discuss ways they can have fun and spend that necessary time with family without spending money.

  • Add up all the money they have spent on extraneous items (this may shock them--good). Then, when all is accounted for, ask them what they can weed out (it may not be everything in that pleasure list yet, that is fine). After they do that, add it up again and create a new budget, taking the money saved and applying it to the items in the "Things they Need but Don't Have Money For" column.

  • Ask what you can do to help them stick to their new budget. Counsel them to get a personal money management program (like Microsoft Money, Peach Tree, etc.). Maybe you personally go over the finances weekly, or monthly... Maybe you won't need to help them again. For many, knowledge is empowering. With the know-how and the proper tools, they will be able to manage themselves from there on out.

  • For some, spending has become a literal sickness, an addiction they can not easily shake even after being taught and warned. Their spending can waste away money better used for kids, clothes, food, bills, etc., until they have nothing left and they turn to depression, gambling, divorce, or worse. In these cases, if you are concerned a friend or family member is jeopardizing their well-being and that of their family, please encourage them to seek professional help from a counselor specializing in compulsive behaviors.

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