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9 do's and don'ts for when a loved one is in debt

Allie Johnson

September 9, 2015

If a loved one is drowning in debt, your first instinct may be to toss out a financial life preserver in the form of sage advice, literature about credit counseling or even an offer of a loan.

Depending on the situation, any of those actions might be the wrong move. But there are good ways to help, says financial counselor Susan Bross. In fact, just talking with your friend or relative might help to break the cycle of negative thinking that can accompany debt, such as, “I'll be in debt forever” or “There's no way I can live on my salary,” she says.

However, discussing a debt problem requires tact. “It does take some finesse to help them think through their options,” Bross says.

If someone you love is struggling with debt, here are nine do's and don'ts:

  1. Don't pry. If you've got a hunch someone you care about is deep in debt, but they haven't confided in you, tread delicately. “Money is a really tough thing to talk about,” says Brad Klontz, a financial psychologist and author of “Mind Over Money: Overcoming the Money Disorders That Threaten Our Financial Health.” That's partly because the person in debt might feel ashamed or embarrassed, he says. But if you know the person very well, you might gently say, “Hey, you seem pretty stressed about money,” Klontz says. That could lead to a good conversation, he says.
  2. Do be a good listener. Being deep in debt can be stressful, with calls from debt collectors, stacks of unpaid bills and tough decisions about whether to pay the electric bill or buy groceries, so a sympathetic ear can help. People want to feel heard, Klontz says. One way to accomplish that is reflective listening — repeating back what the person says — then asking follow-up questions, he says.
  3. Don't blab to others. When someone you care for tells you about a debt problem, keep it confidential, says Kathleen Gurney, founder and CEO of the Financial Psychology Corp. and author of “Your Money Personality: What It Is and How You Can Profit From It.” In her practice, she's seen the tension it can cause when someone breaks a confidence about debt. So, don't spill the beans to your grandkids that mommy and daddy are having trouble making the house payments or reveal to one of your gal pals that another friend canceled her Caribbean cruise plans due to debt. “When people feel they can trust you, they'll open up more,” Gurney says.
  4. Do let your loved one know they're not alone. If you've struggled with debt in the past, telling your story can help, Bross says. “You could say something like, 'I remember when I was in debt, this is what worked for me,'” she says. Sharing personal stories can be helpful because it shows the other person that others have had similar struggles, and it offers hope. “It's a really good strategy,” Bross says.
  5. Do ask before giving advice. You might be dying to dish out budgeting tips, email a link to your favorite personal finance blog or deliver a lecture on the snowball method of paying off credit card debt. But your unsolicited advice likely will not be welcome, Klontz says. In fact, research on behavioral

    “The key is to get your loved one talking about change.”
    –Brad Klontz, financial psychologist and author of “Mind Over Money: Overcoming the Money Disorders That Threaten Our Financial Health”

    change has shown that, at any given time, only about 20 percent of people are in the “action phase,” where they're ready and willing to make a change, he says. If the person you care about is there, they'll probably be asking for your input. Before you give advice, ask if it's OK. “That's very respectful,” Klontz says. “And, once someone says yes, they're going to be more receptive.”
  6. Do have a chat about change. Making confrontational statements, such as “Hey, I thought you were going to cut back on going out to eat,” can backfire and reduce the chance that the person on the receiving end will make a positive change, research has shown, Klontz says. But that doesn't mean you have to keep your mouth shut. One strategy that does work is encouraging 'change talk,' he says. For example, if your loved one says, “This credit card debt is really stressing me out. I need to do something about it,” you might ask what they're thinking about doing, and how they might go about it. “The key is to get your loved one talking about change,” Klontz says.
  7. Don't tempt your friend to spend. Do you regularly hit the mall with your pal for Saturday morning shopping sprees or go out with the gang for dinner and drinks at swanky restaurants? If so, switch to different activities so you can still socialize in a more affordable way, Gurney recommends. For example, suggest meeting for a morning nature walk or host a potluck at your house, she says.
  8. Do watch for signs of depression. Depression and debt can go hand in hand, Klontz says. And a study published in 2013 in Clinical Psychology Review shows a link between debt and suicide. So, watch for changes in behavior, such as missing work, sleeping more or less than usual, drinking more, withdrawing and giving away possessions, he says. If you see any of these signs, do whatever you can to help your loved one get mental health help right away, Klontz says. Just being there also can be helpful. “If you were calling once a week, start calling every day,” he says.
  9. Don't bail out a serial debtor. If you're financially flush, and especially if your loved one is your adult child, you might be thinking about offering a loan. But borrowing money from family or friends can be fraught with trouble. And, if your friend or relative has a pattern of overspending and getting deep in debt, you might be “financially enabling” him or her by making a loan or gift of money. “It's like giving a drink to an alcoholic because his hand is shaking,” Klontz says. “It's help that hurts.”

Even if your normally responsible loved one is in debt due to, say, an illness or job loss, know that becoming a creditor may strain the relationship. For example, what if you lend your best friend $5,000 to pay medical bills, then you see her wearing a new pair of designer heels? “You start to feel betrayed because your loved one bought some new shoes,” Klontz says. “And they start to feel controlled.”

So, proceed carefully, especially if you already have tension or unresolved issues. “I won't make a blanket statement that you should never lend money to friends or family, but it changes the relationship,” he says.

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