How Do You Deal With Family Members Who Are Bad At Managing Money?

by Xin Lu on 5 August 2008 20 comments

You know who I am talking about. Most of us have that one brother who blows his paycheck in a day or a cousin that has no money for retirement. No family is perfect, and we all tend to have a few loved ones who are horrible at managing their money. So what should we do about it?

A difficult situation arises when those who cannot manage money are your parents or elders. A couple of my friends have complained to me that their parents made extremely stupid financial decisions, but did not listen to my friends when they warned the parents against those decision. Parents tend to always think that they know better than their kids no matter how old their kids are and sometimes they are wrong. The worst possible scenario is when a spouse or significant other is extremely bad with money management. This is an issue that dissolves many marriages and relationships. For these sticky situations, I have a few tips here, but they may not be enough.

1. Openly talk about finances - If you are not comfortable with communicating about finances within your family then you may not even be aware of the problems your loved ones are having. If your loved ones can be honest with you about their financial problems then it shows that they trust you and your advice may be valued more.

2. Do not lend money to the irresponsible - As I wrote in a previous article , there is no point in throwing good money after bad debt incurred by irresponsible people. The money you lend would be squandered anyway if the receiver of the money still does not manage it well.

3. Offer help in solving the root problems - Often there is one core problem that is causing your loved one to be bad with finances. It could be an addiction to shopping, drugs, or gambling. It could also be that they are bad at math. Whatever it is, if you could help them identify the root cause of their troubles and help them resolve it then the money problems might dissappear.

4. Conduct financial transactions in a business like manner - Whenever there are big financial transactions such as a significant loan or property sale within a family they should be done in a professional fashion. There should be contracts laid out and terms should be spelled out clearly. If there are no written documents the there could be more broken relationships.

5. Become a trusted source of financial information - If people in your family know that you manage your money well, then they might consult you before making big financial decisions and it is possible you can save them from making a big mistake. It also helps if you are not extremely judgmental so your family feels comfortable talking to you.

Some would say that you should not care what your family members do with their own money because it is their own business, but it is not always that simple because family finances always end up intertwined in some manner. I feel that if you care about your family members you should also care about their financial well being. Ultimately, having a family is more important than having money, but having a family riddled with financial problems can be extremely stressful.

Do you have a family member that cannot manage money? How did you deal with the situation?

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Guest's picture
Alex R.

I grew up in a low-income single parent household. I was always frustrated when it came to issues regarding money. Many of my friends growing up came from well-to-do families and were able to do things I couldn't. I was embarrassed to invite people over to my home. I was embarrassed when my friends asked for something to drink and all I could offer them was a glass of tap water. I found that growing up in this environment fostered a lot of desires...but for the wrong things. Everytime I got ahead just a little bit I would spend it trying to get a piece of what was being held from me. A lot of people criticize "poor people" when they drive past the trailer parks and see the nice cars and the satellite dishes, but these criticisms lack a true understanding. Yeah, maybe poor people act lazy, maybe they spend on the wrong things, maybe they eat the wrong things. You can point to all of these factors and say geez it's all their fault, but you gottalook at the stressors and societal circumstances holding them there - the education systems in those neighborhoods, the lack of political support, etc. Maybe my little take on my own experiences can give some light into why these characteristics are out there.

When many of my personal issues came together for me in my sophomore year of high school, I found that I was continually blaming others and the circumstances around me for my place in life - including family. I would become confrontational and immaturely bring about issues that in retrospect were already cutting deeply into the loved ones around me. I realized one day that it wasn't worth blaming others or circumstances. you could point to 100 things wrong with your life and justify every 1 of them, but it does nothing to change your circumstances. I needed a proactive attitude if I was going to break the cycle. I worked hard and now in another year I'll be earning a doctorate degree and a master's degree. I love personal finance and try to share it with my loved ones. I received a lot of resistance at first, but when they saw my ability to travel and see new places, when they saw the everyday habits that gave me those opportunities, they began asking questions. Now my mom and stepdad formed a real estate company and named it using my initials. We talk over e-mail and our relationship has drastically improved with the increased transparency between the issues we face on an everyday basis. Maybe this is just a part of getting older and sharing understanding with our parents, but I say keep on throwing hints here and there, show that you're willing to talk about it. if they don't take the bait, they don't take the bait - at least you tried. Don't ever let it limit you from achieving your desires though. Live your own dream, don't let circumstances dictate your personal reality.

Guest's picture
Guest

Just reading the title of this at pfblogs.org made made my shoulder/neck area tighten with stress! How about, what to do with a family member who is bad with money, except you didn't really know it and were young, and you are already on the hook for a sizable sum of money? Ick.

Guest's picture
Val

Gosh, my mum is one of those family members that are HORRIBLE at handling money. The biggest problem is that she won't talk to me about ANY financial matters at all even when it pertains to something important. For example, it took much convincing for her to let me use her tax information to fill in the FAFSA and get some grants. (I used guilt, telling her that it was the least she could do since she didn't save a dime for me for college and doesn't help me with any books/supplies expenses now).

At the moment, I need info from her such as the state of her credit score so that I can effectively find a good student loan and an auto loan (2 things that I desperately need). But when I try to talk to her about it, she just yells that she hates talking about money and then ignores me. I have no idea how to deal with this situation except learn personal finance for myself so that when I am finally independent I won't end up like my mum did. And I will gladly give her advice if she asks for it. But she is too stubborn :]

Guest's picture

My mom is the horse. After my dad died, she just couldn't spend the money he left her fast enough! Then, as soon as she blew through all that cash in a few years while living it up with her new boyfriend in South Korea, she started to liquidate all the properties Dad left to her one by one. I and my sisters (all in our 30s by then) knew it would be impossible to try to talk her out of it. But we tried anyway. She was extremely suspicious of anyone who tried to talk about her money. Before long, that whole mess ended up splitting up the entire family. She went through with her plan, stayed long enough in the U.S. to take the money and run. I hope she won't blow through all of it as quickly as she did the rest. If she does, however, I'm sure she'll find someone else to take care of her. She is a classic Human Cuckoo, or what I call sponges or leeches in my free ebook Cuckoo in Your Nest! Actually, she did me a huge favor by letting me see for one last time her true colors. Some people really can't change their old ways b/c they just don't want to.

Guest's picture
Guest

What a great blog subject! I guess I am not the only one suffering considerable stress from a family member with this affliction. I am naturally quite disciplined with my financial affairs. Not that I am any great genius, but I do come out o'k. My problem is my sister. And when I try to make suggestions, she just laughs and says she has absolutely no intention of learning about finance. It is so boring. But guess who she complains to when she needs money. If I back off, she apologizes and says the relationship is more important than money. If we go out somewhere, I am always expected to pay, because I am the one with the money. So, I do avoid her.
Now, she has cancer and no health insurance, but bought a piece of clothing the cost of which would feed me for a couple of weeks. She did it to cheer herself up. She is planning to ask the physician to lower the cost of the surgery. She will probably get what she wants. It is hard to swallow.
I have lived with this situation for years and years. I am so tired of her saying she is "poor." And believe me, she can easily rationalize her situation and win your symphathy. In many ways, she has learned to be a con artist, but it has been a disappointing part of our relationship.
She is my only sister and in many ways a very remarkable person. I guess Susie Orman would say she refuses to grow up.

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Anonymous

I have the same exact sister! Mine doesn't have cancer yet, but after years of chain smoking I am sure she will soon enough. I have tried several times to get her to save for the future to no avail. She has gotten fired so many times because the "boss has it out for her". It is so frustrating to see someone you care about repeatedly screw up. To cope I avoid the topic of money at all costs. Fortunately she lives far away so I don't see her often.

Guest's picture
Whoa!

WHOA! I have no money for retirement, and I resent the idea that I am bad at managing money. And I totally reject the idea that I am bad at math or that I have an addictiopn to shopping, drugs, or gambling.

Xin Lu's picture
Xin Lu

erm.. noone is saying that you are bad at math or have an addiction, but that could be someone else's problem. Having no money for retirement could be a problem if you are near retirement, but if you're 20 years away you still have time to save.

However, if you do have an addiction and squander your money and you totally deny it then you may be that family member everyone is trying to get through to.

Guest's picture
sam

I like that one above*laughs*. Seriously, one thing that worked for me is informing them of the consequence if they mismanaged their money.

For instance, I just found out last week to my disbelief that my parents don't have any health insurance. I have to inform them that if something bad happens to their health, hospital bills can zeroed their ALL their savings in just a few days. It didn't take so long to convince them to buy a health insurance as we belong to a family with history of heart problems.

Yes, instilling fear can be an option*laughs* but sometimes, you have to help them open their mind to possibilities to "force" them to shape up their finances.

Sam
Fix My Personal Finance
http://fixmypersonalfinance.com/

Guest's picture
Mia

could you do a follow up post on how to prepare for a parents old age? My mum is in her late forties with no savings or retirement. i know she will be sickly (she is sickly now, and has already gone through a two year nervous breakdown during which time she sucked me dry of ALL my savings and income). i am her only relative, and it is going to be my responsibility to care for her in her old age. what can i do to make it easier? Help! Im only 25!

Guest's picture
Lindsey

But I'm getting better, thanks to my parents, brother and sites like WiseBread. A very unhappy 18 months living out of state and away from home left me $15,000 in debt. I finally broke down and told my parents, who helped me get out from under the crushing interest by taking out a low interest loan in their name that I'm making the payments on. My brother has let it be known that anytime I'm feeling reckless with money I can call him and he'll talk me down.

A few other tricks my parents' gave me -- Write down my goals and tape them into my wallet, so I have to rethink it every time I reach for my wallet. Moving back to my home state where I'm much happier has already curbed the spending, so has simply living in much cheaper town.

Guest's picture
Edie

I recently had an experience with my about to be 21 year old, married daughter. I've had a budget since I was 16. I am a natural saver. My daughter knows this. I just turned 45 and am debt free except the house.

My daughter told me it's "normal" to have 2 car payments and credit card debt. She is married to an E-4 in the Air Force, aka "broke".

She told me all I care about is the money. I told her I don't, but I wish she wouldn't go an make the decisions with money that I made when I was her age. I didn't want to see her divorced because of money or go through the hardships I had to.

Bottom Line: Don't offer advice unless they ask. Don't lend money to relatives. Let them sink or swim on their own or all they will do is trash you. They are adults and let life teach them their lessons and be ready when the sky falls on them.

Guest's picture
Guest

My two stepkids are both drunks, druggies, and constantly wanting money, for their addictions and lawyers to save them. (Just like their mother) Their father loves to rescue them, the more expensively the better. I find myself at the store sometimes just buying stuff in an insane way.

I'll have to stop, I'm into the self-pity here. Doing something for someone else is the only way I've found to help with this. I'll go volunteer at the animal shelter, and other places, for a few nights each week. I'll be out of the stores.

Being used, by your family or friends, is a problem too. I wonder if there is really love there, in teaching another that they don't have to be responsible for (at least) themselves.

Guest's picture
Kelly

It's difficult to confront a parent with an accusation of bad money management. My father was always bad with money, but my family had an avoidance policy - avoid the issue, and maybe it will go away. Well, you can guess how well that worked!

My father died unexpectedly several years back, and my mother was left with a large mortgage and little savings. Fortunately, the debt he had was in his name, not hers, so she wasn't as liable as she could have been, but she still had to sell the house and downsize. Now she's 67 years old and still working.

I sometimes wish that I had had the courage to talk to my father about his finances, but I still believe that he wouldn't have listened. Sometimes you have to step back and let people make their own choices. All you can do is love them.

Guest's picture
Suz

Ok, so it's not that healthy, but I deal with it by avoiding the topic of money. What bugs me is when family members (especially parents) try and comment on my spending habits (which I've worked very hard to refine) when they don't know what they're talking about! I find I get angry too easily so I just nod and smile and go about my day...

-Suz

Guest's picture
Abby

FIL was miserable at his job for about a decade. He finally got an offer from a competitor and switched over. He took early retirement at his old job. And they spent IT ALL in 9 months. Even the 10% that HR warned him he needed to set aside for tax penalty. Now they're in debt. And the competitor then let him go after six months with no warning. So then they were in debt while he decided to change occupations and went to school with some state help (MIL could only work PT, due to health issues). Then, MIL was diagnosed with congestive heart failure. FIL did finally get a job (contract, no insurance) and what do they do? Start going to the casinos for fun. Recently, they were let go as asst managers of the park. Now that they have to pay space rent again, FIL's solution was to stop paying a friend of the family to come over two hours a week and help MIL with cleaning.

It drives my husband and me crazy, as we struggle to get out of debt, after which we plan to start saving for a house. But in the end, it's not our place to say anything and FIL doesn't listen to the politely worded advice I give. (Did I mention he still hasn't set up payments with the IRS, two years after getting early retirement?)

So we have to accept that there are many things beyond our control. All we can do to help is pay them what we owe them (they gave us $3000 out of early retirement to help settle a student loan) and pray they use it well. And, once we're out of debt, make sure they know that we love them and will do what we can, but will probably never be in a financial position to take care of them (I'm on disability and hubby has his own health issues that affect work). They need to plan as best they can for themselves.

Guest's picture
arcbeauty

My father died when I was 4 and he had left nothing. My mother used to get some help from her brother's. Our uncles helped till certain age,after that it was my elder brother who was responsible for the money. He didn't work,sold of our home and started several businesses by our money. We had several losses and none of them have been very beneficiary. Now my brother is doing a job. I spent several years getting the finance and somehow was also able to get my own flat.My mother and brother not working all my savings is gone. Since now my mother is getting old and having diabetes she seems to be asking me to take care of her instead I am happy to give my flat but I don't understand what do you do with these kind of family.Is it worth having them around ?

Guest's picture
Guest

right, arcbeauty. when are you to just cut off all relations? if your family is just being a drain on your finances, and they are just too dense to learn anything about money management (claiming that you are just being judgmental) yet keep playing the family or elderly guilt trip card? their behavior only worsens the relationship. wouldn't it be nice to end this emotional abuse?

Guest's picture
Guest

My daughter is 40 something and an underpaid educator. After lounging the summer away in Florida at her mother's she returned home to discover the broken down car she had left at home was still broken down and beyond reasonable repair. She asked me to assist her with purchasing a car. I tried to explain that I live on disability, my COBRA insurance has run out and do not have the werewithal to help her. She hung up on me and I have not talked to her since. I do have a small amount of savings and some money in a retirement account, however, I do not think it is a family's obligation to bail out an adult family member who is irresponsible and not willing to help themselves. Also, it is imperative that individuals conserve their resources lest they become a burden on other family members. I only hope she will wake up and learn a life lesson in all this.

Guest's picture
Jo

My husband and I have been married for ten years, live in a modest house and are raising two young children. After suffering a series of strokes, my father-in-law was sick for years before he passed away 12 years ago. Before he became ill, he took care of all the finances and was the primary bread-winner. Because of his medical bills, poor investments, and my mother-in-law’s lack of understanding in financial matters, all of their life savings vanished and she was in debt by the time he passed away. She is now in her 70’s and has no savings, but does get a check each month from her husband’s pension. My husband’s two sisters bought her a new car 10 years ago, since her old one was no longer reliable and she couldn’t afford to keep it running. A couple years later, my sister and brother-in-law finally convinced her to move onto their property; since she couldn’t afford the high rent she was paying up north and was going further into debt. They bought her a nice big modular home and paid off all her credit card debt, which was over ten thousand dollars. The car they bought her was recently totaled in an auto accident. Luckily no one was hurt, she wasn’t at fault, and the insurance money will help her pay for a new vehicle. However; her old vehicle was 10 years old and was starting to need costly repairs. My husband and I both work, and since we can now afford it, we’d like to help buy her a more reliable car. She is still working from home, and received a small inheritance a few years ago, and in theory, should be able to afford a better vehicle. However; she is very irresponsible with money, mostly because she has never felt the full weight of financial responsibility, since family has always been there to offer financial help. In addition, she spends money as soon as she gets it, is not a “saver”, has nothing saved for retirement, and buys a lot of gifts for other people. She always spends far more on my children than any other relatives during birthdays, holidays, etc., yet she can afford it the least. She also routinely buys gifts for friend’s children and relatives and ships them within the U.S. or overseas. Every time she visits us, there is always one or two things she wants to give me that she bought at a “great price”. She also travels oversees every couple years for 3-4 weeks to visit her family and visits us and other relatives four times a year. Last time she went overseas, she brought her family many gifts and paid for their meals at restaurants since she felt like she could afford it and they were on fixed incomes! As far as the car, she insists that if we help her buy a car that she will pay it back, but my husband and I know she probably won’t and my husband is fine with just giving her the money. I am only okay with it if she curbs her spending habits, and starts saving for her future. I am repeatedly getting upset at how much she spends on our two boys and others when she cannot afford it, and is living off the charity of her children, namely her daughter. My husband’s family has talked to her before about her spending, but since it seems to not have had any effect, and they’ve essentially given up. Both of my husband’s sisters are doing extremely well financially because of their spouses, and while we are doing better than most, we still need to save for our sons’ future and ours.

I always feel like the bad person, since I repeatedly scold her for spending money she doesn’t have, and she isn’t my mother, she is my mother-in-law, but I feel that someone needs to say it. I think part of the reason I have so much heartburn over this is that my side of the family are the complete opposite. We know what it is like to have financial troubles, with worry over how the bills will be paid, and we wouldn’t take money from other family unless it was an emergency.