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