Dealing with Debt

How to help a relative or friend who isn’t good with money.

You have likely heard the saying, “Give a man a fish and you feed him for a day. Teach a man to fish, and you feed him for a lifetime.” This age-old advice holds true in numerous situations, including our personal finances.

Maintaining financial stability can be particularly challenging for those in the LGBTQ community. Some of the primary reasons for this include workplace discrimination and pay inequity, the high cost of family planning, potentially higher healthcare costs (particularly for transgender individuals), higher student-loan costs, and less money saved for retirement (which can stem from earning lower wages).

We all know someone who may be down on their luck financially. While we may want to offer them support, there’s a big difference between just handing over cash to solve the immediate issue and showing them how to better manage their money so they can stay out of financial trouble down the road.

Short-Term vs. Long-Term Fixes

There are certainly times when being down-and-out financially happens for reasons beyond our control. For example, a friend may have been involved in an accident or diagnosed with an unexpected illness that threw them off course financially. And of course, there are others who have never been taught how to manage money wisely.

If you are more inclined to help your loved one “learn to fish,” rather than simply handing them cash to bail them out, there are several important strategies you should consider using:

  • Help them create a budget and a spending plan
  • Teach them how to save
  • Show them how to negotiate and be more financially resourceful
  • Put a plan in place to pay down debt and save at the same time
  • Educate them on how to establish good financial habits

Creating a Budget and Spending Plan

While many people do not like the term “budget,” following some type of income and expense guide is essential for long-term success. It is important to stress that it’s not only about how much income one earns, but also how much one spends.

Some of the key parameters of a good, solid spending plan can include:

  • Identifying needs versus wants – If your loved one is having trouble paying their rent or mortgage, but they always seem to have on a new outfit or expensive shoes, it may be time to go over the benefits of spending on luxuries only after monthly expenses and savings goals are met. Otherwise, their debt could end up spiraling out of control, especially if they are racking up purchases on high-interest credit cards and not paying off the entire balance every month.
  • Cutting out unnecessary costs – While your loved one might need to pay for cell-phone service, they usually don’t need the best, most expensive calling plan. Likewise, doing away with premium cable channels and an unused gym membership could free up needed funds each month. For instance, just cutting out a movie channel that costs $15 per month can add $180 to their bottom line each year.
  • Eliminating impulse purchases – Another area that may be costing your loved one is impulse purchases. It can be difficult not to reach for that candy bar in the grocery store checkout line or “supersize” an order at the drive-thru. But over time, these expenses can really add up. That’s why it is critical to make a shopping list and stick to it. In addition, identifying short- and long-term goals will help keep your loved one on track. Each time they accomplish a short-term goal, it can help them stay motivated to keep going and eventually achieve their long-term goals.
  • Learning How to Save – With so few money-management courses taught in our schools, it is easy to see why so many people have trouble sorting out their spending and saving goals. One of the best ways that you can assist a loved one who has trouble with managing money is to show them how to “pay themselves first”—setting aside a certain amount of money in a savings or other type of financial account before using the rest of their income to pay bills. Once they have contributed to their savings, they should focus on paying their essential expenses next (like housing and utilities), and only then consider spending on non-essential items. If your loved one does not yet have an emergency fund in place, this should also be a primary focus. That’s because unexpected costs like home or auto repairs can take a chunk out of one’s budget. But having access to liquid money to put toward emergencies can allow your loved one to leave other funds in place for their originally intended purpose.
  • Negotiating and Being More Resourceful – Teaching your loved one how to negotiate and be resourceful is another way to keep them on track with cutting expenses and building up their savings. Money habits can be ingrained from a young age. For instance, if a parent keeps bailing out their children—even when they become adults—the younger generation will never learn how to be resourceful or responsible. So, while it may be hard to resist jumping in and saving them in financial emergencies, doing so could actually end up hurting them in the long run. Also, many people are not aware that cars and homes aren’t the only items whose price can be negotiated. In fact, it never hurts to ask for a discount—even in a big-box store or other retail shop. You never know when a business owner will be able to “find” additional discounts, and the worst that can happen is that they’ll say no.
  • Paying Down Debt while Increasing Savings – If your loved one is in debt, it is vital that they get it paid off as soon as possible. This is particularly the case with high-interest credit-card balances, because the interest charges can soon snowball out of control. When paying off debts, though, continuing to save should not be ignored. In this case, it is important to find a happy medium between getting debt balances wiped clean while at the same time adding to savings. Otherwise, if your loved one waits until their debts are paid off to begin their savings program, it could potentially never start.
  • Establishing Good Financial Habits Another critical factor in establishing good financial habits is education. Oftentimes, once people know how to move forward—and why—they will be more apt to stick with good spending and savings habits over time. In fact, financial independence and financial freedom is the result of deliberate, habitual practice!

Helping Loved Ones Learn to Fish

Oftentimes, successfully reaching our destination on a long journey is easier when we travel with an experienced guide. So if you’re in the process of assisting a loved one with establishing good financial habits, it could help to seek out a financial-planning professional who can help them put together a customized plan based on their specific situation and goals.

Additionally, pairing up with a planner who is also well-versed in the financial issues facing the LGBTQ community could help you stay on top of things when the laws affecting same-sex relationships change.


Grace S. Yung

Grace S. Yung, CFP, is a certified financial planner practitioner with experience in helping domestic partners plan their finances since 1994. She is a principal at Midtown Financial LLC in Houston and was recognized as a “Five-Star Wealth Manager” in the September 2017 issue of Texas Monthly.
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