How to Help People Get Out of Debt

If a friend or family members is having problems with debt, it is only natural to want to help. But it is important to offer the right kind of help. Simply bailing your friend or family member out with a loan or gift of cash may not be the best strategy. It may be better to teach that friend or family member how to handle their finances properly. By teaching those you care about how to deal with debt you can help them in the short term while helping them bulid a solid foundation for the long run.

Instructions

1

Resist the urge to help your friend in the short term with a loan. A loan can be a part of the solution, but lending money to friends and family members is fraught with peril. It might be better to use your own financial experience to teach your friends how to deal effectively with their debts.

2

Ask your debt-laden friend or family member to gather up his or her bills. Before you can help another person deal with debt you need to know where they stand.

3

Ask him about his income. This can be an uncomfortable conversation to have, but it is an important one.

4

Sit down with your friend or family member and develop a realistic budget. You can use a financial program like Qucken, or a simple spreadsheet program like Excel or Open Office. Be sure to plug in all income informaion and information on outstanding debts. Factor in monthly expenses, such as rent or mortgage payments.

5

Examine the individual's spending patterns and look for opportunities to help save money. Some possible cutbacks may be easy to spot, while othes may be more challenging. If spending $20 a day eating lunch at the local restaurant, simply brown bagging lunch a few times a week can result in enormous savings over time. If the budget is tighter it may be more difficult, but still not impossible, to cut spending and trim expenses.

6

Work out a debt reduction plan using the savings you have identified as a guide. It can take some time to work out of a serious debt problem, but this kind of exercise is the best way to get your friend on a sound financial footing for the long term.