Giving A Helping Financial Hand
For those of us that have reached a point in our financial life where things are pretty gosh darn good, it can be extremely temping to try to help those with less financial foresight than ourselves. Some people donate money to charity as a way to help, while others try to make things a little more personal by offering to help a family member or even a boyfriend or girlfriend with their financial difficulties. But beware, nothing ruins a relationship quicker than the greenback, especially when a person is viewed as a charity case by another. The same essential principle goes for marriages: in relationships where there are huge financial discrepancies between one spouse and the other, it can be a huge source of conflict within the relationship. So, what is a generous person to do with their expert financial advice? Here are a few tips on what to say and do and what to avoid.
It may sound like a broken record but you can’t solve the puzzle until you know what the picture is. It’s time to conduct an audit! Sit down with your friend or family member and plan out their entire list of expenses, their income and a comprehensive list of their debt, including interest rates and which accounts have extra fees attached to them like annual fees, etc. You should also request copies of that person’s credit reports from the three major bureaus to see what state their credit score is in. Once you have all of the information, you can formulate a plan of attack.
Next, you need to decide what kind of help you want to give an in what form. Do you trust the person to simply give them cash and have them send it along to the credit account you’ve picked out as needing the most attention fast or would you feel better taking over an account yourself and sending in checks on that person’s behalf? If the person you are dealing with has what you believe to be a legitimate spending problem, you might want to take over the account yourself and confiscate the cards that are attached to the account. If the person in question hasn’t been responsible enough to stop their spending on their own, they likely aren’t going to stop it now.
If the person you are helping out is more responsible, you can think about co-signing on a credit card that has terms that they could never get on their own. If they have poor credit, the chances of them getting one, low-interest and no fee credit card is almost impossible, but with your help, they might be able to transfer over several cards with high rates to one single card that is much more manageable. But be aware that you are endangering your own credit score by doing this. If your friend is irresponsible with their new card, it can also ruin you, as well. If you can swing it, co-sign on a card, transfer over the balances and then either temporarily close the card, forbidding any future transactions until the card is paid down to a certain level, or simply keep all the cards yourself so the person you are helping doesn’t have the physical ability to use it.
Helping those less fortunate than ourselves is one of the best things we can do for each other. But you need to use common sense or you may find yourself in the same shape as the person you are trying to help.