Financial problems will always be a part of life and that includes people in and around your life. This includes people close to you such as family and friends. As much as you go through your own challenges, they will also have their fair share of problems. When this happens, it will not be long before they either start asking for help or you begin to offer one.
Once you get to the point where family and friends begin to ask for help, you have a big decision ahead of you. You can either lend a helping hand or choose to look the other way. Each decision has its own set of pros and cons. Each decision you make will change the dynamics of your relationship for better or for worse.
This is what makes financial problems of people around you a little different and complex when you 9gcompare` it with your own set of challenges. Personal problems usually need personal solutions. You work on your own income, expenses, make changes towards your goal but these are all you. As soon as you start to include problems from people around you, the dynamics changes.
Apart from the financial aspect of the problem, you have to factor in your relationship with the person you are helping out. The relationship you have with the person asking for help will play a big role on the extent of support you can give out. If you find yourself in a position where the financial problems of people around you are starting to be your problems as well, here are a few things to keep in mind.
Understand the problem
The first item you need to get a hold of is the gravity of the financial problems you are involving yourself in. You need to know the type of problem your friend or a family member has so you can assess if you can get involved with it or not. At the very least, you can figure out up to what extent you can lend your financial support.
It is very rare that they simply need a few dollars to get through their money problems. The reason is that problems concerning money are usually more than just needing money. There are underlying problems that led to that specific money need. This is what you need to look into and understand before getting yourself involved with the problems of people close to you.
They could be in debt because they cannot control their own spending. It is also possible that they have a gambling problem and they are dipping into various funds just to feed their habit. There are also times when they lack the financial knowledge to manage their own finances, that is why they always land in debt. You need to make sure that you understand these things as you get involved with their problems.
Figure out the solution
Financial problems will always have a root cause and understanding this is the first step. As you understand the real cause of the problem, you can now find ways to help them find a real solution to their problems. This reason for looking for a solution that works is that there could be times where they could ask for help which could only further complicate their situation.
If they have a gambling problem and they ask for more money so they can try and win off their losses, you know that they are only digging themselves in a deeper hole. Maybe the help they need is getting therapy to help them manage their gambling addiction. If you know that they need a better understanding of their finances better, maybe the help you can impart are pieces of financial advice to get them to manage their money better.
As much as money is a big help, you need to figure out the most suitable solution for the money problems of people you want to help. It is possible that you could be making it a lot worse for them if you give out money blindly. Look at the problem and figure out the best possible solution you can give out to family and friends.
Assess what help you can offer
Knowing what needs to be done and having the ability to do it are two completely different things. You may know what to do to help your family and friends with their financial problems but do you have the means to do it? If they do need money, do you have enough extra funds with you to lend out without putting your own finances at risk?
There is nothing wrong in helping other people and in fact, you need to be generous with it. How ever, you also need to make sure that you do not put your future needs in danger. Help but also keep in mind what your needs will be as well. If you have a lot of extra money then that is great! If you don’t, find other ways to help.
There are times when they only need someone to talk to. They need to vent out all their anger and frustration when it comes to their finances and you could be there to listen. If they are stressed out because they lost their job and you know of someone who is hiring, make that connection for your friend. There are a lot of ways to help out more than giving money.
Be wary of dipping into your savings
Financial problems can start to ripple out into your own finances when you begin to help without any regard for your own needs. This usually happens you choose to dip into some of your savings just to be able to help. Once you find out that your child needs a big amount for college, you start taking money from your retirement fund to help out.
This starts to be a problem if you are taking money out early from your 401k where a penalty is imposed if you are under 59 ½ according to IRS. You also need to think about your future needs when you finally retire. Where are you going to get the money you need to help you sustain your expenses in retirement? You might find yourself having to work for a longer time just to be able to save for your retirement.
Let them understand your financial situation
One of the best ways to manage family and friends asking for help is to make them understand your current financial situation as well. This is not to make them feel that their problems are so small or you want to take the focus away from their problems. This is to help them understand that you also have some challenges of your own.
In a way, they will also understand if you cannot help financially and choose to help through other means. You can listen to them, help them find work opportunities, or even watch the kids for a day or two as they go out and focus on a few things to help them get back on track. There are a lot of ways you can help even if you are struggling financially as well.
People around you will experience financial problems of their own and you need to be ready to extend a helping hand. However, remember that giving money is not always the way to go. There are a lot of other ways to help.