Even though most Singaporeans are financially stable and the economy in the country is relatively sound, the cost of living is still unbearable to most people. Getting a loan from a financial institution to foot monthly bills is not a good idea. As a result, most people opt to get personal loans from friends and family members.
In this article, we will look at how you can help a family member or friend who is in debt today.
How Do I Help a Friend who is Struggling Financially?
The first thing to note is that it is OK to help a friend who is struggling financially. However, it is imperative to be careful how you do it to avoid ruining your relationship with him or her or making the process unnecessarily weird to both of you. Here are four tips on how to help your friend without making things weird.
Anonymous giving is one of the easiest ways of helping a friend who needs financial help without making things awkward between the two of you. You do not need to inform them that you are giving them a personal loan to help them sort out the bills or expenses.
Send them a gift card with a voucher that they can use to purchase household items in one of the local stores or send them an encouraging card with cash in it. Thanks to advancement in technology, you can also shop online and direct the store to deliver the products to them on a specific day of the week when you are sure they are home.
This builds on the previous tip about giving anonymously. Nobody can predict the future and what goes around comes around. When offering financial help to a friend, it is recommended to be casual about it. Otherwise, they might feel like you are judging them or taking advantage of their situation.
Concisely, be cool about it and make the repayment terms flexible and ideal for them. Consider their current situation. You can even request them to come up with a repayment plan that best suits them to avoid any challenges down the road.
No Strings Attached
A personal loan is great, but it can easily ruin your relationship with your friend or family member if you are not careful how you go about the process. Sure, you will agree on a repayment plan that is ideal for both of you but do not expect something in return afterward.
That is, do not expect him or her to “owe you one” whenever you call in the favour. Remember, the idea is to help them become financially stable out of love, with open hands, and expecting nothing in return.
Know Your Limits
When offering financial help, it is important to consider your current financial capability to avoid plunging yourself into a financial turmoil. Know your limits and adjust your budget accordingly. Otherwise, if you give more than you can afford, you will end up feeling resentful and will eventually complicate your relationship.
How Can I Help A Friend or Family Member Get Out of Debt?
Saying “I’m in debt and I don’t know what to do” aloud can be terrifying to even someone you trust. Therefore, do not expect your friend to confess to you openly that they are in debt and need your help.
Here are some signs you should look out for before you make the next move.
- Your friend has become more secretive and no longer talks about their finances as openly as before
- Your friend has changed his or her spending habits, for example, spending less or overspending without a clear plan of repayment
- Sold their car and started using public transport
- Have had a recent loss of income due to incidents such as divorce, illness, bereavement, or being made redundant at their workplace
- Seem depressed, anxious, or withdrawn
- Avoid speaking or interact with you altogether
They are some of the signs that you should look out for if you suspect your friend or family member is in debt and needs your help.
Let us shift gears and look at specific steps that you can take to help them get out of debt.
Help them get a Seasonal/Part-time Job
With the holidays just around the corner, most local retailers are looking for seasonal employees who are flexible and willing to help them keep their stores running during the busy festive season. Organise a meeting with your friend and offer to help them look for a seasonal or part-time job.
The extra income will help them pay some of the bills and rebuild. Note that, there are plenty of seasonal jobs even after the holidays that they can take advantage of to repay pending bills and loans.
Attend Financial Training Sessions Together
As mentioned earlier, it is tough for someone who is in debt and still struggling to open up even to close friends and relatives. Look for a financial expert in your locality and book an appointment with him then tag along your friend. However, before you do that, you need to contact them to know when they will be free and willing to attend the sessions.
Come up with a reason why it is essential to attend the training sessions without making them feel weird about it. For example, instead of telling them the classes will help them get out of debt, explain to them the benefits of the classes and even give examples of people in your circle who attended the classes also though they are financially stable.
The point we are trying to put across is that, you should not make them feel that the main reason why you proposed you attend the training sessions is because they are going through a rough patch financially. Do your homework to be sure that the financial expert is licensed, reputable, and legally accredited to offer financial help so that you get value for money and time you spend on the sessions.
Help Them Create a Repayment Plan and Budget
The financial training sessions and your interactions so far will make your friend or family member feel comfortable sharing their financial woes with you. Make sure you do not reveal this information to anyone without their consent, as that would definitely ruin your relationship with them.
During one of your interactions with them, discuss the importance of creating a budget and repayment plan. You can even use an example of how you managed to repay a loan by paying it off in small manageable bits. Go an extra mile and help them create a repayment plan for the loan and a monthly budget for their household. Both plans should resonate with their current financial capability. The financial expert can also chip in and help you come up with the plans.
Introduce the Debt Snowball Method
One of the easiest ways of getting out of debt is by paying more than the set minimum monthly payments on your debts and credit cards. The debt snowball method speeds up the repayment process and helps build momentum. The first step involves listing down all the debts starting from with the smallest to the largest.
The excess funds should be channeled to repaying the small debts, while still making the minimum monthly payments to the large loans. Once you complete repaying the small loans, starting channelling the extra cash to the large loans.
The beauty of this repayment strategy is that it creates a snowball effect that makes it easy for you to pay the smaller balances first and save the large loans for last. The goal is to commit all the extra dollars towards debts.
Introduce this repayment method to your friend and explain the benefits as well as how it works in simple terms. Offer to help them budget and monitor the repayments on a weekly or monthly basis depending on the issue at hand.
Help Them Sell Things They No Longer Need
We all have a chunk of things lying in the garage or in other parts of the house that we no longer use or need. Yes, a part-time job will help your friend get extra cash to clear small debts, but you can get more extra cash by selling things that they no longer need online or offline.
Sure, there are some items that they no longer need but will have a difficult time letting go. Remind him or her the reason why they are selling it. You can even do a cost-benefit analysis – show them the amount of money they will get by selling off the items and the overall benefit of using the money to repay the debts.
Use the above tips to help your friend get out debt and become financially stable again. The most important thing to remember when doing so is that you are doing it with an open heart, out of love, and without expecting anything in return. Be willing to hold their hand and walk with them through each phase and commit yourself fully to the course.