It can be difficult watching a friend or family member struggle with debt. Our natural inclination is to, of course, help them out, but money can be a touchy subject. They could get angry and deny it, or interpret you broaching the subject as you offering a cash loan or to co-sign a loan for them, which can typically lead to no good. There are better ways for helping a friend struggling with debt that don't involve a handout, and we've covered them here!
Here are ways to help a friend without putting your credit (or your relationship) at risk.
Some people might think the best way to help a loved one who's experiencing financial trouble is to wave a magic wand—in this case, give them a cash loan—and make all their troubles magically disappear. But the truth is a loan might not offer a long-term solution and it might never be repaid, which can cause family friction or end an otherwise good friendship. On the other hand, co-signing a loan can ultimately hurt your credit rating if your loved one can't make their monthly payments on time.
Lend an ear instead of money
Equifax Canada reports that Canadians’ collective household debt has climbed up to $1.8 trillion, so anyone who is struggling with debt should know that they're not alone, and not by a long shot. Sometimes, a friend may not want your help, but they will take a non-judgmental listening ear. So many of our clients feel a million times better just through the simple action of having someone to talk to and listen to the full extent of their financial worries. So listen to them, share your own debt story if you have one, and let them know they’re not alone.
Once they’ve gotten the weight of carrying around their debt secret off their shoulders, they may be willing to take the next steps to dealing with their debt and might be more receptive to some of the ideas below.
Offer to be an accountability partner
An accountability partner is a person who coaches another person to help them keep a commitment and stay on track, whether it’s exercising, studying, or quitting smoking. It also works for finances if the person who is seeking help is truly ready to accept it.
Work with your friend or loved one to set goals, build a budget, and schedule regular check-ins. During a check in, you could review credit card statements and debit card purchases to see if they are doing any unnecessary spending. As their accountability partner, you've got the green light to question any purchases that don't seem to serve their goal of getting debt-free, such as a $150 charge at Artizia. Your job is to keep them motivated by providing practical advice and money-saving tips, not a lecture.
Offer work or help them find it
Is there anything your friend or loved one could do to earn some extra cash? For example, they could babysit or watch their friends' kids. They could also consider dog walking—depending on where they live, they can actually earn a decent amount of cash just by dog walking. They could also offer to do yard work or other chores people either don't have time to do or can't do themselves (e.g., seniors living in the area). What about renting out a room on Airbnb or selling unwanted items online? Think about other people you know who may be able to use their help or offer a part-time job or side gig, and check out our blog on 10 ways to earn extra cash for more money-making ideas.
Occasionally pick up the tab when you can
If you're inviting your friend out and you’re in a financial position to do so, you can pay for dinner, drinks, or a movie every once in a while. But don’t do it every time or it’ll become expected. Also make sure your friend won't be offended by you paying for their bill. As long as you are not jeopardizing your own budget or finances, it doesn't hurt to pick up your friend's tab from time to time. (Again, it’s helping without handing out cash.)
Plan inexpensive outings and things to do
This doesn’t mean you have to abandon your current lifestyle completely, but if you’re always planning outings that require significant cash, your friend may be tempted to go, which will either put them further into debt or feel depressed about their current financial situation and how they're missing out. Instead you can suggest to go hiking, biking, fishing or for a nice walk around your city or town. There are also often free weekend events, like outdoor concerts, farmers markets, street fairs, and museums.
Having a girls’ or boys’ night in can also be a lot of fun too—sometimes more! Wine, spirits and refreshments are a lot cheaper when consumed at home than at a restaurant or club, plus you can watch a good movie, play cards, grill, bake, or cook.
Temporarily hold onto their credit cards
If a friend or loved one is really struggling with debt, chances are their credit cards might be maxed out anyway, but if they still have some credit available, they’re going to be tempted to use it. You can tell them not to, but old habits die hard and sometimes we feel like we have no choice but to swipe or tap. Offer to hold onto their credit cards for them while they focus on paying them off. This will prevent additional debt and interest charges from piling up.
Suggest non-profit credit counselling
These services can offer your loved one solutions for getting out of debt, like a Debt Consolidation Program where all they have to do is make one monthly payment and the interest on their debt is either stopped or significantly reduced. Just make sure they do their research and look for a non-profit credit counselling agency that is an accredited member of a national organization, like Credit Counselling Canada.
Free non-profit help with debt and money management
Helping a friend get out of debt doesn’t mean giving them a handout. This can cause trouble in the relationship and usually won’t help them learn better money management—before you know it, they may be needing help again. But like any good friend, you want to be there for them. Luckily, our caring counsellors are always here to lend a helping hand when it's needed. If you know someone who is struggling, they can call 1.800.267.2272 and book a free counselling session with one of our counsellors who will help them get back on track!
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