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How to help a loved one in debt

By Josephine Lim

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Following Hollywood fashion designer L'Wren Scott's suicide, news reports have shed light on the financial issues Mick Jagger's longtime girlfriend was facing. Her company was deep in debt to the tune of $6 million and she was planning to shut down her business, according to an article in the New York Times. Jagger bailed her out of business woes in the past, which begs the question: Why didn't she ask him to help her again?support-loved-one-in-debt

It's quite common for people with money issues to keep them hidden from people they care about, says Jeffrey Schwartz, executive director of Consolidated Credit Counseling Services of Canada.

"We don't necessarily want to involve loved ones in our financial matters because we feel it's a letdown, or we don't want them to have a jaded opinion of us because we have trouble managing our money," he says.

Canadians may have lifelong debt through car loans, student loans and a mortgage, or may use spending as a way to manage unpleasant feelings. But it's when the spending is out of control that it becomes an issue, says Dr. Ivan Bilash, a psychologist practicing in Winnipeg.

While your close friend or family member may not confide in you, there are some signs to clue you in:

  • They are juggling bills by paying off a bill with an advance from a credit card.

  • They are working more overtime or looking for extra work, or asking for a pay advance.

  • They have a stack of unopened mail. This is a sign of the person becoming numb and despondent to the situation when they're spiralling downward, says Dr. Moira Somers, a neuropsychologist specializing in financial psychology.

  • They are not answering phone calls. They may even cancel their phone or move to escape creditors; their relatives are being bombarded by calls from creditors.

  • Their behaviour changes. They may become withdrawn, lose sleep or weight, or engage in risky behaviour -- such as gambling to attempt to win a large sum to pay the debt.

How to approach the situation
If you suspect someone you care about is in debt, it's important to approach them in a compassionate, non-judgmental and accessible manner, says Somers. Don't jump right in and don't be too forceful in your approach, adds Bilash.

Somers suggests asking your loved one these or similar questions to help them open up on the issue: "I notice you seem to be getting a lot of those calls (from creditors)," or "I'm concerned, would you like to tell me what's happening with you?"

Another helpful tactic is to share a personal story about dealing with debt to help lessen your friend's embarrassment, adds Scott Hannah, President and CEO of the Credit Counselling Society.

If your friend or family member becomes defensive, it's important to voice your understanding in their difficulty to discuss the issue and reiterate that you'll keep your cool about the situation, says Somers.

"Being really extravagant gets lots of judgment and criticism if you're watching it from the outside," she says. "The really successful conversation happens if there's just a commitment to express love, concern and a commitment to find a solution to this problem."

How to help your loved one reach a solution
Debt has a toll on both the person struggling to get their financial house in order and people close to them. If you are supporting a friend in this situation, it's important that you are financially and emotionally well yourself, says Somers.

"You may be worried sick about them, but fundamentally it's the other person's journey."

One obvious solution may be to lend a loved one money, but Hannah advises against it because it could backfire.

"Debt isn't the problem, debt is a symptom of the problem," he says. "Unless you deal with the problem itself, the debt is never going away."

If the person should ask for a loan, you can say that you're not prepared to jeopardize your relationship over money or that you can't afford it.

There may be one-off situations, such as a health issue, a divorce or job loss, when you may decide to help them out. It's important to ensure that you're financially stable enough to offer any help and that you aren't pulled down in debt with them. It's also important that you can put aside any resentment if your friend or relative doesn't pay you back, since there is always a chance of that happening.

Meanwhile, you can help in other ways besides lending money:

  • Encourage your friend to see a third-party specialist to discuss the situation -- whether it's a credit counsellor or financial adviser to discuss the debt, or a therapist or psychologist to discuss the emotional issues behind the debt.
  • Help them research the specialists. Sometimes it's friends or families who reach out to the credit counselling agencies for help on how to help a loved one, says Schwartz.
  • Lend them a hand around the house. Offer to cook or help with minor repairs to alleviate some minor costs.

Listen to them in a non-judgmental manner. Reassure them debt is not uncommon, and they're not alone, says Schwartz.

See related: Author Q&A: What to do about “Crushing Debt”, 5 ways credit can complicate your relationship

Published: April 2, 2014