Frankly, money and family members aren’t always the best combination. Yet debt is a real concern that many of us experience in our own lives or through the experiences of our family members and friends.

Debt can be self-induced because of poor financial habits and credit card debts or due to external circumstances like retrenchment during a tough economy.

Some of us also fall into debt through unexpected medical emergencies. So how can you help a family member in debt? Here are 5 ways to consider.

Family should Listen; not judge!

Let’s face it. Money is always a sensitive topic even amongst friends, let alone family members. A family member in debt is not always in the best emotional frame of mind. The last thing for a person in debt is to have his/her family member nagging at them and jumping to conclusions.

Perhaps one of the best ways to help is to lend a listening ear. This may sound overrated and cliché but it really goes a long way. State upfront that your intention is not to judge them but to listen and to help.

Help to alleviate the initial awkwardness by showing them you are empathic and it is helpful to share your own story about how you struggle financially yourself. Don’t offer any solutions first until there is sufficient comfort level. Who knows, your family member may ask for help even before you initiate as long as he or she is comfortable with you.

Offer non-cash assistance

Not everyone has the ability to provide or is comfortable with accepting cash assistance from their family members. In this case, you can consider offering non-monetary help. For instance, provide them with gift vouchers such as NTUC vouchers which can be used to buy household items, groceries and even milk powder if they have young children.

Know somebody who may be able to provide career counselling? Or somebody from human resource who is in a hiring capacity? Get them introduced and connected! Or help to vet through the family member’s resume or keep a look out for employment opportunities.

Sometimes the family member may need an extra pair of hands in helping with their new-born child or even household chores especially for those who are suddenly incapacitated due to medical reasons. In scenarios like these, non-cash assistance may actually be more meaningful.

Providing cash assistance

Before you actually offer some form of cash assistance, do make sure that you are comfortable in doing so both financially and psychologically. There have been many cases of people getting into debt themselves or falling out with another family member because of arguments that arise due to unpaid loans.

Cash assistance can come in two forms; either as a one-time cash gift or a loan that is meant to be repaid. Make sure you discuss this carefully especially on repayment terms and the frequency of repayment. Although it is not often that you charge interest rates on a loan to another family member, it is important to discuss this and come to a mutual agreement. This will help each other to understand the financial arrangements and avoid much hassle at a later stage.

If one is unable to provide any form of cash assistance, there are licensed and legal avenues such as taking a personal loan with a bank or legal moneylender. Anyone in the family can also help to conduct some preliminary research on reputable companies with good rates.

Creating a budget and payment schedule together

Regardless of the format and form of assistance, it is necessary to create a budget together with the family member who is in debt.

Two budgets can be created; one for daily expenses and the other for repayment of all outstanding loans. Having a clearly written spreadsheet that lists down the details of all outstanding loans is an essential step towards clearing them. This is because, by listing down all debts and available assets, we can help to plan for a repayment schedule and also get a clear idea of their financial situation.

In addition, people who are in financial debt aren’t always aware of where their money is going. A well-written budget provides a good overview of where the money is going including providing insights into where expenses can be cut. This helps to increase disposable income which can be used to repay the debts.

Another advantage of creating a budget and repayment schedule is that it helps to avoid being declared a bankrupt especially when the authorities are convinced that there is a structured plan to repay your debts and creditors.

Seeking professional help

There is nothing shameful about seeking professional help. This is especially helpful in situations when the family member is uncomfortable in sharing details of his/her financial troubles with you.

In many cases, getting professional financial counselling or debt management services acts as a leverage where the debtor is able to have stronger negotiating powers with the banks. It shows that you are serious about repaying them and negotiation is done through professional and publicly recognised institutions rather than an individual who may have less bargaining power.

Professional financial counselling often provides information, support and advocacy for people with immediate financial issues and lowers the risk of future problems. In addition, professional debt management services can even help you design a repayment strategy and schedule that is better than the ones you create on your own.

It is not always easy to discuss money matters with your family members and loved ones, let alone in situations when the particular family member is in debt. Besides monetary assistance, there are many ways to help them.

Most importantly, listen and avoid being overly judgemental resulting in an awkward situation. Be sure to come to some sort of mutual agreement if cash is involved. If it is necessary to take a loan from external parties, only do so through licensed moneylenders. With the right tact, it is definitely possible to help a family member who is in debt.

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About the author :Lynette Tanhas more than six years of experience in financial analysis & writing, having stepped foot in the financial world as a commodities analyst. She has also been interviewed by various international media, including appearances on CNBC, BBC & Channel News Asia.