Hi everyone - I'm looking for some advice. My brother is about 10k in credit-card debt. He works a minimum wage job because the company he worked for (for 10 years) closed. He doesn't have any education beyond high school nor does he have the desire or money to go to school.
He has a mortgage which he informed me is 1600$/month. Then of course he has a car, car insurance, food, etc etc. I believe working full time at 15$ an hour after taxes is not even enough to cover his mortgage. After a year of struggling, he has finally allowed me to help him. I told him I'd lend him the 10k to pay off the credit card bills so that he doesn't have to pay 200-400$ a month in just interest fees. The question I have is, where do you even start when trying to help someone become more frugal and aware of their finances? He doesn't even know how much interest he pays. I want to shock him into being motivated to make a change for himself.
I've always been money-savvy (I started saving when I was 8 years old) so I don't really understand how non-frugal/spendy people think. Is there a short video that I should start with? Should I give him an example of how long it would take him to pay off 10k with only paying minimum payments each month?
We are going over all his finances this month. He's going to have to suck it up and get another job for a short while but any ideas about what he could do? He doesn't own a computer nor does he really know how to use one completely (he's 32 but we didn't really grow up with a bunch of technology in the house).
Talking about money is often difficult, especially when you already know the outcome is going to be that his expenses are exceeding his income and there isn't going to be an easy way to solve that problem.
You're going to have to lead him to figuring out that his expenses are exceeding his income in a way he figures it out himself vs you just telling him. If it comes from you then he is less likely to accept it and change it, if he figures out himself then I think he will be more likely to accept and change.
If he's open to doing something like Dave Ramsey then I would do that, if he isn't then you're going to have to help.
Divide this into different steps. Step one is expenses, sit down together with a piece of paper and categories and spend 30 minutes filling it out. Make this very factual - don't say anything about any spending habits or interest rates, just getting the facts and moving on. The only comments I would make are to provide the categories (so nothing gets left out) and if something seems really far off, like he spends $5 for food in a week. Let that simmer and leave it with him if he wants to change any numbers or do research. You want him to start thinking about his spending totals. Putting expenses down on paper is often a big surprise for people and they need time to process.
Step two - at least a week later is income. On the expenses sheet of paper with the total compare against the monthly income. Going to see a big variance. Once again, no comments, just the numbers - you want him to see the difference. Hopefully he starts to see - hey I spend $3K and make $2K - this isn't going to work. He may start to engage a bit about talking about things, let him lead that conversation.
Step three - at least a week later is starting to talk about either how to reduce expenses or increase income - only one of them and he can decide which should be first. He can't reduce his expenses enough for his current income, but you can't tell him that - he needs to walk through that process himself. He may start to think about selling his house or getting a roommate or not eating out as much, you can help gently guide, but let him take the lead. An mediocre idea from him is better than a great idea from you because he will feel ownership.
Step four - at least a week later is talk about reducing expenses or increasing income (the one that didn't get discussed in Step 3). Hopefully he is starting to come up with some of this on his own - coming up with some 2nd job ideas, looking at openings for jobs that have a higher salary. Maybe you could suggest he starts working on a resume.
At this point hopefully he has made the connection and is open to discussing ways to increase income and decrease expenses. You will have to continue to gently guide him, but letting him take the lead. You can also start to have conversations about things like interest rates and paying off credit cards and prioritizing debt pay-offs as his knowledge and awareness hopefully increases.
At this point hopefully it's starting to click with him - he has a list of expenses and income and has started to take at least some baby steps to increase income and reduce expenses.
It's a delicate process - it will take time to get there and you'll have to gauge when to gently lead and when to let it simmer. He will be inefficient on some things and will come up with ideas better than yours on other things.
As for the $10K - you do what you think works but paying off the credit card isn't going to stop the bleeding - it's just mopping up the blood already on the floor.
