How to give financial advice without being an ass?

[no_stache]

I was recently asked by a family member, to lend them 10k to help them get out of credit card debt (13.5k). I stopped them right there and said .... let me see your financial records. Are you using mint, what are your cc balances, what are the interest rates, what are your monthly expenses. After collecting all this information, I started up excel and coming up with a burn list of services to modify or cancel. And here, I kid you not [ Amazon Prime, 250/mo car insurance on a 1500.00 car, tv+internet, netflix, audible, spotify, email spam service, dropbox cloud storage, etc]. I got my family member to hang up, call geico and get a quote. They did and dropped their payment from 250/mo to 80/mo +170 ... we went after a few more things, and then came netflix. I suddenly came upon the crux of the debt problem, which was not a lack of income, but big ol' case of deserviness. The conversation stopped right there, forward progress was over, and my family member told me that cutting this out was going to ruin their lifestyle (I pointed out that they had tv and amazon prime, along with hulu and dozens of other services, but no dice). I tried to explain that with their 3k/mo salary, every 30.00 saved was 1% net they were reclaiming and that if they got rid of all the extra crap, they could be debt free in only 6 short months (a whopping savings of 800/mo) if they followed my spending cut outline. This was no good. I followed up the next day and found that w/ 13.5k in debt, they had applied for a 10k loan at 15% w/ a 500 origination fee ... whacking their credit score and instantly bringing them up to 14k in debt. I was ready to cry and frustration and pity because I believed, and still do, that my family member is destined to lose everything, because they don't think they have a problem. This chain of events happened last week. Today this family member posted that they were excited for the Amazon Prime Day occurring tomorrow. I'm glad I gave 800/mo in advice vs 1000/mo in my hard earned cash, but I am feeling like a failure in that I cannot seem to communicate or convince my family member that they need to make a 100% commitment to their debt, or be owned by it in the very near future. I don't want to be negative or super authoritarian, since this particular person responds very poorly to such attitudes. Do you have a similar story? How did you not only lead the horse to water, but make it drink - and buy into it as well?

Notes: I created a nicely colored shared google doc w/ all the data to facilitate describing the paydown and how easy it was to tackle each card and the optimal way to handle the paydown. The sheet also included the expenses, salary, and percentages to show that the spending was eating into 100% of their earnings.

[forummm]

I have had approximately zero luck in similar situations. I just gave up. They don't want the advice.

http://forum.mrmoneymustache.com/antimustachian-wall-of-shame-and-comedy/relatives-who-just-don't-get-it/

[Kalergie]

I'm sorry but the person wants 10K from you! That's your hard earned money. PLUS you provided free advice. On that note, it is your duty to inquire about his/her ability to pay it back. Guess what banks do before giving cash? I say, don't give any cash. Only give advise if this person is approaching you for it. Anything else will end in tears!

[MDM]

I was recently asked by a family member....

no_stache, welcome to the forum.

Are you comfortable telling a little more about the family member's relation to you?  In other words, is this person ~your age (e.g., many siblings or cousins), or younger (e.g., your child or many nephews/nieces), or older (e.g., parents or many aunts/uncles)?

[regulator]

I have lots of letters after my name, an expensive/top shelf MBA, have always worked in some sort of financial industry job, and am FI at an early age.  The whole family and many friends come to me for financial advice.  Sometimes I can make an impact just by fooling around near the edges, but these are the easy ones.  More often, they ask for help, appear to listen and sometimes even nod their heads as I show them the numbers.  Then they go back to what they were doing before, sometimes making some minor changes that help them.

Get used to it.  You cannot wave a magic wand and get people to change their behavior if they do not want to.  You can be a mensch and do the nice thing by sharing your knowledge and giving advice, but ultimately these people are adults and they will make their own choices.  "Not my circus, not my monkeys."

[trailrated]

They just want you to fix the symptom, not the thing causing it. In other words they want the debt to magically disappear while thinking it has nothing to do with their spending priorities and patterns. If they don't understand those two things are linked I would run not walk away from helping them financially.

I have a good friend about 25k in debt, I helped them budget to be paid off and debt free in 8 months. Instead he flew to Brazil for the world cup, has an upcoming trip to mexico, still has student loan debt, is selling stock options to cover part of his credit card debt but I am sure it will shoot right back up within a month.

I wish him well and hope he is having fun but also sent him a spreadsheet showing he is on track to pay off his debts in about 15 years with an insane amount of interest.

[no_stache]

Younger brother mid 20's setting himself up for disaster :( ... he was laid off after having his job for only 1 month, luckily he's very bright in non-financial aspects, and got another job within a few weeks. He's hit rock bottom before (mental issues), which is why I'm trying to help as best I can w/ advice. Certainly not lending him money though, since he won't acknowledge his spending problem. To be 13k in debt, and have an excess forced outflow of 700/mo ... I feel like I'm dealing w/ a drug addict in that the gratification of spending cannot be overcome by logic or the pain of spending.

[Lis]

You can lead a horse to water...

I think you've done all you can do. By all means you can say no to lending him the money. I think ultimately your part is done unless he comes asking for advice. Checking in frequently and nagging would be a pain in the ass, but I think what you've done is noble and helpful. If he does ask for help (not in the "I need money" way but "please help me make a plan" way), agree to help (if you want) and avoid the "I told you" so's.

[johnny847]

They just want you to fix the symptom, not the thing causing it. In other words they want the debt to magically disappear while thinking it has nothing to do with their spending priorities and patterns. If they don't understand those two things are linked I would run not walk away from helping them financially.

Couldn't have said it better myself.

[no_stache]

I have had approximately zero luck in similar situations. I just gave up. They don't want the advice.

http://forum.mrmoneymustache.com/antimustachian-wall-of-shame-and-comedy/relatives-who-just-don't-get-it/

That thread is just painful to read O_O

[jeromedawg]

Sorry for your negative experience. This is such a recurring theme it's not funny... my in-laws, who suffered a lot from debt but are in a much better place now after much nagging from my wife and I, recently spent $700 (almost double that) on a bidet. I say almost double because they surprise-bought one as a gift for us... we profusely rejected this "gift" though and told them to sell the installation to another one of their gullible friends (this was sold to them via pyramid scam/scheme). They much too easily believe anything anyone tells them, especially when it comes down to buying stuff. Especially bigger items. They took out a 30 year mortgage on a home back in 2004 and they're close to 70 now. Not sure what they were thinking outside of "this is an investment and our kids will take it when we're gone..." - definitely not gonna happen. They were at the point of defaulting on their mortgage as well until we urged them to refi and almost get it cut in half. They also had over $10k in credit card debt but we were able to help them pay it off. We did loan $10k to them at some point but they did allow us to help them cut expenses, and still kind of do, but they still don't get it. They wouldn't be able to do any of this without our help, and at first opportunity they keep repeating their mistakes thinking it's no big deal. A penny here a penny there... whatever. It can be dangerous when you start living like a millionaire...

[Ozstache]

I helped a family member out with an interest free loan to pay off a huge credit card debt on the condition that they cancelled said credit card, cut it up in front of me and replaced it with a debit card. One year later they had paid down their debt to me and they tell me they don't really notice much of a lifestyle impact of now having to live within their means using a debit card. I call that a win! Somewhat manipulative of me I know, but if someone asks for my financial help involving my money then I expect my money's worth.

[no_stache]

I helped a family member out with an interest free loan to pay off a huge credit card debt on the condition that they cancelled said credit card, cut it up in front of me and replaced it with a debit card. One year later they had paid down their debt to me and they tell me they don't really notice much of a lifestyle impact of now having to live within their means using a debit card. I call that a win! Somewhat manipulative of me I know, but if someone asks for my financial help involving my money then I expect my money's worth.

I've been thinking about gamification a bit. Perhaps 'loaning' x-dollars on a scale if they cut expenses by so much. 10.00 for cutting 100, 100.00 for cutting 600.00? From what I've seen, financial gamification is pretty successful, may be worth a shot. If it works, it buys me piece of mind that my brother won't be bankrupt or homeless. And if it doesn't, I'm out somewhere between 10-500.00. :S

[SJS]

These "types" of people are their own worst enemy.  The word "budget" terrifies them.  Just offered to help a friend sit down and come up with one after she asked me to give her $300 to pay her gas bill.  Got absolutely no response to my offer.  Go figure.

[okits]

I helped a family member out with an interest free loan to pay off a huge credit card debt on the condition that they cancelled said credit card, cut it up in front of me and replaced it with a debit card. One year later they had paid down their debt to me and they tell me they don't really notice much of a lifestyle impact of now having to live within their means using a debit card. I call that a win! Somewhat manipulative of me I know, but if someone asks for my financial help involving my money then I expect my money's worth.

I see nothing wrong with what you did. Only giving a loan is to only give a short-term reprieve from larger problems.  You gave a learning experience, one that seems was effective. That's far more valuable.

Besides, if borrowers don't like the terms they can walk away.  It's your money, you make the rules.