Debt is a normal part of every American’s life. One study estimated that as many as eight in 10 Americans are currently in debt of some kind.
Contrary to misconceptions, not all debt is bad. Many people are in debt because of student loans and mortgages, both of which are necessary. However, increasingly, many people are acquiring debt that is not for their home. Of those surveyed, 69% said that, although the debt was essential, they would rather not have them.
A debt that has become extremely problematic is credit card debt.
America’s Credit Card Debt Problem
There is an increasing number of people who use credit cards to pay for goods and services. There is also a rising number of consumers who are now drowning in credit card debt.
In 2019, as much as 55% of all Americans with credit cards are in debt. About one in 10 people surveyed admitted that their balance is more than $5,000. The national average balance among those who have credit card debt is $4,293.
Overall, they added $26 billion in credit card debt, the largest among all debt categories, in the last quarter of 2018 alone.
Debt of all kinds, but especially credit card debt which has high-interest rates, can cause distress among individuals and family members. It can be easy to be suckered into a loved one’s financial problems, but before you offer a helping hand, you should make sure that you are not burying yourself into debt with them. There are other ways to help without giving them money or co-signing a loan.
Offer Non-Monetary Financial Resources
You do not have to step in and personally pay for your loved one’s debt to help them. Often, providing them the resources to help themselves is a far better solution than handing them your own savings.
You can refer your loved one to a local bankruptcy attorney, for example. Almost all credit card debt can be erased through Chapter 7. This option eliminates your debt within 90 days, tax-free. It is the best option if you think you cannot pay your balance on time for whatever reason, but especially if you have lost your source of income. Chapter 13 is more of a repayment plan.
Introducing your loved ones to a financial advisor can also help them help themselves get out of debt. A financial adviser can create a budget that will involve regular payment of balances without moving funds away from other expenses. They can identify areas where the money is bleeding out, such as daily coffee runs or nightly online shopping, and redirect it toward things that are more productive.
Lighten the Burden
You should not give your loved one cash, but you can help alleviate their stress by providing non-financial assistance. For example, your loved one may compromise on food in order to save up money to pay off their balance. You can help them by cooking a delicious, healthy meal and inviting them to eat with you a few times a week. You can even hand them gift certificates for groceries, medicine, and gas.
By covering some of their essential purchases, you provide them relief from the ongoing and cyclical stress of being in debt. You will also be helping them come up with the sum they need to pay off their balance quicker and ensure that they can continue to live comfortably despite the debt.
Be Ready with Helpful Tips
Not all people will be receptive to advice if unsolicited. They may not listen even if you recommend a way out of their present predicament because many people are stubborn.
So, instead of giving them a hard time, be ready with helpful tips when they approach you. There are things that you can do that will make repayment easier such as automating payments to creditors and developing a monthly budget. These steps will teach them how to better manage their finances today while they are in debt and in the future so that they never fall into debt again.
Lending your loved one money to pay off their credit card debt or co-signing a loan with them is not a bad solution, but it can be tricky. If they fail to pay it off, you will be affected, too. You will be responsible for paying off the loan and, if you need money because of an illness or you lost your job, it will not be easy to recover the amount you lent.
Sometimes, offering help in other ways is better for you and for your loved one.
