November 3, 2015
Dealing with the Financially Irresponsible
Jim and Leticia Fitzsimmons adore their 27-year-old daughter. She’s smart, outgoing and bubbles with enthusiasm. Since graduating college three years ago, she’s had a job in marketing and earns a living wage.
But the Fitzsimmons have a problem they keep to themselves: Daughter Megan is constantly broke and leans on her parents for extra cash.
Megan spends money faster than it comes in. She lives in a pricey apartment, enjoys fine dining and frequent travel, and buys expensive clothes. When the credit card bills arrive, she fires off texts and emails to her parents, pleading for help, which she almost always gets.
The Fitzsimmons family has a serious problem. At a time when parents should be feathering their retirement account, they’re diverting sometimes hundreds of dollars a month to cover their daughter’s bills.
When Help Becomes Enabling
At first blush, Jim and Leticia might look like dedicated parents helping a still unsteady child gain her financial footing. But after several years, post-graduate help has morphed into a syndrome called financial enabling. The longer it continues, the more damage it will do to both parents and child.
Here’s how it works: During her college years, Megan counted on regular checks from her parents to pay her bills. After she graduated, she needed extra help launching a career and her parents gave it to her. The trouble began when she found a job but didn’t become self-sufficient.
For Megan, asking for help is easier than learning how to budget her monthly salary. Her parents, confusing financial support with love, went along with her. In reality, they’re telling Megan they see nothing wrong with asking family and friends for cash or loans.
Instead of offering to help her draft a budget and learn to use it, her parents are abetting financial irresponsibility.
Beware of financial enabling. Don’t give money to grown children if you don’t know exactly how they’ll use it, and avoid making repeated gifts that become supplemental income. Even in a marriage, if one partner can’t manage money well enough to live within the household budget, the other partner needs to set rules. Not doing so could quickly lead to a financial crisis.
Signs You Are Financially Enabling Someone
If someone, even a close family member, asks for money, remember your finances come first. If you’re behind in your retirement savings or are drowning in credit card debt, you need to put those money issues first in most cases. Gifts are discretionary; debt payments are obligatory.
The solution is almost always tough love. Making a loan to a friend or family member to cover an emergency is one thing – especially if the borrower offers a plan for paying you back. But bailing out someone who always seems to be in financial distress could poison a relationship and do little to solve a deep-seated problem with money management.
It’s important to know when financial support moves from aid to addiction. Consider these signs:
- You give your children large cash gifts regularly. People should learn to live within their means, and receiving big infusions of cash from a relative can train them to depend on income that might not always be there. It’s called living in a false economy, and it can subvert financial responsibility.
- You offer the recipient cash without discussing how it will be used or how it will be paid back. People need to understand that money is a terrific tool, but a limited one. Learning how to use the tool is a key to financial good health. Before offering a loan or a gift, have the recipient explain how the money will be used and how it will be repaid. If it’s for an emergency, get to talk about how to avoid a similar problem in the future.
- Is the person willing to accept non-financial help? If a family member needs to get to work and lacks transportation, offer to drive them for a couple weeks while they can arrange financing for a car. If the person insists on money, consider it a warning sign and be wary.
Take a Stand Against Irresponsibility
After reviewing the situation, taking stock of how much money you’ve already gifted or loaned the person, it might be time to be more forceful. If the borrower doesn’t immediately pledge to become self-sufficient, you should offer help.
Here are some suggestions on ways to assist:
- If the borrower is falling behind financially and needs credit card debt relief, suggest the person see a nonprofit credit counselor or debt-management firm. Reputable debt counselors can help create a plan for paying down debt and getting back on track, usually without taking out a loan.
- Avoid a condescending attitude. Simply because you have your finances under control doesn’t mean you’re morally or intellectually superior to the person with the money problems. Offer suggestions, but don’t preach. Be firm, but not derogatory. If the person in trouble is your child, don’t revert to old roles. You are all adults. Act that way.
- A special gift to help a family member pay for an education or finance an emergency expense is one thing. Giving money every time the person asked for it quickly leads to economic dependency and risks turning the person into an addict. If you give money, you should feel free to ask for detailed plan on how the money will be spent.
- Avoid making loans to friends and family. If the borrower fails to repay a loan on time, it can lead to hard feelings and an entirely new set of problems. If you don’t feel you can afford a gift, don’t give the money. If you decide to offer a loan, only do it if you feel you won’t suffer if the money isn’t returned.
- Think before you give or loan money. A romantic partner or a coworker might ask for a gift or a loan, but remember love and friendship can cloud your good judgment. If the person in incapable of budgeting or refuses to discuss a strategy for using the money, say no. Even if they do, be very cautious. There’s nothing wrong with telling someone that you just don’t feel comfortable with the request.