We all have a few loved ones who are horrible at managing their money. You know who they are: a relative who blows through a paycheck in a day, or a family member who has no money set aside for retirement.
Talking about financial matters can be a sensitive topic for some families, and it’s understandable that you may wish to keep a few personal cards close to your chest. But not talking about money can be detrimental in more ways than one, both to you and your loved ones. Here are some tips to consider when talking about family and finances:
Talk openly. If you are uncomfortable communicating about finances within your family, then you may not even be aware of a problem your loved one is having. If family members are honest with you about their financial situation, it could be a sign they trust you and value your advice.
Do not lend money to the irresponsible. There is no point in throwing good money after bad debt incurred by irresponsible people, even if they are family members. The money you lend will be squandered anyway if the receiver of the money does not manage it well.
Offer help in solving the root problems. Often there is one core problem that is causing a family member to be bad with their finances. It could be an addiction to shopping, drugs, or gambling. It could also be that they are just bad at math. Whatever it is, offer to help them identify the root cause of their troubles, and then help them resolve it.
Conduct financial transactions in a business like manner. Whenever there is a big financial transaction — such as a significant personal loan, or property sale within a family — it should be done in a professional fashion. Make sure there is a logical paper trail of the transaction, and that contracts and terms are clearly spelled out. Ensure all individuals involved have copies of the paperwork for their personal files.
Become a trusted source of financial information. If people in your family know you manage your money well, they might consult you before making big financial decisions. As a result, you might save them from a big financial mistake.