With the economy continuing to worsen and unemployment rates rising, more and more individuals are struggling financially. It’s estimated over 23% of Americans are experiencing severe financial problems. Expenses are mounting, credit card debt is skyrocketing, and your children wonder when you’ll be able to take them to Disney Land again… it’s not a pretty sight.
How to Handle Financial Problems with Your Parents
We’ve all heard the phrase, “it’s a family affair,” but that’s undoubtedly true when it comes to your parents’ money and their overall financial health. Every family is different, so no matter your family dynamic, you should know how to handle financial problems between you and your parents.
Understand that they are still your parents
Don’t fall into thinking you have to become an expert financial advisor overnight. You’re their child, not a professional financial planner. That said, if they want you to help them evaluate their situation and make recommendations, you should be able to help them think through the options to make the right decisions for their circumstances.
Assess the situation – Financial Problems
Before you start deciding what steps to take, figure out how dire the situation is. If your parents are just behind on paying some bills, that’s a different conversation than if they’re in danger of having their homes foreclosed upon or going bankrupt.
Talk honestly with them about what’s going on
If your parents face serious financial problems, this is probably not something they want to talk about with you — or anyone else — but it needs to happen. But don’t assume anything; ask them straightforward questions about how bad things are and what plans they have for fixing the problem. If the problems don’t need immediate attention, prompt them to make minor adjustments now to put them in a better position.
Understand their income
Your parents may be embarrassed about discussing their finances, but it will be harder to find resources to help them without this information. It’s challenging to develop a plan if you don’t know how much money comes in each month and goes out.
Help them find resources and assistance
Please list all their financial obligations and see which ones could be reduced or eliminated. You might also want to research local assistance programs to help with utility bills, housing costs, and food expenses.
Discover their assets
You’ll want to know exactly how much money they have in the bank, what type of retirement accounts they have (if any) and what sort of investments they own (if any). It would be best if you also got an idea of how much life insurance they have and whether they need more coverage.
Create a new budget together – Financial Problems
A budget helps you identify where all the money goes and whether there are any areas where money can be saved.
Counsel them on how to save and spend money wisely
If your parents are having trouble managing their finances, it can be helpful for them to get some advice on how to save and spend more wisely in their day-to-day lives.
Avoid becoming the middleman
If you have to pay for your parents financially, you must keep your finances in order. Taking over the payments on your parents’ home or credit cards might seem like a good idea. But that probably isn’t a good plan, even if your parents have offered to pay you back.
Summary: Financial Problems
In the end, it’s important to remember that both sides want what is best for each other. Your parents may provide you with financial help because they want to help you out and make life easier. A financial crisis that lasts too long may have more problems than it solves, both for you and your parents. I hope these tips will help you and your parents resolve your issues, but communication is always key. Take steps to resolve any issues between you and your partner before further harm is done.