My friend seems to be drowning in debt. How can I help?

What’s the best way to help when someone close to you is in debt? The following answers are from Vanja Aladin, Financial Recovery Advisor at Raymond Chabot.

Q: What are the signs that someone close to me may be having financial problems?

A: There are a number of signs that could indicate money problems, in the person’s attitudes and actions. Let’s take attitudes, for example. If your spouse seems uncomfortable talking about their finances, this may be a hint that something’s wrong. Stress and depression could be another sign. Of course the causes may not necessarily be financial. Regardless, it’s important to be attentive.

Q: Beyond attitudes, what are some behaviours to look for?

A: There’s a good chance that someone who starts borrowing money from friends and family is in a bad position. Same goes for if they start getting more and more credit cards. And if they start receiving unusual mail—it’s probably from creditors! Avoiding answering phone calls could also indicate money problems.

Q: Should I be worried about my friend’s extravagant purchases?

A: There’s no doubt that reckless spending without tracking expenses is one of the precursors to money problems. The opposite can be a sign as well. If you have a friend who doesn’t want to go out anymore or spend money, even for essentials like groceries, it may mean you have reason for concern.

Q: When I can tell a friend or family member is having financial difficulties, how do I bring it up?

A: In a way that’s open and empathetic! And without judgment or prejudice. Often the people who come to see me at my office are feeling totally lost. They’re living with fear and shame. Their self-esteem is low. It’s important that they’re treated with compassion so that they can feel confident, both when they arrive at my office and by their friends and family. This way they are supported on all sides.

Q: What are some tips for bringing up the subject of money?

A: When talking about money with a partner or someone close to you, making a budget together is a good first step. It provides an organic opportunity to open up about their income and expenses. Another suggestion: If you’re worried about the finances of someone close to you, ask them open-ended questions. It might seem mundane, but just ask them how things are going! Show them that you’re there to listen and have their best interests at heart. This may help them open up about what they’re going through.

Q: Are there things I should avoid doing if I want to help?

A: Absolutely! It’s important to avoid judgment. Confrontation, accusations, criticisms and pity will always be counterproductive. In general, I think it’s important to try not to have any extreme reactions. And especially to not insert yourself into the situation. It won’t be helpful for you say things like “I would never be able to deal with this!” or “Personally, I have really good credit.” What your loved one needs to understand is that there are solutions to their problems.

Q: My best friend asked me to be their guarantor to help them out. Should I do it?

A: Being a guarantor comes with risks. If you decided to be a guarantor for your best friend, that means that you’ll take on alltheir payment obligations if your friend cannot honour them. Before agreeing, it’s crucial to ask yourself one thing: Am I comfortable assuming 100% of my friend’s debts if they are unable to pay?

Q: So is it a better idea to just lend them money?

A: Again this is a personal decision that requires some serious thought. If it’s not too high a sum, you have the means, you’re in no rush to get your money back and you want your friend to be able to start fresh without damaged credit, lending them money might be a viable option for you both.

But be careful: If their debts are too high, they may have to declare bankruptcy despite their best efforts and intentions. Only lend them money if you can accept that you might not get it back if they go bankrupt.

Q: Is it a good idea to force someone to see an advisor?

A: Forcing someone won’t be that effective. The people who come to see me have often already come a long way in how they see their situation. The day they finally enter my office is the day that they feel ready or at least open to discussing their situation and the possible solutions available to them. When convincing someone to consult a professional, pressuring them is rarely successful. I suggest talking about—or even introducing them to—people who’ve been through the same thing. It’s important to break the taboo!

Q: So making an appointment for someone else is a bad idea?

A: That depends. If your mother is open to receiving help from an advisor but embarrassed about taking those first steps, calling for her may be the extra support she needs. But if she’s clearly against the idea of working with an advisor, making an appointment for her might not be helpful at this point. There’s a chance she won’t show up to the meeting. In this case, she needs you to be available to listen more than anything.

Q: My mother has finally made an appointment at Raymond Chabot for a free consultation. Should I go with her?

A: The way to know the answer to this question is to ask her! If you sense that your friend or family member is nervous or afraid of forgetting information, it could be helpful to offer to go with them. Then the both of you can take notes and ask questions! Clients who come to my office often bring a friend, spouse or parent. Of course you shouldn’t make the person feel obligated to bring you. The best way to help someone often starts by simply asking: How can I help?