What is the best way to help someone get out of a financial hole?

[rnorwo1]

Very long story short, my brother (40 yo, divorced, one kid grown) is a financial mess. He filed bankruptcy maybe 10 years ago and got back on track, then he was in an accident and spent 2 years with surgeries and rehab, on disability and racked up cc debt again. I bailed him out of that debt, he went back to work and was doing well, but then a year or two later I ended up giving him quite a bit more money for more debt. My DH and I are ok financially but not where we'd like to be in terms of savings goals, so sending him money is not the easiest thing for me to justify, and I feel so guilty asking my DH to help him (although they have a great relationship.)

Finally he has been staying out of debt, however, his basic bills do not leave much wiggle room in his budget, so anytime anything comes up, like car repairs, he is in the hole again. While he's not returned to credit cards, he's paying a fortune in NSF and late fees, and constantly in the negative. He is juggling things around every month, making double payments (to catch up on missed payments) on some things while neglecting others, to turn around and do the same thing with different bills the following months.

He is also completely clueless about how to manage money (and I mean the basics, like recording the checks you've written and truly understanding how much money is available... he thinks looking at the balance online is sufficient!), but he is living very frugally. I just looked at his bank statements and there is no going out to eat or other entertainment or shopping... in fact he only spent $111 the entire month on food/toiletries and such.

I have listed for him things he should cut, like the phone and direct tv, but that's about all he has that is even remotely a "luxury." He is looking for a new job to hopefully increase his pay or at least decrease his commuting costs, but who knows how long that will take?

Obviously, sending him more money will not solve anything. He needs someone to teach him how to manage what he has and he needs a more permanent fix, such as increasing his income. We are several hours away from each other, so sitting down with him in person to demonstrate how to maintain a checkbook will be very difficult.

The only thing I can think of is to start another checking account for him, something we both have access to, and deposit some money in it to give him a fresh start, while his current checking account sits and gets sorted out of this negative cycle. That way, I can look at the account daily and give him feedback, maybe I can check in with him daily and see what he is showing in his check register balance, etc. Then maybe I can help him catch mistakes before they get out of hand again?

Any other thoughts?? I would love an idea that did not require me putting out more money for him! If he did cancel the above (which would only free up about $200 a month) and we just worked on him getting out of the cycle himself, how long should that take? I just don't see how to do that while incurring the negative fees, but I've never been in this situation before... maybe it's not impossible?

Thank you so much for any ideas!!!

 

[beansmom]

cash don't bounce.

It IS possible to live without a checking account. Inconvenient, yes, but possible.

I would put him on the cash envelope system with no check or debit cards.

Ultimately, it is his responsbility to learn to handle his money. You (nor anyone else) can constantly bail him out. He needs to stand on his own without you for a crutch.

 

[disneyofcourse]

beansmom said it all. Plain and simple.


He needs to go on cash.

You need to stop saving him. I know you care about him but its really not your responsibility to care for him. It's not good to hurt your own finances.


What else is he spending money on if you say he's living so frugally? A past co-worker (Years ago! Don't know the situation now) had similar issues and none of his family knew he had an online gambling problem. He had gone into some serious debt and lived frugally besides that.

 

[Cooky]

.

 

[TiggerTails57]

Very long story short, my brother (40 yo, divorced, one kid grown) is a financial mess. He filed bankruptcy maybe 10 years ago and got back on track, then he was in an accident and spent 2 years with surgeries and rehab, on disability and racked up cc debt again. I bailed him out of that debt, he went back to work and was doing well, but then a year or two later I ended up giving him quite a bit more money for more debt. My DH and I are ok financially but not where we'd like to be in terms of savings goals, so sending him money is not the easiest thing for me to justify, and I feel so guilty asking my DH to help him (although they have a great relationship.)

Finally he has been staying out of debt, however, his basic bills do not leave much wiggle room in his budget, so anytime anything comes up, like car repairs, he is in the hole again. While he's not returned to credit cards, he's paying a fortune in NSF and late fees, and constantly in the negative. He is juggling things around every month, making double payments (to catch up on missed payments) on some things while neglecting others, to turn around and do the same thing with different bills the following months.

He is also completely clueless about how to manage money (and I mean the basics, like recording the checks you've written and truly understanding how much money is available... he thinks looking at the balance online is sufficient!), but he is living very frugally. I just looked at his bank statements and there is no going out to eat or other entertainment or shopping... in fact he only spent $111 the entire month on food/toiletries and such.

I have listed for him things he should cut, like the phone and direct tv, but that's about all he has that is even remotely a "luxury." He is looking for a new job to hopefully increase his pay or at least decrease his commuting costs, but who knows how long that will take?

Obviously, sending him more money will not solve anything. He needs someone to teach him how to manage what he has and he needs a more permanent fix, such as increasing his income. We are several hours away from each other, so sitting down with him in person to demonstrate how to maintain a checkbook will be very difficult.

The only thing I can think of is to start another checking account for him, something we both have access to, and deposit some money in it to give him a fresh start, while his current checking account sits and gets sorted out of this negative cycle. That way, I can look at the account daily and give him feedback, maybe I can check in with him daily and see what he is showing in his check register balance, etc. Then maybe I can help him catch mistakes before they get out of hand again?

Any other thoughts?? I would love an idea that did not require me putting out more money for him! If he did cancel the above (which would only free up about $200 a month) and we just worked on him getting out of the cycle himself, how long should that take? I just don't see how to do that while incurring the negative fees, but I've never been in this situation before... maybe it's not impossible?

Thank you so much for any ideas!!!

As Dr. Phil says........."you can't fix money problems with money"

 

[Cleocat]

In my eyes looks like he needs another job to help with some of the extra debt he has. I'm not throwing stones or flaming him. My wife and I have been that way for the last year or so. We have had our share of tough times and knid of the same situation as your brother with injuries and sugerys in the last couple of months.
I have a ft and 2 pt jobs to help pay the bills and now my wife is rehab'd she just recenty started a new job so hopefully we can get back on track.
Helping out is nice like you did intially but it isn't going to fix any problems he may have with money management.
The only way to pay back money is to make more money.
Also suggest he read some books try ones written by Larry Winget or David Bach I have a couple and they may jar something to help him out.
Good Luck

 

[*pixie*dust*]

Opening a joint account is a bad idea. You then become jointly liable for what happens in the account. So if the account goes negative they will then go after you for the money. No sense in putting your credit and reputation on the line.
I know you love him and are trying to help but bailing him out is hurting not helping. He is your brother, not your child. He needs to stand on his own two feet. Give him the number for a good, reputable credit counselor that can work with him on his budget. He needs to fix this not you.

I know it is hard but sometimes tough love is the best love.

 

[rnorwo1]

OP here, thanks for all the responses, and you are all right. I had already talked myself out of the joint checking account by the time I checked for responses!

As far as what he's spending the money on right now, it's just basic bills, and like I wrote earlier, barely $100 a month on groceries. In the past he was living beyond his means, but right now his means just don't cover basic expenses.... well, they cover his current expenses, but there's not any left over for bumps in the road, like $600 in car repairs he had last month which sent him into serious red status.

He's not asking for a handout, now or in the past, he just brought his stuff to me and asked for guidance and help with a plan... I just have the bleeding heart and thought that was the fastest way. I know for a fact that he lives with guilt all the time about the help we've given him, and I hate that for him.

I guess right now I can just try to help him get out of the mess just with what he has, just help him get a plan, even if it takes a few months... it just goes against everything in my nature to throw money away for fees! Oh well, nothing I can do about that. I'll also mention the second job, but he's on salary and works crazy over time, without pay, for the current job, so I don't know how much free time he has to work extra. Hopefully he can work something out.
Thanks again for the advice!!

 

[tweedlemom]

I've heard that Dave Ramsey's book "The Total Money Makeover" is very good for financial advice.

 

[Cinderella's slipper]

OP here, thanks for all the responses, and you are all right. I had already talked myself out of the joint checking account by the time I checked for responses!

As far as what he's spending the money on right now, it's just basic bills, and like I wrote earlier, barely $100 a month on groceries. In the past he was living beyond his means, but right now his means just don't cover basic expenses.... well, they cover his current expenses, but there's not any left over for bumps in the road, like $600 in car repairs he had last month which sent him into serious red status.

He's not asking for a handout, now or in the past, he just brought his stuff to me and asked for guidance and help with a plan... I just have the bleeding heart and thought that was the fastest way. I know for a fact that he lives with guilt all the time about the help we've given him, and I hate that for him.

I guess right now I can just try to help him get out of the mess just with what he has, just help him get a plan, even if it takes a few months... it just goes against everything in my nature to throw money away for fees! Oh well, nothing I can do about that. I'll also mention the second job, but he's on salary and works crazy over time, without pay, for the current job, so I don't know how much free time he has to work extra. Hopefully he can work something out.
Thanks again for the advice!!

He's your brother, yet the very best gift you can give him is to research and find him a personal financial counselor - who might be able to recommend a lower fee account, or find a credit union, generally with reduced fees. Perhaps a local financial institution offers a money management course. Point him in the right direction, push him if you have to and then stand back and watch him fly. Good luck! He's very lucky to have you.

 

[Aliceacc]

Can you find him a class, either in adult ed, a local library, or at the local community college, on personal banking?

Bailing him out time after time is a bandaid approach. He sounds as though he needs more serious help.

Oh, and the mom in me applauds you as a wonderful sister!!

 

[rnorwo1]

Can you find him a class, either in adult ed, a local library, or at the local community college, on personal banking?

Bailing him out time after time is a bandaid approach. He sounds as though he needs more serious help.

Oh, and the mom in me applauds you as a wonderful sister!!

Thanks, that brought tears to my eyes! He's my older brother, but our parents died very young... I don't know how my younger sister and I were still able to learn everything about surviving life and he didn't, but he definitely missed the boat on many things. I just feel so sorry for him, he tries to do the best he can, and I feel like my mom would be devastated to know how much he's struggling (in lots of areas.)

I am definitely going to try to find someone closer to him to teach him these skills, just say a prayer that this time is the charm. And he has an interview on Thursday at a place that is 5 miles from his home, so that would save about $500 a month in commuting costs!

 

[Aliceacc]

Thanks, that brought tears to my eyes! He's my older brother, but our parents died very young... I don't know how my younger sister and I were still able to learn everything about surviving life and he didn't, but he definitely missed the boat on many things. I just feel so sorry for him, he tries to do the best he can, and I feel like my mom would be devastated to know how much he's struggling (in lots of areas.)

I am definitely going to try to find someone closer to him to teach him these skills, just say a prayer that this time is the charm. And he has an interview on Thursday at a place that is 5 miles from his home, so that would save about $500 a month in commuting costs!

When he gets the job, think about working with him on a budget. If he can do automatic withdrawls, it will save him the trouble of remembering to write out the checks-- and he'll KNOW the bills will get paid.

 

[Patience]

It sounds like he either needs to lower his monthly expenses by obtaining cheaper housing and/or finding a roommate to help out with expenses OR he needs to get a second job. He also needs to learn how to save, even if it is only $5 per week. The TV and phone also need to be downgraded or eliminated. A grown man should certainly be capable of managing a checkbook and could do it if he wanted to in my opinion. If, however, there is an issue that makes him incapable of figuring out how to balance a checkbook, then he really should be operating with cash only. The worst thing you could do is open a joint account with him or join your finances with his in any way. I will also say that you sound like a very sweet person with a caring heart but if you really want to help your brother, point him to a financial counselor and then let him sink or swim. He will never learn to be financially responsible if he knows that you (or other family members) will bail him out.

 

[thomas998]

Some people need to hit rock bottom before they wake up and do the right thing.

From the story you've told I wouldn't be surprised if he didn't get some help with things when he went bankrupt the first time... what you've described sound like you are enabling him to be in the situation he is in.

No one needs a checking account... any check you need to make can be done with a money order and costs maybe $1 a piece.

No one needs Direct TV... frankly no one really NEEDS a tv... how much would he save if he cut that, probably at least $50 for the monthly cost.... maybe a few more dollars in electric savings from not having a TV... maybe more long term as he and the others in the house would be more likely to be active and not sit on a couch all day, imagine the health care savings.

He needs to live by what he makes and no more... that fact that he is paying bills late and getting NSF charges tell me he is really on a fast tract to sinking in debt. The first step is eliminating the checking account, if you can't manage one then you shouldn't have one and anymore than 1 NSF in a 3 year period is a sign you don't need one.

In the end you can't help him... he has to do that himself... you can destroy your marriage by continually siphoning off your family's resources for him, your husband might not resent it now, but would you blame him if he did some day?

 

[indimom]

It sounds like he either needs to lower his monthly expenses by obtaining cheaper housing and/or finding a roommate to help out with expenses OR he needs to get a second job. He also needs to learn how to save, even if it is only $5 per week. The TV and phone also need to be downgraded or eliminated. A grown man should certainly be capable of managing a checkbook and could do it if he wanted to in my opinion. If, however, there is an issue that makes him incapable of figuring out how to balance a checkbook, then he really should be operating with cash only. The worst thing you could do is open a joint account with him or join your finances with his in any way. I will also say that you sound like a very sweet person with a caring heart but if you really want to help your brother, point him to a financial counselor and then let him sink or swim. He will never learn to be financially responsible if he knows that you (or other family members) will bail him out.

I was also wondering about the housing expenses and "little" extras. Is there anything he can cut there?

Get a smaller place? Take in a roommate?
Turn off the AC? Turn down the thermostat?
Get more work to bring in more income?

To get caught up sometimes you've got to get radical. And along the way it's pretty enlightening to realize what is trully a need and what is really just a want.

Another thought that can cause some real budgeting issues when you are cutting it close. Is his income steady week to week or does it fluctuate?? It can be particularly hard to budget if your income is not exactly the same week to week, you really have to be able to plan ahead for the "lean" weeks. A steady income is much easier to manage. If it's variable, he's going to need even more help figuring out how to budget for all the bills.

Some other tips for your brother, which may make managing the big expenses easier:
Break up the bigger bills (insurance, etc) into monthly or quarterly payments so he doesn't get socked by a large bill on a short month.
See if he can get an estimated gas or electric bill (these help ease the load during the winter months when these costs can skyrocket by spreading the bill out evenly year round).
Consider any and all options that will simplify the bill paying process and make it more manageable. Can he do a combo package for TV/Internet/Phone so there are fewer bills to track. That sort of thing.

Good Luck. I hope he can get it all sorted out. It's very stressful to live close to the edge.

 

[disneysteve]

I agree with what others have said. Stop giving him money - that only aggravates the problem. If his current income doesn't cover his current expenses, there are only two solutions to that problem - increase income or decrease expenses. He can increase income by getting a better job or second job. He can sell unneeded belongings. He can decrease expenses by cutting out luxuries, if any, and/or by moving to cheaper housing perhaps with a roommate or two to share costs.

 

[emilymad]

I have no advice but my brother is in a similar situation. His history isn't the same but the net result is. It is really painful to watch so hugs!

My brother is at a point where I don't think he wants to hear about reality or how to fix the situation he is in. I think he is going to have to hit rock bottom to come to his senses. He is fairly close to that now. My other brother is doing better but not really in the same place financially that I am. I really don't know how they missed some of these life lessons.

Thanks for all the advice other people have written. It is really helpful to hear!

 

[singitalto]

Dave Ramsey has a financial course that my husband and I attended and it was wonderful!!! Go to http://www.daveramsey.com/fpu/ and see if there's a class in your area. If there is I would sign your brother up- that you can pay for-It cost about $100 but it is soo valuable. It will teach him all the things everyone is talking about in this thread. You know what they say don't give a man a fish, but teach him how to fish!!! This would do it !!!
Dave Ramsey is GREAT!!!

 

[disneysteve]

Go to http://www.daveramsey.com/fpu/ and see if there's a class in your area. If there is I would sign your brother up- that you can pay for

I agree. If he is willing to go through Financial Peace, I'd have no problem with you paying his way. That is totally different than just handing him money. FPU would actually teach him what he needs to know to get out of this hole and never go back into it - but he has to be willing to listen and do what they teach.

You could also give him a copy of The Total Money Makeover book by Dave Ramsey and let him read that and get started.