Friends come with hat in hand, but I don't think it will help

Question

I have two friends, a married couple with a ~1yr child. Shortly before they had the child, they moved in with his grandparents. The grandparents are apparently unwilling or unable to care to the child, so the father quit his job and became a stay-at-home dad (his wife's salary being higher than his).

This past weekend, when at my house for a regular get-together, the pair spoke to me and my housemates asking for help. Apparently, between the reduced income of the father quitting his job and the rent being paid to his grandparents (and the expenses of having a child), they had merely been sitting on a buffer that has been slowly dwindling, rather than getting back on their feet as was the plan when they first moved in.

I love my friends, and I would be happy to help them -- in fact, between me and another friend over the past two months, they've been given ~$300 for various reasons, from gifts to payment for assisting in a move -- but the problem is that I'm not so certain that charity is going to help them in the long run.

Despite their money troubles, the husband continues to purchase entertainment for himself, from Magic: the Gathering cards to video games. The wife isn't much better; while I don't interact with her as frequently, apparently her money mismanagement is threatening to shut a door on an opportunity the pair has with his parents which would reduce their rent and allow him to work again.

I don't want to see my friends in trouble, but I feel that charity will only put a band-aid on a much larger problem. My housemates and I discussed the issue on the following day, but we didn't come up with any resolution. (Two of my housemates are also the wife's brothers.)

The question is:

Is there some other way that I can help dig my friends out of the hole they appear to be in? Alternatively, would giving them more money be sufficient to help them?

Update: The husband does seem to be looking to do what he can; he called one of my housemates earlier today with a proposition of cleaning our house on a regular basis (presumably for pay, but I was not a part of the phone conversation). While I take the initiative as a good sign, I wonder how he plans to implement his idea; he does not have a license (and his wife uses the car to drive to work, anyway), and he still needs to care for his child. My housemate who he talked to (at the least -- likely all of us) will be having a more in-depth conversation within the week.

Just a side note: poor people are allowed to have entertainment too. Trying to save money by cutting out absolutely every small luxury can take a toll on your mental health; used games and secondhand MTG cards can be cheap enough to provide some small spice in life without breaking the bank if you're smart about it. — Yamikuronue, Dec 02 '13 at 17:00
@Yamikuronue, I don't disagree. However, when I regularly see my friend with zero income buying new MtG cards and new games, I can't help but wonder what he's cutting into in order to afford them. (Most recently: Battlefield 4, Romance of the Nine Empires, and a handful of MtG singles with total value somewhere in the $50-80 range, purchased from our LGS.) He did cut Xbox Live from his budget, but that was months ago. — Brian S, Dec 02 '13 at 17:07
Sure, sure. I mostly want to suggest that you approach the gaming less as "you can't have games, you're poor" and more "let's make better gaming choices" when you talk to him; a lot of people start shaming poor people for daring to want things and that's usually counter productive. — Yamikuronue, Dec 02 '13 at 17:10
If they have an open mind, tell them to start reading the Mr. Money Mustache blog — Jay, Dec 02 '13 at 19:45
This sort of mutual embarrassment is what government administered social assistance is supposed to spare us from. — Kaz, Dec 02 '13 at 22:19
Side note: video games often provide one the best "dollar spent per hour of entertainment" ratios available, particularly when buying used. — MikeS, Dec 03 '13 at 00:49
@MikeS, That's well-known in our social circle(s). It works better if you buy a game and keep it compared to buying new games as they're released, but video games are still good time/money entertainment. — Brian S, Dec 03 '13 at 04:49
@MikeS Especially for values of "buying used" approximately equal to "fetched over bittorrent". :) — Kaz, Dec 03 '13 at 05:28
I've dealt with these sorts of problems personally (even having family live with us while they struggled to get on their feet) and I've found the book When Helping Hurts to be exceptionally helpful. Our Western culture tends to view money troubles as a distinct issue, but often money troubles are just a symptom of deeper problems. It's focused more on large-scale poverty, but many of the insights are helpful on the small scale as well. — JDB, Dec 03 '13 at 16:48
"Money makeover" features in the Los Angeles Times have had some useful case studies of people in similar situations (e.g., this one) that may give some ideas. — BrenBarn, Dec 10 '13 at 21:20

score 35 · Accepted Answer · answered Dec 02 '13 at 15:30

Your heart is in the right place. Especially since they've got a kid.

If you really want to help them, have the uncomfortable conversation with them that they need to have about money. Specifically, how to develop and stick to a budget. It is a painful, but valuable lesson for life.

Depending on what type of relationship you have with them, you can approach it in different ways... just giving them friendly advice is perhaps the lightest "touch" you could have... but might not make the impression you need.

If they are asking you for money, I would personally make it a condition that they work through their personal budget with you, and then start living within that budget. If you're lending money, it's not too much to ask to follow their accounts or finances so that you can see that they're on the right track. If you're a close enough friend, you could really walk them through it and help them to develop the habits of:

estimating how much they will earn in a month
estimating how much they should spend in a month,
tracking how much they are actually spending, and
comparing how much they actually earn with how much they actually spend.
Doing this every month until they get out of the weeds. They should at least do it every 3 months when they're in good financial shape, but even then each month doesn't hurt.

Setting them up with something like Mint.com (if they're in the US) would be a handy place to start. You can share the login information with them if they trust you... and then they can change it once whatever agreed-upon terms come around.

It sounds weird, I know, but I have helped two friends out of credit-card debt this way. The hardest part is getting around the discomfort/taboo/shame of them knowing they need help and not wanting to accept it.

+1 The biggest help you can provide is to get their decision making process on track. A few hundred dollars won't fix anything if their brain is wired to live beyond their means. — Larsenal, Dec 02 '13 at 21:18
it should be pointed out that we don't know if the friends in question have poor money management skills overall. It seems like they have made several smart financial decisions such as having a sizable buffer to live off of, moving to a less expensive place (or so they thought). Best laid plans, you know. — Vidro3, Dec 02 '13 at 21:57
I think those five steps are something that needs to be taught in school. I'm always surprised at how many people don't do anything remotely like it... Once or twice, I've had people surprised at the idea, like the thought of keeping track of your money never occurred to them before! — Izkata, Dec 03 '13 at 03:48
whats the deal with Product Placement here?? I've recently signed up to YouNeedABudget.com ... best $30 i ever spent. #1 Give every dollar a job // #2 Save for a rainy day // #3 Roll with the punches // #4 live on last months income — Jez, Dec 03 '13 at 17:55

score 15 · Answer 2 · answered Dec 02 '13 at 19:01

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I like THEAO's answer above but I would make some changes.

Treat this as a gift; not a loan. Having to ask your friend for repayments is likely to become a huge strain on the friendship.
Giving them money, whether you decide to do it as a gift or a loan, does not entitle you to then dictate their life. Sitting down with friends and going over their budget until it satisfies you is likely to be stressful for you both and demeaning to them.
You can make getting help from a financial advisor/counselor a part of your gift. I would go as far as to suggest paying for that service for your friends as a part of the money you give them.
If a few months from now they need more money, you'll have to reassess the situation.

answered Dec 02 '13 at 19:01

Vidro3

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I thought I left my approach pretty open ended--nothing about being entitled to anything. I did say that with the limited information OP gave, the right approach lies somewhere between "sit down and have a grown up talk" and "provide more hands-on guidance". That's a pretty broad spectrum. One friend that I've helped through this just wanted some help listing out the handful of items for a budget and setting things up. The other friend really struggled with keeping to a habit, so they asked me if I would help them track their finances for 3 months, and I was a lot more involved. It depends. – THEAO Dec 02 '13 at 20:13
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setting a "condition" of going over the budget with the friend seemed a bit entitled to me. I simply doubt the that your experience helping friends and overcoming the taboo is likely to be repeated. But, different strokes. – Vidro3 Dec 02 '13 at 21:05
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This is a good answer. Counselling isn't a skill everybody has. Sending your friend to credit counseling where pros will help is likely more productive and slightly less embarrassing. – MrChrister Dec 03 '13 at 08:22
+1 Very good advice. 2) Yes, this is literally true, but I'd point out that offering money with a condition is not dictating their lives. I think there is a middle ground that can be found here. 3) +1 Seems like a good middle ground for 2. 4) +1 Agreed

Patrick M

Dec 04 '13 at 10:31

score 12 · Answer 3 · edited Dec 02 '13 at 22:09

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IMHO these people need to understand finance. I think Dave Ramsey is the best for this kind of situation. They need their butts kicked. What kind of parent spends money on playing cards when they have a child and not a place of their own? Answer: Parents that needs to grow up.

Most of all they probably have an income problem. I would assume that the husband stays at home because he does not earn enough to justify quality child care. Okay how about he cares for a few other kids and turns watching one kid into an income stream? Duh?

Giving them money will only hurt them in the long run. They are holding onto childhood, avoiding becoming adults. No amount of money you can give them will dig them out of their rut, in fact it may only prolong it.

MTG is an intellectual game. If he spent half as much brain power on earning a living, the could probably be well off, and earn enough to have a tidy budget for gaming.

Sorry Yamikuronue, but I disagree with your first comment.

edited Dec 02 '13 at 22:09

JTP - Apologise to Monica

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answered Dec 02 '13 at 18:22

Pete B.

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Having them read mrmoneymustache.com might help too, if they have an open mind. Especially, the debt emergency post – Jay Dec 02 '13 at 19:18
+1 - After my edit, I agree with much of your intent. The David is helpful to those who are in this situation, less so for those who actually are ready to save and invest. – JTP - Apologise to Monica Dec 02 '13 at 22:10
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Not sure about money mustache, but they need a budget and a boost in income. – Pete B. Dec 03 '13 at 00:45

score 8 · Answer 4 · answered Dec 02 '13 at 20:26

The key for your friends is a robust and detailed form of budgeting. There are plenty of website resources to help them through that process and you should steer them there rather than go through it with them yourself. Of course you should show willing to answer questions and help if asked.

The budgeting exercise will require quite some effort and diligence to track historical and current actual expenditure (keeping a detailed spending diary is an excellent way to start). This must be coupled with a lot thought about ways to trim at various degrees of severity. For example it means analysing all utilities deals to make sure they're on the most suitable package. It is also an ongoing, iterative process - not a one-off.

The only way in which you giving money to them would be of help is if they have borrowings and the cost of servicing that debt via interest is what's tipping their budget from positive to negative. Only if they are averaging a cash surplus each month can they make headway. Otherwise, the underlying causes of their woes are not being addressed, existing spending habits continue and they are merely deferring the changes they need to make.

Your friends have to adopt LBYM - Living Below Your Means. That's simply a modern version of Mr Micawber's famous, and oft-quoted, recipe for happiness:

"Annual income twenty pounds, annual expenditure nineteen [pounds] nineteen [shillings] and six [pence], result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."

Discussion forums like this make interesting reading: http://boards.fool.com/living-below-your-means-100158.aspx?mid=30971651&sort=collapsed

iluxa · Answer 5 · 2013-12-03T00:39:19.813

Very difficult situation, I've had similar ones.

You simply cannot not help a friend. Worse, you have to be perceived as helping by the friend himself. And the friend thinks what he needs is money, not a lecture.
At the same time, you can't keep feeding the friend's bad habits, as it will only make things worse in the long run

One option I've resorted to (didn't really work, but may work for you?) was this: say the guy asks for $250, you give him $100 and explain in detail why it's the best you can do at the moment - times are tough, you're saving for XYZ yourself, blah blah blah. Message being sent:

I'm here for you as a friend, willing to help
I'm not an infinite pool of money, and there are limits that have nothing to do with our friendship
You still have to figure out where to carve out the remaining $150 that you need, perhaps no games for you this month?

Another thing I did once (that worked well) was just drive over, yell at the guy, submit his resume to 20 different places, and watch him get a job within weeks (the guy sat on a couch for months not even looking around). In your case this may translate into taking the friend out to a bar, pouring a couple of beers into him and telling him to grow TF up for baby's sake. Use your judgement re how well that's going to go across :)

JDB · Answer 6 · 2013-12-03T19:29:06.837

First and foremost you must remember that they are people (something I don't think you have trouble with, but others might). When dealing with increasingly desperate financial struggles, it's not uncommon to allow financial trouble to define you, or for others to see you only as "poor".

Money is a human creation. It's not real, like fire or water, and "money problems" is a misnomer. Whatever problems they have, money is only one symptom. Often, dealing with those deeper human problems, such as lack of confidence, depression, fear or behavioral issues, is the key to correcting "downstream" problems like poor money management. Not that learning how to manage money isn't important, but it doesn't sound like that is the primary issue in this case.

Westerners tend to view money trouble as distinct from other problems. The answer to money troubles is often understood to be "more money" or "smarter money" - earn more or spend better. It helps to step back and look beyond finances. What's going in their lives? How does that make them feel? Do they feel unimportant or valueless? How's their family life? Do they have good emotional support, or are they running "on empty", trying to fill the emptiness with other things (like games, for example). (Simply telling them to stop purchasing games, for example, without finding a better replacement just perpetuates the feelings of shame, valuelessness and emptiness.)

Discovering the deeper elements of your friends' situation is much more complicated than giving them money or paying for a financial counselor (neither of which are bad things), but it may make a tremendous difference not just in your friends' bank account, but in their lives as well.

My wife and I have experienced all of this first-hand, so I know the predicament you are in. We've even had people in tough financial situations live in our home with us. In all the situations in which we've been close enough to understand context, money wasn't the primary issue. It's always been something else, more often than not family, but not always.

I've found the book When Helping Hurts helpful for gaining some perspective, though it's not a perfect match (since it deals more with poverty on a grand scale). You may still find it helpful in terms of general principles, but, ultimately, each situation is going to be unique and no one-size-fits-all strategy exists to solve all problems. In the end, building a deeper relationship is the best path toward finding a long-term solution.

score 2 · Answer 7 · edited Dec 03 '13 at 13:02

This situation is certainly difficult to handle. While there are good reasons for and against giving or loaning money directly why not handle this in an open and honest way?

Give your friends the link to your question, which shows that you care about their well-being and the friendship. It also shows that you are deeply concerned that the situation might become worse if they are unable to get the finances in order.

If a close friend of mine would be so concerned it would definitely get me starting to think about the situation and possible ways out of it. There will be no single solution to the problems they are facing but having friends that actually care can stabilize such a tricky situation much more than any small financial gain.

When a friend of mine was in deep financial trouble he did not hang out with us anymore because we often met in bars or cafés which were at that point just too expensive for him. So simply changing the location to a less expensive place allowed him to participate in social life again and was much better if we would have payed for him and created an atmosphere of social debt.

Friends come with hat in hand, but I don't think it will help

The question is:

7 Answers7