Ask the Readers: Debt Consolidation or Consumer Credit Counseling?
Published on - April 24th, 2009 (by J.D. Roth) One of my favorite parts of Get Rich Slowly is the weekly “Ask the Readers” section. It’s fantastic to see how well this community pulls together to help each other find solutions to financial dilemmas. Most of the questions come via e-mail, but last week I met a man named Aaron who reads the site. He told me that he could use some reader advice for his situation. Here’s Aaron’s story:
My girlfriend has managed to get in over her head financially. This is partly due to her own foolish spending patterns, but it’s also partly due to her family. She co-signed on a credit card with her father, and then he racked up a few thousand dollars in debt and stopped paying on it. Her sister has several kids and no job, so my girlfriend pays for her phone and car repairs, etc.
I’m not entirely sure of her complete financial situation, and she’s hesitant to disclose everything to me. I want to help her get to a stable point where she can:
- Pay all of her bills every month instead of putting them off, accruing late fees, and dodging calls from creditors.
- Actually start saving some money.
How can I help her to put a plan together to get all of this straightened out? I’m interested in non-profit consumer counseling services, but I’m also wary of companies that will just take money from her and not actually do any good.
This situation sounds tricky because it doesn’t just involve Aaron’s girlfriend, but her entire family. For some people, family comes first, even if that means sacrificing their own financial security. It’s a price they’re willing to pay. Still, it may be possible to help her.
First, I think it’s important to be leery of debt consolidation companies. These are not the same as consumer counseling services. When my brother got into financial trouble, he and his wife sought help from a debt consolidation company. They regret making this choice. The company didn’t do everything they promised, and in fact, made matters worse.
Dave Ramsey is wary of all debt consolidation services, but from what I’ve heard, there are reputable non-profit agencies that can help people with their problems. At MSN Money, Liz Pulliam Weston has put together a short guide to credit counseling. A recent Consumer Reports article suggested starting with these two organizations:
- National Foundation for Credit Counseling
- Association of Independent Consumer Credit Counseling Agencies
I’ve also heard people recommend United Family Services. Also, the U.S. Federal Trade Commission has an on-line guide to choosing a credit counselor. (And don’t forget to that Dave Ramsey’s Total Money Makeover has helped many people turn their lives around — including me!)
One final note: It can be difficult to approach these subjects with a loved one. You mean well, but your partner or family member may not always see it that way. When speaking with his girlfriend, Aaron should be careful not to damage the relationship. (And this means different things to different people, of course.)
Do you have any advice for Aaron? What would you do in this situation? How can he help his girlfriend take control of her finances and turn things around? Also, do you have any experience with debt consolidation and/or consumer credit counseling? If so, please share your story.
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I would suggest enrolling her in Financial Peace University. An open, group-based environment can be very encouraging, especially in her desperate situation. He could even go to it with her.
Non-profit counseling is obviously preferable, however I’d really try to avoid either, at least at first.
I think both of these things can lead to someone putting off the responsibility. The best thing in the world for her (like me) would be for her to really have to come to terms, accept responsibility, and realize she has the power to change it. If you let someone else fight your wars, it’s easy to never change the base habits.
Either way, good luck! She’s lucky to have you right now to help her through this.
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Normally I would also say to stay away from credit counseling, but this girl is in need of an independent 3rd party. It’s amazing how we’ll listen to “professional” advice even if it’s the same advice that would come from a loved one.
This girl not only needs to learn how to manage her money, but at the same time she must learn how to keep her money separate from her family’s money. You won’t fix the root problem with a debt consolidation.
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Stay away from debt consolidation. My sister was in a similar situation and ended up consolidating debt without changing overspending habits and got in worse. In the end the solution was to go to a free debt counselling service (in ireland this is a government run service) and these negotiated repayment terms on all her debts for her, (effectively no new interest will accrue, and she pays off a small amount if her arrears every month).
This has allowed her to live again, but her credit score is irreparably damaged, and she will continue to repay these debts for 40+ years (You cannot wipe personal debts through bankruptcy in Ireland)
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At risk of sounding heartless, I would be more concerned about whether he intends to have a long term relationship with her. If her family is that out of control, it could wreak havoc on a marriage. Unless she is willing to put her foot down and separate her finances from those of her family, I would be very cautious about anything long term.
I would agree about the National Foundation for Credit Counseling. Anyone not affiliated with them, and especially any of these “debt settlement” agencies (the ones that advertise they’ll tell you what the creditors don’t want you to know – what a crock), stay far away from.
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It kind of sounds like more a family issue than a financial issue. Does she have access to an Employee Assistance Program at work where she could get some free counseling?
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I was in a situation that was similar, and the results were not encouraging.
Long story short, people who irrationally presume that resources are infinite do NOT make good relationship partners.
Get out early, cut your losses and breathe a sigh of relief.
If you stick around your paycheck will disappear before you even get it; your credit cards will be maxed-out before you can even say “Eighteen Percent Interest” and your life will be living hell from which no escape will be possible.
Women who do this inflict what I call the “Delightfully Indulgent Daddy Syndrome” on the men in their lives. Simply stated, ‘Daddy’ will indulge his princess incessantly, which will build the expectation that the man in her life must do the same. Even if she snags a very wealthy boyfriend/husband, the spending will exceed even those ample resources. In short spending will always outstrip income/assets and the end result will be that she will dump you the minute a bigger, better deal comes along.
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As far as practical help goes, I think that making a Statement of Affairs would be a good first step. This means listing all bills/outgoings and amounts, all debts and their minimum payments, and balances owed and interest rates. I’d add to the list the amount of money that she actually spends on contributing to her family.
Any reputable organisations looking to help get her out of debt will need this information, and it’s possible that in laying it out on paper she’ll be able to see solutions that aren’t obvious currently.
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I’ve tried helping friends and family in the past with financial issues, gambling issues, addictions, emotional drama, hoarding … so many issues that never get resolved by ‘helping.’ The more you try to help, the more it keeps them going on their own destructive path. Think about it – what kind of father would force his debts on his kids? Yes, some families are tight-knit and help each other out, but I have a hard time believing it’s been mutual. How long has her sister been relying on her to support her kids? Any plans to change that on the horizon? There’s a never ending demand for free money, and unless Aaron wants to support a family of 5 before he even has his own kids, he should stay out of it. Aaron should be very careful about becoming an enabler to a bad situation. His girlfriend is hesitant to disclose to him, and it doesn’t sound like she’s even asked for help here. So don’t. He should keep his finances completely separate from hers and, if and when, she wants help, then begin with giving her information about co-dependent relationships and financial abuse within families.
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I’m with Jen. He needs to figure out if this is a train he wants to ride. She doesn’t trust him enough to share her numbers but she trusts her family enough to let them hold her down. That’s a sign to cut and run in my book.
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I went through credit counseling a few years ago. After racking up too much debt, then going to grad school I just couldn’t keep up with payments. It’s not that I didn’t have the money. I didn’t take the time to keep up with each card/loan and my money in general. So things fell apart. I hit the bottom, credit cards calling my work-study employer? Yeah, bad. I signed up with a credit counseling organization (ACCC) and all I had to do was make sure I had enough in the bank to cover their one payment each month. They automatically deducted it and I could finish my degree in peace. They were very helpful and understanding as well. Still the trick was learning how NOT to spend money to begin with (and that included not lending money to family, it was hard, but they, your family, will understand). I finally payed the whole thing off and am now free of consumer debt. Student loans are another thing.
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I agree there are family as well as financial issues going on, and that EAP counseling mentioned above(which is indeed free)is a good idea. I would also give Consumer Credit counseling a try, however, and not dismiss it out of hand. If the first session doesn’t feel right, a person can just decline their services, without having lost anything.
In any event, the crucial focus is to live within one’s means. I think a relationship, if it’s going to be healthy and long-term, has got to embrace that principle; it’s like a law of nature. I’m a former counselor. See this short piece on crafting a happy marriage http://www.diamondcutlife.org/diamond-cut-sustainable-marriage/
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I have been using credit counseling services from GreenPath (a national non-profit CCC). They have been great and have lots of information on their website.
He could try showing her the website or another one like it to get a feel for where she is emotionally before trying to solve her problems for her. When I first met my husband, he wanted to rescue me, but I was very resistant because I didn’t want to feel like I owed money to someone I love.
Eventually though, he convinced me to at least go meet with the GreenPath people and it was the best thing I have ever done. The most valuable thing they did was to get my interest rates lowered, so my top one went from 36% to 8%. I only have one more month of payments left to go!
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If his question had been, “My girlfriend really wants to get out of debt. How can I help?” I’d have a different answer. But for now my answer is to let her sink. She has to WANT help and be actively and intently seeking it before any sort of program will improve things. For now I think the best thing Aaron could do is to model good financial behavior and not pay for things for her.
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Paying someone else to fix your mess doesn’t change the underlying behavior – especially with most of these “credit counseling services”. You very often get no counseling for the fees you pay.
Have her start reading some books on personal finance or link her to some PF blogs. Maybe she’ll get interested and take some initiative on her own. Good luck.
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Aaron can’t do much of anything until his girlfriend can admit that she has a problem and decide that she wants to do something about it. You can give all of the financial advice in the world, but until someone fully commits to change – nothing will improve in their financial situation.
Admitting to being in financial trouble is not something that comes easy; people do not like admitting failure. It helps to communicate to people that they are not in this alone; lots of people have run themselves into equally troubled situations. In addition, there are countless stories of people who were able to get themselves out of debt and change their lifes.
Once his girlfriend is on board for change the first exercise that needs done is listing out all of the in’s and out’s – how much money is coming in and how much is going out. Today she has more going out than going in and thus she is in debt. The goal is to develop a plan for tomorrow to take more in than she sends out.
Good luck.
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Sorry to say, my best financial advice to Aaron is to get out of this relationship.
His girlfriend will never get free of her freeloading sister and irresponsible father without damaging her relationship with them, and regardless of her decision, it will always be a source of contention between herself and Aaron.
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I’m also a big fan of Dave Ramsey’ TMM and agree with others that taking ownership of the problem yourself leads to fundemental changes in how you view and use money. If you push that job off to someone else you may solve the immediate problem but you don’t change how your emotional connection to money and you’ll likely be back in the same spot at some point.
Regarding family dynamics, that is a tough one. A lot of people say you shouldn’t lend money or give money to family but I have lent money, given money and borrowed money within my family and while I’ve not always been paid back I wouldn’t change my decisions at all.
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I would suggest credit counseling and possibly even straight up therapy. Sounds like she needs to set boundaries, learn why she’s overspending, and use that knowledge to say no to the family and get a handle on her own finances. Aaron shouldn’t pay her bills.
As a woman married to a former compulsive debtor and spender who’s turned his life around dramatically, I can safely say people can change, but really have to hit bottom and need an impetus to change. I wouldn’t kiss off the relationship entirely. She sounds like a generous person.
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P.S. I think it would also help Aaron and his girlfriend to sit down and talk about where they got their money attitudes, their family’s influences, and what they believe about money now.
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Debt Consolidation companies = bad.
Consumer Credit Counseling agencies = good.
Some 5 years ago we (wife & I) got into some dire straits for a variety of reasons, but found a local office through: http://www.creditcounseling.org
Disclaimer: No affiliation, just a satisfied client of their central New England office.
After looking at 2 DC firms (one who filed bankruptcy and got a class-action suit piled on them afterwords), we got good input on the CCCS in our area, and it was helpful that they offered local seminars (free) on budgeting, purchasing, and (at the time) a buddy system if “you felt the urge to splurge”.
Check your State registry boards and the BBB, and I’ll bet you find good reports on a regional CCCS type entity in her area, but “less than stellar” reports on DC companies.
As a few opined: Tough step to take, but worth it in the long run: IF one finally MAKES that decision AND sticks with it.
In my bad English: The problem don’t go away on its own.
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This sounds like a family issue more than a financial one. Frankly, Aaron needs more information and numbers to be able to give responsible and prudent advice. (sister’s unemployment benefits? welfare? what’s the budget look like? what’s going on with dad?)
If the girlfriend won’t say, or–heaven forbid–she doesn’t even know, there’s really not much Aaron can do (without making things worse by his own uninformed decisions) except step aside and watch gravity takes its course. It’s ultimately up to the girlfriend whether she wants to learn the hard way, or the harder way.
Lastly, if she realizes what she needs to do, she should get help from more people than just Aaron. Strength in numbers.
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I have had to use credit counseling service twice…once after I graduated from undergrad and once after grad school. I had to pay for everything on my own and although I was still working full time, I wasn’t able to keep up with my expenses once the student loans ran out. I went through a very helpful organization (Money Management International) that worked with the credit card companies to reduce my interest rates making my monthly payment manageable again. I made my final payment about 6 months ago and my credit score has not been damaged in any way by using a credit counseling service and in fact it’s pretty good!
When I met my boyfriend he had deferred his student loans in order to make sure he was able to just pay the minimum payment on his credit cards after he racked up debt from college. He’s a year into the program and is once again able to make his student loan payments and can see the light at the end of the tunnel.
We have been able to live credit card free and have also manged to finally save some money. If I had to do it again I absolutely would. One thing to note is if she were to use a credit counseling service, one part of the agreement is you cannot use your credit cards. Your accounts will be closed and if you open a new credit card the counseling service will find out, you will be removed from the program and your interest rates will go back to what they were before. She will have to learn to live without them, but they will teach you how to do that. If she’s ready to commit to it she should consider a credit counseling service.
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Do not marry her until she has gotten this straightened out. And if she is not willing to get this mess sorted then run don’t walk to the nearest exit.
You do not want to take on this burden of supporting her entire family. And if she is not willing to put herself, you and your relationship before freeloading relatives then she is not old enough to get married.
Now I need to call my dad and tell him what a wonderful guy he is. I haven’t had to go to the Bank of Dad in over 15 years because he taught me how to avoid that indignity.
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Aaa em, in my best Dave Ramsey voice: Counseling and consolidation are not the issues. Credit counseling won’t do anything for her that she can’t do for herself, namely negotiating with creditors and getting on a plan. Why pay someone to do if for her. Secondly, consolidation won’t solve the problem if she doesn’t change her spending. Financial Peace is a great idea, but short of that get Dave’s book the Total Money Makeover and follow the Baby Steps. It’s not rocket science, spend less than you earn, get and stay current on your debts, and and pay your debts down to zero, starting with the smallest.
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As many have said – get out of this relationship, get out now! If Aaron is responsible with his money why would he want to be in a situation where his partner could be so crazily irresponsible??!
On top of that, as well all now from the success of the various 12-step programs you can’t help someone who doesn’t want to help themselves. It appears she is very reluctant, if she does go along it will only be because of his insistence – that never leads to a good result.
Stop trying to “fix” someone! You’re not her Daddy. Unless she makes a dramatic about face and comes begging for help get out as quick as possible. This is only an indicator for many other underlying problems.
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If she is open to accepting Aaron’s help, I think the best place to start is organization. Can you help her to start a list of all her debts, order a free copy of her credit report to make sure she knows about all her debts, go through the stacks of bills that are probably all over the place and determine what needs to be kept and dealt with and what can be shredded or trashed. If she is willing, then go at it determinedly, but understand that it will be difficult and she’ll probably want to quit several times before its over with. I also think the comments about counseling and FPU or some other program that helps the individual retain/find control of their financial situation rather than takes control is great advice. I used to work for a big bank and talked to people who were in truly heart breaking situations b/c of credit consolidation places. They were sopping up all these folks’ money and then paying their bills late and accruing more fees in their name. I would be extremely cautious with any consolidation. Best wishes!
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Roxanne, we need more dads like your Dad. Give him a double dose of thanks from the wider world.
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I agree with Albert- this is more a family issue because he might get his GF help but can he change her whole family?
I married someone whose 2 siblings had never learned anything about finance and self-support but to keep asking for money. His parents indulged these “kids” until almost the end of their lives- when the kids were in their 40′s and 50′s(basically supported by parents!). My in-laws were not wealthy either. When it appeared that my sister-in-law hoped to continue this process with my husband, I realized that it was very good that my husband and I had separate accounts. I was very diligent about savings accounts for our kids’ education. I told my husband that he had to pay his portion of our bills and also take into account that I would not take up the slack in our family accounts for money he would give a sister who basically refused to work(because “I am not like you, I can’t punch a clock or let someone else tell me what to do”-but being her own boss didn’t work either- cost my in-laws a lot though ). he gave her a few thousand and then cut her off. It did result in some extremely nasty phone calls and at least one more than crazy ranting letter. So will the GF be willing to stand up to her family?
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As a debt collection attorney, I see this situation all the time. Just reading Get Rich Slowly and Dave Ramsey will provide more than enough info to create a “get out of debt” plan, although a debt counsellor may be helpful. As for debt consolidation companies, once it gets legal they are almost always counterproductive. Debtors assume the legal process has stopped, and then discover that judgment has been entered against them. About the defaulted credit card, get it taken care of (pay off or get into a payment plan) ASAP. Once in default, the interest rate skyrockets, late fees accrue, and eventually attorney fees and court costs may well be added to the debt.
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I have to agree with the other commenters, she needs to figure out what is right for her. One of the things that I would like to note is that almost all of the “Debt Consolidation” companies that you will find out there aren’t actually debt consolidation. When you think debt consolidation you think “oh I’ll get one big loan to pay off my small loans, and it will have smaller interest”. That is completely not what these people do. Most of them are debt negotiation firms, where you pay into a savings account every month and STOP paying your bills. At that point, they take like $75 a month or something and pool you together with hundreds of others who are also in bad with the same companies and try to negotiate with them to write you all off as a tax break. I’m of the opinion that it will happen less and less as the market is bad because it will make the banks look bad to not have those assets on their books, marking them as a write-off takes them off the books for them and they look worse.
As a bonus, the people at these “debt consolidation” companies are super pushy salespeople. I tried to call some of them up looking for classic consolidation, and they seriously kept me on the phone for way longer than I wanted. I’ve got a blog post about my experiences a few years ago at http://base0.net/archives/30-debt-consolidation-scam-scum-or-sweet.html which has garnered a bunch of comments both pro and con on debt consolidation.
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Albert I will send dad your love. As my mother used to say they would not have a pot to piss in if it hadn’t been for him.
What that guy can do with numbers and finances is amazing.
He is the type of guy who when I was a teenager would make me write out the mortgage checks for the year every January so I understood how things work. $86.00 a month.
I can’t fathom a father that would financially screw up a kid.
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MYOB. Seriously. You want this for her, but nowhere does it say she wants it for herself. Until she does, you’re just coming across as patronizing and controlling and wanting to “fix” her. This is who she is right now. You have to decide if this is the person you want to be with, even if she never changes, because YOU CAN’T CHANGE HER. Until she specifically asks for your help, stay out of it.
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Did she ask for help? If she didn’t, then you can’t help her. Do you want to marry her? If your answer is, “I’m not sure yet”, then this is none of your business.
If the answer is “Yes, definitely.” then sit down and have a talk with her. Let her know that you love her and could see a future together, but you have concerns about her finances. If she wants marriage with you, then she needs to address these concerns. Do not tell her what she has to do – that’s for her to decide. If she asks for your opinion and advice, give it to her. Your job is to let her know you care about her, and what your concerns are. If she is unwilling to make changes, then leave. You will be entangling your finances with hers and her family problems forever if you marry her. That’s even if you get a divorce later. In divorce, you will still bear the scars of anything that comes out of it. Probably a broken heart and a pile of bills. Don’t marry her thinking things will be fine “if only if…”
You cannot fix her problems. She has to fix it. However, you can make your situation as messy as hers.
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I went to one of those non-profit credit counselors years ago. They were not hugely helpful – I was already doing everything right, I just didn’t make enough money to live in LA. However, having them confirm what I already suspected gave me the impetus to finally ask for (and get) a raise at work that kept me from sinking further.
My BF went to a debt consolidation company. It was a ripoff. He paid the same amount but the money never got to the creditors. He ended up filing bankruptcy.
I am also really offended and disgusted by family members that would deliberately destroy each other financially – especially parents!!! but I know it happens all the time.
I am fortunate to have a Dad like Roxanne’s and all my immediate family members are reasonably sane and functional. 
However my inlaws, while managing to do well enough for themselves, somehow failed completely to pass their acumen on to my husband, who is a bit of a flake. He gets better all the time though. 
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Based on my own experience when was in mountains of debt, the only people who deal with these sorts of situations that *aren’t* just scam artists are bankruptcy attorneys (I never did end up filing bankruptcy, though).
I agree with the “you can lead a horse to water, but you can’t make her drink” assessment that other people are mentioning, though. Until she asks for assistance, anything you do will probably just be looked at as annoying and invasive. If this is a huge deal to you, but she doesn’t care about it, go find yourself another girlfriend that shares your values. You’re either going to break up eventually, or you’re going to get married, and it’s not a good sign for a marriage if you guys have completely different viewpoints on matters like this.
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Enroll her in Dave Ramsey’s Financial Peace University or get her his book. She needs a completely new way to think about and approach her finances — NOT the bandage solution that credit counseling will give her. She also needs some serious boundaries with her family members. Until then, her finances will never be stable and neither of you will be free from drama. In the long-run, you need to really think about whether you want to build a relationship with this woman. Unless she seriously changes, you’ll never have financial peace and you’ll be married to her insane family.
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I was one of those women who couldn’t manage money, who spent incessantly and ate out on the credit cards every day. Somehow I managed not to get so bad that I couldn’t pay it off sporadically and then start again. No matter what you blame it on, relatives, your own needs, timing, etc, there is an underlying problem that needs to be addressed through therapy, in my opinion and personal experience. Much like alcoholism the person has to hit bottom and decide for themselves that they want to change. Since the whole impetus fopr change seems to be coming from Aaron, I don’t think a plan to help the girlfriend will work. You can’t push people into change. I’m afraid my answer is to break off the relationship but to be lovingly honest about why.
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This post struck a cord with me because my husband’s brother has played the role of your girlfriend’s family for years. Unless your girlfriend is willing to stop supporting her family by giving them money, there is no solution. It’s painful. It will get ugly. But it’s the only way.
For you though, I agree that you can’t help someone who won’t help themselves. That one piece of advice can save you a lot of time and pain. Take stock, decide what you want from the relationship and act accordingly.
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I would be very careful when talking to her about money because her family obviously depend on her a great deal. She will have to make the difficult decision as to whether or not to keep giving them money, and it’s a lose-lose situation.
Either she stops and it damages (for a short while, at least) her relationship with her family. Or she decides to keep helping them and it damages her financial position.
Whatever she chooses, it’s her money and you must not be judgemental. Lead by example, rather than trying to persuade her to do anything, and accept what a difficult situation she is in.
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I once thought that love conquered all, but that was before I had a husband that could make money vanish. We both had good jobs, but he managed to make more than $50k/year vanish without much trace. Hobbies, hotels, giving it to friends, eating out, over tipping, etc – we bled money. I dared not spend much and eventually we fought more and more about money, and it was a major factor leading to us splitting up. His family were frugal so no idea where it came from. So beware – I think making sure you are compatible money-wise is as important as making sure you agree on children, and religion.
Especially important – do NOT buy a house together!
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Another thing to consider with this relationship is all the emotional burden Aaron and his girlfriend will have to carry because of this. Financial problem often leads to feuding among family members and I can totally see that happening sooner or later.
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Bluntmoney – You got it exactly right. Just wanted to second your comments. Girlfriend needs to want to change, boyfriend can model good behavior and not enable. Beyond that, it’s not his business.
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Why not try one of Dave Ramsey’s Certified Counselors? They can help walk her through the situation and teach her how to handle this herself for a fraction of the cost of the monthly fee that it included with consumer credit counseling services. Also, doesn’t working with a credit counseling agency negatively affect your credit score?
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Folks, people who are so far in debt they can’t see their toenails aren’t going to read this blog.
I say bring back debtors’ prison.
Yup, you betcha, lock ‘em up.
That would get a major rise from the folks in Washington.
Bozo
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Unlike many commentors, I don’t believe it’s time for Aaron to abandon ship. I think he honestly loves his girlfriend and wants to help her. He’s not doing this for himself!
Obviously he should keep his finances completely seperate from his girfriend’s for the time being. And he should really make sure she WANTS his help.
DO NOT LEND HER MONEY. She will not be any better off and he may never be paid back. If he is really serious about helping her in the long run, he should put any money he is willing to GIVE her (not lend her) into a savings account. That way she is building savings, he is helping her out, and she is not building more debt. Perhaps this savings could be used as an emergency fund in case she ever gets in REALLY bad trouble, or maybe as part of a downpayment for their first home or wedding.
Sounds like this girl needs a budget! Make a list of every bill she has each month (including credit card payments), how much it is, and when it is typically due. If the amount varies, guess HIGH. If the due date varies, guess EARLY. Set aside the money to pay these bills in an envelope, a special checking account, just somewhere where she knows the money is SET ASIDE for BILLS not fun/family bailout. It has to be somewhere she must consciously withdraw from, knowing that it is her bills fund.
If she really needs fun money, start setting aside the late fees and/or interest she AVOIDS into a fun money envelope. For example, if she pays a bill on time and avoids a $20 late fee she usually incurrs, let her buy a $20 clothing item, or whatever. Aaron may want to donate to this fund to reward her smart financial choices.
She needs to have a good long talk with her sister. Set a maximum amount that she will give to her each month, and limits on what she will help pay for. Transportation and phone calls sound reasonable, but make sure she is not driving a Lexus and talking on the lastest iPhone. Be very firm about the maximum, and never EVER give her more than that. Only give her money when you are sure she is doing something proactive, like looking for a job or taking the father to court. Her sister needs to know that she isn’t a magical never-ending money tree. If possible, set a date (maybe 1-2 years in the future) at which point all money-flow to the sister will STOP. This should help spark Sister into getting her act together.
Well, this ended up being rather long, but I really wanted to say something useful. People just saying “RUN” are not helping. Love is usually a lot stronger than greed, and I think the girlfriend really loves her family (although she may still be mad at dad) and doesn’t care if she’s broke. Aaron also really cares for his girlfriend, and despite her financial woes, he doesn’t want to leave her. Rather than break her heart, let’s try to fix her bank.
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I am going to have to agree with Cathy’s post #33 and many others like it. If the GF hasn’t asked for help, advice is not going to do anything.
Aaron has to make some decisions. Here is where $$ and the heart have a hard time co-habitating. Aaron will need to take a look at his situation and decide whether he is in it for the long and bumpy road ahead. Aaron needs to protect himself first. There is a reason why she is not forthcoming with information. What is she hiding? Aaron should be careful of getting involved to the point where he becomes legally financially responsible for some of her debt before even knowing what her net worth is.
I know it sounds harsh but you gotta look out for # 1 first and then help others. This is unlike Aaron’s GF who looks to help others first. Which although admirable, will lead to stressors in her life
If her finances start becoming a major issue in the relationship (which appear to be happening, hence the request for assistance), Aaron will need to prepare a plan of attack with outs along the way if she does not follow through.
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I’m too lazy to read every comment but I wanted to add my one cent. Sorry, but we’re in a recession. I’m keeping the other cent for me.
I used Consumer Credit Counseling Service a few years back and wouldn’t recommend to anyone. A few phone calls to your creditors will get you the same thing. If you want to just send them $20 to get them off your back, you can do that yourself. You don’t need CCCS to do it for you.
This problem is deeper than that though and will involve breaking habits and possibly isolating or damaging relationships with family. Tough call. The only person who is capable of deciding what to do is your girlfriend with your help and some informed opinions. Good luck
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I agree with Courtney (#45): there’s a lot of general advice here, but not much in the way of specifics. While I completely agree that Aaron can’t solve his GF’s money problems for her, I do think there are steps he can take to get her to start thinking about this stuff.
Doing some preliminary research on his own so he can give guidance if/when she wants it (like assessing the credit counselors) seems like a good idea.
Taking her out to dinner and working into the conversation that she seems stressed out about money and if she wants to talk about it he’s available to listen and will work hard to not pass judgment seems like a good idea.
If she’s interested in talking about it in more detail, helping her to focus on her own habits and spending first seems like a good idea. Once she starts to get a handle on her own money, she may be able to start thinking about her family.
It’s a shame that her dad was so irresponsible, but at this point, it seems like what was done is done and since she co-signed, she’s unfortunately responsible. So she’ll probably just have to account for that in her own budgeting, and hopefully come to the realization that she shouldn’t do that ever again.
In other words, maybe there need to be some “prenatal” steps before getting to the baby steps of paying down debt and setting up an emergency fund–and could also come before arbitrarily making the decision to leave the relationship.
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I hate to disagree with some posters here but Credit Counselling = Loan Consolidation.
Keep in mind, when you sign up with Credit Counselling services a note goes on your credit bureau and it will impact your credit score and opinions of prospective creditors.
The benefit of working with them is the lower rate and single payment, but beware of other impacts.
At the same time they do not perform any counselling per se, they actually just consolidate your loans (hence the equation in the beginning of the post).
Despite being non-profit, their primary goal is to make money (by charging banks part of the settlement funds), which is why so many of them eventually end up in courts.
I have dealt with Credit Counselling agencies from the professional stand point rather than a customer, so my opinion could be a bit skewed.
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“In other words, maybe there need to be some “prenatal” steps”
Wonderful idea. Folks who can’t pay their bills should be cautioned about having children.
I suspect there is a connection between deadbeat parents and deadbeat children.
However, given the fact Washingtonians pay deadbeats to have more children (I’m thinking welfare here), it’s a lost cause.
Have a nice weekend.
Bozo
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