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
The U.S. Federal Trade Commission has an online 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.