It’s hard when a friend or family member is struggling with money, especially if they live in Mexico and you don’t. One way to help is to send them some cash, but that only provides them with a short-term solution to a long-term problem.
If your loved one isn’t good with their money, it’s probably because they don’t have a budget. Keep sending them money, if it’s needed, but consider helping them create a budget so they can take control of their own financial future.
Start the Conversation Mindfully
Having a frank conversation with a loved one about money can be hard. It can really pay off to enter the conversation mindfully.
If they don’t bring it up first, you’ll have to bring it up with them. You want to bring it up in such a way that your loved one doesn’t feel threatened or judged. It can be helpful to start with a story of your own about how you struggled with your finances and what you did about it.
You may have to bring it up a few times, so don’t give up! Let them know you’re there to help them with their budget and they’ll know to come to you when they’re ready.
Create a List of Monthly Expenses
When they are ready to work with you on a budget, you must start by creating a list of monthly expenses. That includes:
- Utility bills
- Student loans, if applicable
- Credit card bills
- Medical debt
- Monthly subscriptions
You must encourage your loved one to be honest. Eating out and entertainment count towards the monthly budget, and it isn’t helpful if they downplay how much they spend on extras every month.
Compare Expenses to Monthly Income
After the two of you have brainstormed every conceivable expense and tallied up how much they all cost, it’s time to compare that to their monthly income.
It is important to consider income after tax, as that’s the amount that your friend or family member actually has to spend on their monthly expenses. Chances are, this one comparison will be very enlightening.
Determine Next Steps
Now, the real work begins. Following the 50/20/30 rule can be helpful. Fixed costs, like rent, should make up 50 percent of your loved one’s income, 30 percent are variable costs, like entertainment and groceries, and 20 percent should go to savings.
How much are they spending in each category? Is there a way to shrink one category so more money can be used in another?
If they simply aren’t making enough money, no matter how you shake the numbers, they’ll have to start looking for another or a second job, but at least they won’t be in the dark about their finances anymore!
You don’t have to live down the street to help a friend or family member with their finances. Spend some time on the phone and follow these tips to help your loved one create a budget that will help them get back on track.