Handling the Financial Irresponsibility of Family Members

When you’ve devoted a lot of effort to fixing your own finances and putting yourself on a great financial track and you’ve spent a lot of time absorbing and thinking about good financial practices, the financial conversations you hear can sometimes be really frustrating.

You’ll hear people talking about their huge financial missteps as though they’re no big deal or even as though they’re a good thing. For example, maybe you’ll hear from a relative who is proud of the fact that they replace their new vehicle every three years with another new one when they barely make $40,000 a year.

That alone isn’t a big deal, but it’s often coupled with conversation about how they’re struggling financially and how the entire financial system is unfair. That same cousin who showed up in the brand new pickup truck that looks virtually identical to the brand new pickup truck they bought three years ago complains about how the whole system is rigged and that they’ll never retire, and then they’ll turn to you and expect agreement and reinforcement.

Even worse is the relative who takes you aside to give you a long sob story of financial misfortune, one that would have been mostly solved with an emergency fund, and then asks for a “loan” that you both know they’ll never pay back.

Those situations happen to me on occasion, and I used to find them incredibly frustrating and almost anger-inducing. Their financial mistakes were incredibly obvious and I wanted to simply say, “Can’t you see that you’re doing this financial damage to yourself?”

Over time, as I matured a little and heard many, many stories like this from readers, I came to realize something very important: most people do realize their own financial mistakes. That cousin knows how much those trucks are costing him. That other cousin knows that they’ve made some bad moves to wind up in a position where they’re swallowing their pride and basically begging for money. People are not unaware of their own financial missteps.

If people aren’t unaware of their missteps, what’s going on, then?

For starters, while understanding (at least some of) your mistakes can be pretty easy, actually correcting those mistakes is pretty hard. It requires a lot of behavioral changes. It requires a lot of self-denial. Most people won’t commit to those kinds of changes in their life unless it’s desperate.

At the same time, if you’re not making a ton of money, it’s very hard to get ahead financially because you just don’t have a lot to work with and there isn’t much room for error. You can make lots of good financial moves, but if you don’t have a lot of money to begin with, one or two missteps or one big unfortunate event can undo a lot of effort, and that contributes strongly to a sense of hopelessness.

Another factor to consider is that while many people might not like aspects of their life – like their retirement situation – they like other aspects of their life a lot and thus, on the balance, they prefer things as they are rather than making changes. I know a lot of people in this camp. While they might long to have more money or have a healthy retirement savings, when they look at their life on the whole and the changes they perceive that they would have to make to get on a different path, they don’t want to make those changes. Their life, as it is now, is better for them on the whole.

I’m sure that, in some aspects of your life, there’s something you’re unhappy with, that you’d like to correct, but you don’t do so because the balance that you have in your life right now is better than what it would take to correct that thing, so you table it. Many, many people do that with their finances.

Furthermore, people often want to blame forces outside of their control for the things that go wrong in their life. Undoubtedly, forces outside of our control can smash into our life like a meteor, but we made a lot of decisions leading up to those events and after those events. Did we prepare our life to be future-proof, or did we live in the moment? It takes some introspection to see this, but it’s a flavor of introspection that many people don’t want to take on. It doesn’t mean they’re bad, it just means that they want an easy explanation for their financial difficulties and unexpected events are an easy thing to point at.

When you consider those factors, it becomes clear that when you see someone else being financially irresponsible, it shouldn’t frustrate you; rather, it’s simply a different choice of priorities. It does not mean that your priorities are right and theirs are wrong, nor does it mean that their priorities are right and yours are wrong. Very likely, your priorities are right for the condition of your life and your own personal characteristics, and their priorities are right for the condition of their life and their characteristics.

So, let’s roll things back to that family event where your cousin who has that brand new vehicle is complaining about never being able to retire because the system is stacked against them. It might feel frustrating, particularly if you’ve worked hard to put yourself in a position where you can retire and you know from personal experience that it can be done with hard work, but what should you actually do?

Nothing. That’s what you should do.

Just sit there and listen to their story. It’s not your story. It’s their story. Just listen.

If you feel frustrated, just try to envision the world through their shoes for a while. That person probably has a lot of personal pride in that truck of theirs, which is why they’re always buying a new one. That other person probably feels overwhelmed by a series of unfortunate events in their life.

There is almost no case in which your interjections about financial responsibility are going to be welcome.

Instead, try to find a rapport or common ground with that person. Ask questions about their story. Compliment their truck and look it over with positive reactions to it.

There will come a time when you are telling your story (but probably not today), and that’s the point where you can slip in some financial wisdom. Today, listen to their story and use that opportunity to build a stronger relationship.

What if you’re being asked for money in some way? If the person is asking you for money, then you should absolutely feel free to say “no.” There should never be an obligation to just fork over money upon request, no matter what the relationship and no matter what the situation. Just say “no.”

Being in a situation where you’ve loaned money to a relative or a close friend creates a lender-borrower relationship, and no one on earth has warm and fuzzy feelings for their lender. They might be appreciative of the loan, but they’ll never feel joyous about repaying it, and that means some degree of negative feeling from them is going to be levied toward you.

Rather, look for other ways to help. Offer to help them find work or to polish their resume. Offer to look over their business plan. Offer to give them a ride to work for the next few weeks until their car is fixed.

If you absolutely feel as though you should help them directly, then make it a fully no-strings-attached gift. Just put the money in their hand and tell them that it’s theirs.

If you absolutely feel you must give someone some advice, get them into a one-on-one situation and tell them that you have some experience with getting one’s financial house in better shape and you’d love to give them some suggestions, if they want. Leave the ball in their court – don’t thrust unsolicited financial advice at them as it will often be resented.

Aside from those things, the best thing you can do is stand back and try to gain an appreciation of their story as a distinct journey through life, not just an extension of your own story. Many, many family conflicts occur when you try to substitute what you value into someone else’s story that’s centered around what they value. You don’t know what’s best for them, so don’t fall into that trap. There’s very little benefit and a whole lot of pain down that path.

Good luck!

Trent Hamm

Founder of The Simple Dollar

Trent Hamm founded The Simple Dollar in 2006 after developing innovative financial strategies to get out of debt. Since then, he’s written three books (published by Simon & Schuster and Financial Times Press), contributed to Business Insider, US News & World Report, Yahoo Finance, and Lifehacker, and been featured in The New York Times, TIME, Forbes, The Guardian, and elsewhere.