It is tough to see your parents make one poor decision after another when it comes to their finances. It can be stressful to you also to find out that your parents will not be having a comfortable retirement due to debt.
You are not alone in worrying about your parents’ retirement. Many children are looking for ways to help their parents get out of their financial troubles. They have concerns about their parents’ quality of life.
Many adults own limited assets they can depend on during their retirement. Less than half own their own house. If your parents are within this demographic, then chances are they are drowning in debt as well.
You should learn from the mistakes of your parents and become more stable financially yourself. It is very important to talk to them about their situation as soon as you can. They might not accept your help at first, but you must try your best to convince them to so that they can get clear their financial problems as soon as possible.
There is the possibility that your parents don’t accept your help no matter how hard you try, however. You can only help people who are willing to accept your help and can’t force your parents to manage their finances if they don’t want to or if they can’t.
If your parents have already accepted the reality of their situation, though, then they are more likely to accept your help. The following are some methods you can use to assist your parents with paying off their debt.
Be a Good Example
The first thing you need to do is to be a role model for your parents. They were your role models growing up, but now, it should be the other way around. You should be open with your parents about your finances and discuss your financial status with them. They will probably be more than happy to give their opinions on your decisions.
You should give subtle hints on how budgeting has worked for you and that they should try to create one for themselves. It might take some time, but they will soon see how budgeting can benefit their own situation.
Create a Debt Payoff Plan
Before you can make a debt payoff strategy, you should first look into your parents’ financial status. You should know the terms and conditions of their cash loans before attempting anything. The best way to do this is by going through their financial reports and listing all their debts.
Experts recommend creating a spreadsheet to make it easier to sort through the complicated debt information. The data you need to get includes lenders, remaining balances, minimum monthly payments, rates of interest, and due dates.
You can easily sort and arrange the loans by category with the spreadsheet. Doing this will make it easier for you to determine which one needs to be paid off first. By going through the statements, you will find information that can help reduce the remaining loan amounts. That’s one reason you should take the time to look at the statements both closely and thoroughly.
The information you gathered can be overwhelming, though. You should remember, however, why you are doing it and come up with a plan to get your parents out of debt as soon as both you and they can. One of the best ways to repay loans fast is through the “avalanche method,” which involves paying off the one with the highest interest rate first. You can also opt for the “snowball method”; that plan means they would pay off the smallest loans first.
No matter which method your parents choose to use, they can do it more easily with the help of the spreadsheet. This will allow them to know how much they need to pay, and it will motivate them to get rid of all their debts.
If the interest rates are too high, you can choose to consolidate them into one loan with a lower rate. You can also ask lenders if they would be willing to refinance the loans. If your parents have always made timely payments, lenders will generally provide some assistance in form of lower interest rates.
Some lenders also offer balance transfers with a zero-percentage rate. Before taking this route, just make sure that your parents can repay their loans completely before the promotion period expires. You can also show them how to roll the debt over to another promo if their deal expires before they were able to pay off their loans completely.
Reduce Overhead Costs
More often than not, spending is the root cause, not a secondary one, of debt problems. You should make your parents become more aware that they need to change the way they use their credit cards. The earlier they accept the fact that they shouldn’t rely on credit, the better their situation will be.
Just like you did with the list of their financial burdens, you should help your parents make a list of their monthly expenses. Tracking their spending will definitely make your parents become more aware of where their money goes —and how much goes where.
By knowing how much they spend monthly, they will find out how they can reduce their spending. Then, you and they should create a budget based on the information. It’s vitally important to make sure that they stick to the budget and not spend more than they earn.
Helping your loved ones get out of debt is not always that simple, though, especially if they don’t want to, or will not, accept your help. You should be understanding and patient with them in the hopes that they change their mind when they realize the advantages you are making available to them. It is important that you not force them to accept your help and just wait until they are ready.