You’re out to dinner with a friend, and the bill comes. You get ready to pony up your half, and your friend sheepishly asks, “Can I pay you back later?” Not wanting to seem like you don’t trust your friend, you agree.
Later never comes. You go out for drinks another day, and it happens again. Somehow your friend is always able to go out, but never able to pay.
Sound familiar? Here’s the problem: every time you offer to foot the bill, you’re acting as a financial enabler.
Any of us can be a financial enabler, whether we realize it or not. Parents to kids (and vice versa), friends to friends, even spouses. Read on to find out if you’re enabling, why it’s more damaging than helpful to everyone involved, and what you can do about it now.
What does it mean to be a financial enabler?
Everyone runs into money trouble sometimes. And lending money during those times doesn’t automatically make you a financial enabler.
But when that lending becomes more of a routine – or if the other person doesn’t stop spending money they can’t afford – you might have a more serious problem on your hands.
Certified financial planner Kaya Ladejobi explains how enabling can happen.
“The areas that I typically see clients enabling others is by bailing out friends and family members who make bad financial decisions,” Ladejobi says. “The ones being bailed out never seem to learn their lesson since they didn’t suffer the consequences of bad decisions in the first place.”
You know that friend who borrows from you every time you go out? If you allow it, they never have to learn to say no to plans that are out of their budget – or to find a way to stop spending money and still be social. As much as we want to help, enabling only prolongs the problem.
How to provide financial support without enabling
1. Listen to your gut
Founder of Empyrion Wealth Management, Kimberly Foss, discusses this issue on the Watching Your Wealth podcast. One of the first pieces of advice she offers is to trust your gut.
No one is immune to money mistakes, not even the most responsible person you know. If you believe something is off, consider that before you act.
And if you want to make sure your money is going to the right place, follow the advice of psychologist Dr. Helen Odessky. Direct payments to creditors or landlords rather than to the person borrowing from you.
If the other party doesn’t like the sound of that arrangement, that could be a red flag that they’re not telling the truth about why they need the money.
2. Structure your support
Foss and Odessky both speak to the importance of structuring your support. In Watching Your Wealth, Foss suggests offering help for specific timelines. Dr. Odessky echoes that sentiment.
“Get clear on how long you will be providing assistance,” Odessky explains. “For example, saying, ‘I can help for six months by contributing X amount of dollars’ will create the kind of boundaries both parties need to feel safe with the arrangement.”
3. Manage expectations
It’s important to manage expectations throughout the process. Even if you agree to an arrangement upfront, the other person might think they can bend that a little later. Make it abundantly clear that this won’t be an option – and then stay firm in your resolve if the question comes up.
According to Dr. Odessky, this isn’t just something that protects you. It also helps create an environment that is empowering rather than enabling.
4. Teach them to fish
If you want your financial support to go the extra mile, Foss suggests not just lending money but also “teaching them to fish” – helping them understand how to help themselves. Ways to do this include:
- Offering to help create a budget.
- Brainstorming ways to increase income.
- Discussing different debt payoff techniques.
If you’re a parent helping your child (even your adult child), then doing any of the above can be a great way to help them mature financially.
And if their financial triggers are the same as yours, sharing your story and the things you learned about how to stop acting on those triggers can be tremendously helpful and empowering.
In this case, showing some vulnerability could help you and the other person connect on a deeper level. This could lead to some honest and productive money conversations.
5. Take care of yourself
Sinking your finances to help someone else doesn’t do you or the other person any good. You’ll build up resentment – and when both of you can’t pay your bills, what can you do then?
This step may sound fluffy, but it’s serious. Never give financial support unless you can comfortably afford to lose the money you’re lending. If you’re not able to operate on the assumption that you’ll never see those dollars again, then you’re not in a position to help.
And even if you can afford it, there might be other ways you can help. Odessky explains:
Ask yourself if the financial arrangement will cause you to resent the person. If the answer is yes, perhaps you can help in another way. For example, you could help them develop a resume while they look for a job and do mock interviews with honest feedback. You could even offer free babysitting while they’re at work or help prepare meals.
Financial support can come in a variety of ways. You might even find that offering your time or skills is even more helpful in the long run.
What to do if you need help
Let’s say someone’s financially enabling you. Ladejobi offers some tips to help you move forward without being enabled:
- Be the social organizer so you can see your family and friends in a more budget-friendly manner.
- Share your situation and goals with your loved ones, so they understand what you’re dealing with.
- Ask for an accountability partner so you can learn and solidify money habits that lead you to financial freedom.
It might seem easier to ask for help footing the bill than telling the truth about your financial woes. But being open and honest with your loved ones creates an environment in which you can release any shame you might be feeling. They, in turn, can give you support and ideas to make it better.
Remember, no one is immune to financial mistakes. Chances are, opening up will lead to a slew of money stories you didn’t know your loved ones encountered in the past. And that could lead to just what you needed to get through this – solidarity, community, and actionable advice to move forward with.
Interested in refinancing student loans?Here are the top 6 lenders of 2019!
|Lender||Variable APR||Eligible Degrees|
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.97% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at email@example.com, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.57% – 6.97%1||Undergrad & Graduate|
|2.47% – 6.99%3||Undergrad & Graduate|
|2.68% – 8.77%4||Undergrad & Graduate|
|3.24% – 6.66%2||Undergrad & Graduate|
|2.61% – 7.35%5||Undergrad & Graduate|
|3.01% – 9.75%6||Undergrad & Graduate|