If you do not have financial responsibility for your loved ones, you will likely manage with what you have smoothly, but otherwise, you may feel a pinch in your pocket. While the cost of living is rapidly going up, it is becoming more challenging to get by.
If you are to support your elderly parents, you will have to take into account your financial condition carefully. Now your budget will not just cater to your needs but to the needs of your loved ones. If taking care of their needs forces you to take on debt to make ends meet, you will not be able to support them very long; therefore, a sustainable approach is necessary.
How to manage finances when you are to support loved ones
Financial experts have suggested some tips to get by when you have the responsibility of your loved ones as well.
1. Start a budget
You cannot wash your hands of your elderly parents or in-laws when they need you. They may need your help for either paying off debts or paying off medical bills.
If you have been supporting them financially due to any reason, you should prepare a budget because this is your additional expense. Having a budget will help you stick to your retirement goals while helping your loved ones financially.
2. Discuss problems early
Although you can show generosity by helping your loved ones, it is not always the case that your budget allows for it. After stowing away for your retirement and emergency expenses, you may have no surplus in your account.
To not hurt them, you may put off stashing for retirement, but this may not last too long. Therefore, it is suggested that you talk to them sooner rather than later if you suspect that they are suffering from financial problems.
Nip it into the bud so you do not have to go through complications down the line. Experts have revealed that people often wait to tell about their problems until they are in a dire state. In fact, they hesitate to talk about money problems.
Therefore, schedule a time to talk to them about their problems. They may flinch from sharing their problems with you, but you should be asked about problems you have noticed diplomatically. Tell them if they hide it, it will be all but impossible to deal with them. You need to be a patient listener. Before you start ranting at them, try to walk a mile in their shoes.
They may have their own reasons for being stuck in the mud, so try to understand their situation from their point of view. If you have found that they are partly responsible for being in this mess, you do not need to get it in their neck.
You should rather politely admonish them. You should let them know how some kind of action can throw them in at the deep end. If you want them to open up to discuss topics that they feel ashamed of, you will have to pursue such discussions more frequently.
For instance, if they are planning to take on debt, you should try to ask them the reason why they need it. If it is a small amount of money, you should not mind helping them. However, if they need a large amount of money, you should examine their repaying capacity so they do not borrow more than their repaying capacity.
They may feel like you are sticking your snoot into their financial affairs. You do not need to foist your opinion on them. If they are reluctant to share it with you, try to avoid pressuring them.
However, you should tell them the consequences of taking on too much debt. If you come to know that they need to take out personal loans in the UK, check if they can repay them. If you suspect it, try to help them reduce their loan amount.
3. Build your emergency fund
As now you have the responsibility of your loved ones, you will have to put in extra effort to build an emergency cushion. Sit down and look at your monthly expenses and see how you can increase your emergency fund.
A rule of thumb says that you should have worth at least six-month of your living expenses, but it must be worth nine-month as you have a burden on your loved ones’ needs. Start saving money as soon as possible.
There are certain expenses you think you do not need to stash away at this moment, but when a problem arises, you regret it. Elderly parents are at risk of catching serious illnesses. Even if they have medical insurance, this may not be enough to cover their medical expenses.
Therefore, you will need a large emergency cushion that does not just help cover your unforeseen expenses but also the expenses of your loved ones. You cannot control all events, so you do not need it panic if your budget refuses to back you.
It ultimately depends on your monthly income. Despite slashing your expenses, you may have a problem meeting all expenses. Concentrate on doing what you can do as things take their course.
4. Set clear boundaries
Before you decide to give a helping hand to your loved ones, you need to decide how much you are ready to give up. It is vital to bear in mind that you have your own limitations. You cannot act beyond your boundaries.
Even though you can manage to have some money left for your loved ones, you should give it a second thought. Your boundaries can change at any time. For instance, you may have a baby, or you may come across unforeseen expenses.
You may need to seek loans from direct lenders during financial emergencies. You should carefully check your financial condition before helping out others. Do not fight shy about talking about it with your loved ones. Both the parties should agree on the plan you have come up with. In order to help your loved ones, you can neglect your future needs. Never do it.
It is intrinsic to prioritise your savings goals. There is no point in giving a helping hand if you are to compromise your own needs. Experts warn people who put their finances on the back burner just in order to help their loved ones. There is nothing wrong with saying no when you cannot help your loved ones.
The bottom line
It is quite challenging to get by when you have the responsibility to your loved ones. Try to create a budget to see how much it has scope for meeting their expenses. You may have to slash your expenses to have some room for their expenses in your budget.
However, before that, you will have to see how much you can actually afford. It does not make sense to help them when you are unable to meet your own expenses. This is why you both should agree on the plan you have. If you can easily meet their expenses, you should try to check your future needs carefully. To avoid problems being worse, you should talk to your loved ones and try to nip them into the bud.
