You can do a lot to help your friend in debt by not doing any of this
There is no virtue in being indebted but pointing it out won’t solve the problem, here's what will.
You are planning to celebrate your parents’ 50th wedding anniversary. As the family comes together, ideas flow and before you know it, the event becomes bigger and bigger. You notice your brother becoming irritable as days pass, and protesting new expenses. The other siblings complain that the brother is being stingy. Pause. Could he be in debt?
People do not wear their indebtedness on their sleeve. Families actively try to hide the fact that they have run up debts they cannot pay. They feel remorseful and ashamed and wish their problem would go away. While they struggle with debt, they try their best to put up a brave face and behave normally. How can you find out if a relative or friend needs help? What should you do or not do?
You don’t have to pry into someone’s personal life or draw wrong conclusions. But as a caring friend you can look out for telltale signs. Panicking when something needs pooling of money is one of the signs. When you go out to eat, or order more to drink, or plan a foreign holiday, or buy an expensive gift, you will find that your friend in debt gets upset, or argues for keeping the spending low, or finds excuses to not participate.
Your friend could be quiet and non-participative in discussions about money. When someone speaks about the new property they are buying, or about an investment they plan to make, or about the plans for their child, or their new car, you will find your indebted friend completely disinterested in the conversation. They do not wish to speak about large spends, which might have been the reason they are in debt.
You may find that they do not pick up the phone, or open the door when the bell rings, quickly. You may see unopened bills and mails in their homes. You may find that they are not too willing to meet new people. Repeated calls for collecting dues, mails reminding them about credit card balances, and fears about collection agents make them edgy about such things.
Some people in debt exhibit denial. You will find them buying stuff, indulging in conspicuous consumption, and using their shopping sprees as psychological escapes. Some others fall into depression, withdrawing completely and struggling to cope with the mountain of debt. It is only when you keenly observe and see the patterns over time, that you can tell.
What could you do? The primary need of an indebted person is a sounding board, someone who won’t judge, but can be trusted. They know that they have to get themselves out of the pit they have fallen into. They worry about the steps to take and the tough path to recovery. Thinking aloud, discussing their choices, and getting the confidence to take action, are all helped with a supportive ear. You can be that person, provided you don’t tell a soul what you know.
Typically, indebtedness creates tremendous stress in the family. Couples blame one another, refuse to brush off regret about bad decisions, and tempers flare. Many relationships have ended when credit card, home loan and car loan EMIs pile up beyond the repaying capabilities of the household. The spouse may thus become a point of stress, rather than a source of strength and encouragement to solve the problem. Close friends and relatives can play a constructive role.
What should you not do? Do not discuss the events that led to the debt, and tell them that they should not have overspent, changed the car, or bought the house. They already know why they are in a debt trap, and they already regret those decisions. They are also ashamed about the spending. Instead, let them know that the debt trap they face is a more common problem than they think. They might think they are alone, but knowing that others have dealt with the issue will give them confidence.
Do not assume that giving them money will solve the problem. It can make it worse. They will feel an increased burden of debt. They will fail to take the corrective steps they should. They will shift responsibility to you. You will risk endangering the relationship, because as the lender you will now resent their decisions about how the money you gave has been used. As Shakespeare famously said, when you lend to a friend, you lose both the money and the friend.
When your friend begins to speak about their problem, do not change the topic. They need to be sure they have your attention, and however uncomfortable it is, hear them out. Ask brief questions that nudge the conversation ahead, but ensure that your friend is able to think aloud. Inviting the friend home when you are alone, to an atmosphere where there is no pressure of the food bill, or the worry that others will know, will help them open up.
Do not offer solutions that worked for others or give authoritative advice if you are not sure it works. Your friend should know his choices in a manner that helps them decide. Seeking more information, approaching professional agencies that help with indebtedness, contacting lenders for help with reworking the debt, are all choices your friend should seek. Do not play the role of a problem solver if you aren’t professionally equipped to do so.
Do not behave as if you understand your friend’s situation. You probably don’t if you have not been in a debt trap yourself. People in trouble can sense pity, sympathy and empty empathy, and these responses make them even more depressed. Even if they like such attention, you should know that these responses do not solve the problem they have. Let them know you are sorry for them, but prod them to think about how they plan to get out of debt. Encourage them to consider their choices, even if it is the painful route of tearing up their credit cards, and repaying their loans in small installments.
Do not tell your friend that they should now learn their lessons and spend carefully. No one needs righteous advice, even if they are in deep trouble. There is no virtue in being indebted, but pointing it out won’t solve the problem.
(The author is chairperson, Centre for Investment Education and Learning.)