Is it even worth trying to give financial advice? UPDATE #28, #42

[Lynn2000]

"On the other hand, I'd be a horrible friend if I were able to help my friend and her DH figure out their way out of this financial pit and I refused to tell them how." I don't think this is true at all. Recovering financial stability from the kind of hole they're in is a complex process that takes a lot of time, effort, and personal discipline. It's not like her cake keeps coming out badly and you're hiding the fact that her baking soda is stale--there's no one magic thing you can tell her that would solve her problems. There is a ton of financial advice out there already and it doesn't sound like she's really interested in following any of it, so it's hard for me to imagine she would suddenly change her mind just because you offered to help.

That said, if you really want to get involved, I think it would be most polite to separate your financial motivation from your friendship motivation. Tell her frankly that her financial situation makes you worry about the safety of your joint investment. She needs to put $X in some kind of untouchable account that will ensure her half of the investment is paid for Y amount of time (or whatever); and after that is done, if she wants, you will happily give her financial advice and/or take her to a financial planner, as a friend. If she's not interested in securing her half of the joint investment, you've already looked into it and will be pulling out using ABC steps on D timeline.

If she chooses the first option, you will rest easy knowing that your investment is secure, and you will be able to give her financial advice truly as a concerned friend. If you just give her financial advice, allegedly as "just" a friend but always with the idea in the back of your mind that your own money could be at stake, I think that's a bit shady, even if you mean well. Take your own stake out of it first. If you're really going to try and help her with her finances you will need to have many frank, perhaps uncomfortable conversations with her, so best to start here.

Though personally, being non-confrontational and not savvy about financial matters, I would just be looking for a way to disentangle myself from her, and not get involved in giving advice.

[rashea]

Does she have EAP at work? I would suggest she go there for financial counseling. Then it's not coming from a friend, but she'll get told in no uncertain terms that she needs to straighten things out.

[EMuir]

I would recommend to her that it would be a great time to buy out your half of the boat.  Then take the money and rejoice that you're no longer tangled up with them.

[DavidH]

If she wants genuine advice, then paying down her debt, starting with the debt with the highest interest rate is the way to go.  It seems so obvious to me, that I assume most people can figure that part out, particularly since with a few minutes on line, you can get advice if it's really needed.  I think what she wants is validation around spending it frivolously, which I wouldn't be willing to give her. 

The logic of I won't pay down debt since my husband might just rack up more debt so I'll spend it frivolously now just doesn't make any sense to me. 

If she asks for advice, I'd ask her are you really sure you want my advice, and then if she confirmed that she wanted it, I'd give her genuine advice.  Otherwise, I'd just stay out of it.  Owning a joint asset together doesn't give you the right to offer unsolicited financial advice, particularly if they have paid their obligations just far.  On the other other hand, when asked, you don't have to just say what they want to hear.

[Slartibartfast]

OP here.

There is a natural end date to our join financial entanglement - 12-18 months down the road - but I like the idea of seeing if we can hurry that along.  As much as DH and I love the "boat," I hate the idea that my friend is stuck paying the same "not pocket change" we are for it whether she wants to or not.  I didn't know the extent of their debt before our conversation yesterday - and I'd hate to think she's sticking with the boat because she feels obligated to me to continue, even though it's clearly spending money they don't have.  (Yes, I realize it's their choice what to spend their money on, but I still don't like thinking it's indirectly spent on me.  I'd rather she spend it on something else completely frivolous if she wants to, but something she has 100% control over.)

My friend and her DH also do have a weird system with money in their house.  They both have their own accounts, plus a joint account, and they do both work so they each have income - but they're constantly trying to find ways to sneak charges past the other one.  I long ago told my friend point-blank that I wasn't going to lie to her DH about going to lunch with her.  (We'd trade off who pays each time, and sometimes she'd put it on their joint card and say "Don't tell DH, teeheehee!")  Her DH is already making plans for how he's going to spend a chunk of her $50K - on an interest of his that she has no interest in or control over - but I'm definitely not touching that one with a ten-foot pole!

I'm going to look into more information about credit counseling and financial advisors around here and see what I can come up with.  I really do appreciate the advice and the perspective!

ETA: Okay, I've just had a few minutes to look, but it seems like what's traditionally marketed as "consumer credit counseling" is basically those debt-packaging services which can help but trash your credit.  I don't think that's what my friend and her DH needs - they are making payments on everything, they're just in over their heads.  Is there a service out there which is basically financial advice focused on debt instead of investments, and if so, what's it called?  Not surprisingly, the Googles are full of financial companies trying to spam every possible money-based keyword so it's hard to sort out the actual help 

[Peregrine]

I use Edward Jones for my financial planning.  While my family doesn't have a hug chunk of investments we have small retirement accounts going.  Our consultant is certainly interested in our long term financial health moreso than just what I can invest for the year.  You might check out something like that.

[PastryGoddess]

I would recommend The National Foundation for Credit Counseling www.nfcc.org AKA The Consumer Credit Counseling Service (CCCS)

[Amara]

Ah, PastryGoddess just provided the link I was going to. That is the correct organization. They provide excellent service, though from your posts I would guess it unlikely it will work in your friend's case because they require that all credit cards be turned over to them for destruction and the credit lines shut down. But they do work with the creditors and the people's budgets to get them out of debt. They also require you attend classes. It takes a commitment, not a particularly pleasant one, but it works. If they are willing they can be helped.

Another organization that no one has addressed and that seems particularly appropriate here is Debtors Anonymous, the Twelve-Step organization that is to debtors what AA is to alcoholics ( http://www.debtorsanonymous.org/ ). Again, it requires commitment but it helps those who want it.

I also second the suggestions that you get out of this joint venture as soon as you can.

ETA: First, this $50,000 is going to be to a compulsive debtor, which it sounds like they both are, what the keys to a liquor store would be to an alcoholic. Second, while I may be wrong wouldn't taxes be due on the money, meaning they will owe estimated taxes. If this is the case and they don't make their estimated payment, they will be "spending" money they don't have the right to. If that happens, they will make their situation dangerously worse by messing with the IRS.

[Winterlight]

I would focus on your own financial situation and do what you can to get out of the joint venture. I don't get the sense any financial advice to your friend will be productive.

This. It sounds like they're both messing up the finances here, not just him.

[Kiara]

Seconding Amara and PastryGoddess.  I went through CCCS and got myself out of $40,000 worth of debt.  Took me 5 years.  They worked with the credit cards to stop all the calls and helped me get a budget set up.  I have no idea if they helped my credit or not - mine was pretty much trashed when I started, and I was able to buy a house ten years later, so it must have helped somehow.   

Michelle Singletary is also a good financial author, although be forewarned that she can be pretty religious.  I don't think it's to the point of being overbearing, but some people do.

[PastryGoddess]

For those of you watching the thread, beware of other organizations that have a "CCS" in their name/acronym.  A lot of them are piggy backing off of the CCCS name and because they look similar, people are often taken in by unscrupulous organizations.

[sweetonsno]

I second the financial advisor advice. If you think she'd be open to it, I would also suggest taking some of it to spend on "fun" and putting the majority into a retirement fund or some other sort of investment account that she can't touch for X number of years.

[Kaypeep]

I'd advise her friend to contact one or two credit cards about paying off the debt with a lump sum.  Most of what they owe is probably interest.  Some banks are willing to write off almost half of what you owe if you pay off an agreed upon balance.  For example, if  friend owes $30K on a card, the bank may be willing to accept $15K in a lump sum, and they will write off the other $15.  Then you can close the card.

My boyfriend did this and it helped him a lot.  It did not have a significant impact on his credit report, either.  The only caveat was that he had to pay tax on the amount written off, because the IRS considered it as income.  So friend would need another small sum to pay the tax bill on the write off amount.

[Slartibartfast]

SURPRISINGLY FAST UPDATE

(Although I just now realized I put this in the "Children" folder - could a mod please move it to a more appropriate location?)

So I actually had lunch with my friend today.  Based on the advice of all you wonderful eHellions, I did a little lookup first and came across a local nonprofit that does financial counseling - budgeting, financial management, debt, etc.  It looks like they do debt consolidation also, which they charge for, but their classes and advisors are free.  I took down some information and gave her their number/website/info.  I told her I knew it was none of my business what she did with her money but it scared the heck out of me that she could inherit $50K and still not have enough to get out of debt.  (I didn't mention anything about the boat - that's for another time.)  She said she was going to look into it and had been thinking about figuring out a budget for a while now.  I didn't say this, but I'm hoping they can give her some advice about her DH's habits as well - she can't be the only person in town legally tied to a partner who doesn't care to bother being financially logical.  I figure people must go through this with divorces all the time.

Anyway, it's in her court now, and if she chooses to waste her money then at least I tried to point her in a better direction.  I really do like her (and her DH) as friends, so I am hoping that if they can shore up their finances they'm shore up other areas of their life as well.

[bloo]

You are a very caring friend. I hope it works out for them! Thanks for the update.