Our Daughter is Deep in Debt

Hi Scott,

Can you advise my 24-year-old daughter on how to face the financial mess she has created? She lost her job in May and has lived off credit cards since then; she now has debts of $27,000. After a period of estrangement from us (she simply would not talk to us -- we think she was ashamed), she has finally told us about her problem. We already knew, as we are being hassled by credit collectors looking for her. She needs our support to get on track, but where to start?

Jan

Hi Jan,

Without a job, and with a shot credit file, the easiest short-term solution will be for her to go bankrupt.

But it won’t do anything for her self-esteem. To reconcile both her self-worth and her net worth, she needs to take responsibility for her actions and dig her way out of this mess.

She needs to have a win -- and you can help. So, sit down together and write out all her outstanding debts on a piece of paper so she can get the full picture.

Obviously, she needs to get a job (preferably two) and begin meeting the minimum repayments on all these debts. Then she should ‘domino’ her debts from smallest to largest -- focusing all her efforts on knocking out the smallest debt, just like a domino. Celebrate with her each time she pays off even one debt.

Give her all the love and support you can muster, but don’t bail her out -- let her find her own way back.

Scott