Guiding Mom Through the Mess

Ben has divorced parents. His mom has $126,000 in debt. She makes $2,700 a month. He isn't sure how to help guide her through this mess. What would Dave suggest?

QUESTION: Ben in Atlanta has divorced parents. He’s 19, and his mom recently came to him with financial problems. She has $126,000 in debt, which includes a mortgage, a business loan, a car loan and credit cards. She makes $2,700 a month. He isn’t sure how to help guide her through this mess. What would Dave suggest?

ANSWER: What she will have to do is prioritize these debts that she’s paying on and take care of her basic necessities first and then list the other debts by order of importance. Obviously, paying her house payment is important. The debt on the former business is less important and credit cards are even less important.

We do want to get to them; they are all important. But what’s most important is the question you ask yourself. Then you see what you can do to walk through this and begin to tear into it.

She’s never gotten her career on track since the divorce—that’s her biggest problem. Obviously if we can get her income up, it solves a lot of these problems. I want her to have a five-year plan to be earning twice what she’s earning. That’s probably not going to involve working at Home Depot like she’s doing unless she moves into management or something.

You said she’s thinking about taking out a $20,000 loan through her brother, your uncle. That doesn’t pay off anything. It just changes who the loan is with. It’s not her only option. She’s going to take that loan out and she’s not going to pay it. Then she’ll have a whole different kind of stress—with family. We’ve got to get her income up and get her on a plan before she has to make any of those decisions.