How to tell a family member their spending is out control

As a financial counsellor I often receive calls from worried family members expressing concern about a loved one or friend in relation to their money-handling skills, mounting debt on a credit card or multiple cards.

Or there are transactions on their bank statements which could indicate a hidden problem.

In the 1970s Australians commenced a love affair with credit thanks to our banks introducing the Bankcard.

Today credit is very easy to obtain, with a vast number of credit providers, from mainstream to the dodgy lenders that charge up to 48% interest.

This is a financial trap, waiting to ensnare people in loans which they will often have difficulty resolving or getting under control.

Financial counsellors report clients with two, three, four or more credit cards, all with different organisations, and maxed out, plus a mortgage and a personal loan. In spite of earning good money they can't afford to make all the payments each month!

People don't like to discuss it and admit that they are struggling financially; it indicates failure and embarrassment.

So it's important to have that hard conversation about personal finances, as the longer you leave this issue the deeper the debt will become and more difficult it will be to resolve.

People with debts often avoid opening letters (throwing them in the bin unopened) or don't answer their phone if they know it is a creditor. It's all too hard, and much easier to stick their head in the sand about their predicament.

Some tips on dealing with those you care about in relation to debt or difficult financial circumstances:

- Choose a setting that is relaxed and non-confrontational with few distractions.

- Be sure to start that difficult conversation without being judgmental. Be unshockable about the financial circumstances, encouraging conversation.

- Raise your concerns or observations as to how the person may be acting in a caring, non-threatening matter. Maybe they are always saying, "I haven't got any money!" but you are aware that payday was yesterday.

- Thank them for being open and honest and trusting you.

- Offer to support them work through their financial problems.

- Suggest financial counselling. Your loved one may be more comfortable speaking to a qualified, independent counsellor.

- Be on the lookout for signs that financial stress may be the result of a gambling or substance problem. Addiction counselling may also be needed.

- Beware of companies that want to charge for a service to fix debts.

A free, independent financial counsellor can be found by calling the National Debt Helpline (1800 007 007), which is staffed by financial .

A financial counsellor can only talk to the person who owes the debt, ie their name is on the account. However, a friend or relative can attend to support a person as long as the debtor is happy with their attendance.

State and federal governments fund the employment of financial counsellors (holding the qualification of a diploma in community services/financial counselling) who work within major charities and smaller community organisations.

Also the MoneySmart website has lots of tips for handling debts.

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