How To How to Manage Finances While Supporting Loved Ones Read the Article Open Share Drawer Share this:Click to share on Twitter (Opens in new window)Click to share on Facebook (Opens in new window)Click to share on Tumblr (Opens in new window)Click to share on Pinterest (Opens in new window)Click to share on LinkedIn (Opens in new window) Written by Zina Kumok Published Mar 5, 2021 - [Updated Mar 29, 2022] 5 min read Advertising Disclosure The views expressed on this blog are those of the bloggers, and not necessarily those of Intuit. Third-party blogger may have received compensation for their time and services. Click here to read full disclosure on third-party bloggers. This blog does not provide legal, financial, accounting or tax advice. The content on this blog is "as is" and carries no warranties. Intuit does not warrant or guarantee the accuracy, reliability, and completeness of the content on this blog. After 20 days, comments are closed on posts. Intuit may, but has no obligation to, monitor comments. Comments that include profanity or abusive language will not be posted. Click here to read full Terms of Service. Have you ever wondered why airline flight attendants instruct you to put on your own oxygen mask before assisting others? It might seem selfish to put your own needs before the needs of your loved ones, but this rule is actually part of a broader philosophy: in order to help someone else, you need to be on firm footing yourself. This is especially true when helping someone financially. If supporting your elderly parents forces you to take on debt just to make ends meet, you won’t be able to support them for very long. A careful, sustainable approach is the only way to make sure everyone’s well-being is accounted for. That’s why we’ve put together some simple, practical strategies from financial experts who have been in this situation before. Start a Budget Anika Jindal of What Anika Says has been sending money to her husband’s parents for the past five years to help them pay off some debt from their struggling garment business. She and her husband plan to keep helping them until the debt is paid off, hopefully at the end of this year. Jindal said having a budget has made it possible for the couple to stick to their own retirement goals and help her in-laws at the same time. Before they started sending money to his parents, their approach to budgeting was decidedly more lax. “But once we decided we are going all-in to help them, we started preparing a monthly budget to make sure we are spending our money wisely,” Jindal said. Discuss Problems Early If you suspect that a loved one is having financial problems you might be able to help with, ask them about it sooner rather than later. Financial planner R.J. Weiss of The Ways to Wealth said he sees many people wait until they’re in dire straits before mentioning the severity of their situation. At that point, it can be incredibly difficult to help them. Set up a time to talk and calmly ask about any problems you’ve noticed. Avoid being judgemental or critical, because that will usually lead to the other person becoming defensive. You want them to open up, not avoid the topic because they feel ashamed. Build Your Emergency Fund When taking care of a loved one, it becomes even more important to have an emergency fund in place because you’re responsible for someone besides yourself. Take some time to re-evaluate your fixed expenses and determine if you need to increase your emergency fund. You may need to save 6 to 12 month’s worth of expenses instead of just the standard three-month recommendation. Caregivers often have to take unpaid time off work, so you should have enough to pay the bills during that time. Evaluate Insurance Policies If you’re financially responsible for another person, you may need to increase your own life insurance policy to protect them if you pass away first. Figure out the annual cost of care for that person and multiply this number by how many years they likely have left. If you already have a term life policy, you can contact the current provider and ask how to increase the total payout. You should also consider buying a disability insurance policy in case you can no longer work, but still have to care for your loved one. Start Saving for it Now Financial educator Athena Lent of Money Smart Latina said she always knew she’d end up taking care of her dad at some point. But when he had a stroke last year, she realized that was going to happen sooner than she expected. While he hasn’t had to move in with her yet, Lent has started preparing for the inevitable. She automatically saves a certain amount in a separate savings account every month to cover his future expenses. “If you even think you might be in my shoes in the future, start saving and figuring it out now,” she said. To make up how much she needs to save, Lent has worked on increasing income from her side hustle. Having another stream of income means she doesn’t have to worry about pinching pennies to make it all work. Set Clear Boundaries Before agreeing to help a relative, you should think about your own limits and how much you are willing to give up. Remember that your boundaries may change over time, like if you have a child or experience your own financial hardship. Both parties should be willing to revisit the arrangement in the future. If your loved one moves in with you, you should also clearly agree on who will be responsible for which expenses. “By having boundaries, you can say things to yourself like, ‘I’m willing to decrease the amount of saving for retirement for six months, but I’m unwilling to go beyond a point where I’m not able to get the full match on my 401(k),'” Weiss said. Don’t Neglect Your Own Future When supporting a loved one, try to remember the saying, “Don’t set yourself on fire to keep others warm.” As tempting as it may be to put your finances on the back burner, it’s important to still prioritize your own major goals. Remember, you won’t be able to borrow money for your own retirement. Get a Tax Break If you provide the majority of financial assistance for a loved one, you may be able to claim them as a dependent on your taxes. This can also make you eligible for a special tax credit worth up to $500. This will only come into play if they don’t claim to be independent on their own tax return. They must also earn less than $4,300 a year, be unmarried and be a US citizen. Talk to a tax specialist if you’re unsure whether or not you can claim someone else as a dependent. Find Outside Resources Your loved ones may be eligible for financial help that could ease their burden. Contact a social worker who may be able to connect you with organizations that can help. The Eldercare Locator site from the U.S. Administration on Aging has a list of resources available to elders and their caregivers. You can also contact your city’s United Way agency to be connected with other local agencies that provide specific support. Previous Post 6 Ways to Maximize Your Finance Toolkit Next Post Real Minter Story: Marcus Written by Zina Kumok Zina Kumok is a freelance writer specializing in personal finance. A former reporter, she has covered murder trials, the Final Four and everything in between. She has been featured in Lifehacker, DailyWorth and Time. Read about how she paid off $28,000 worth of student loans in three years at Conscious Coins. More from Zina Kumok Visit the website of Zina Kumok. Browse Related Articles Mint App News Intuit Credit Karma welcomes all Minters! Retirement 101 5 Things the SECURE 2.0 Act changes about retirement Home Buying 101 What Are Homeowners Association (HOA) Fees and What Do … Financial Planning What Are Tax Deductions and Credits? 20 Ways To Save on… Financial Planning What Is Income Tax and How Is It Calculated? Investing 101 The 15 Best Investments for 2023 Investing 101 How To Buy Stocks: A Beginner’s Guide Investing 101 What Is Real Estate Wholesaling? Life What Is A Brushing Scam? Financial Planning WTFinance: Annuities vs Life Insurance