THE BLOG
09/23/2014 10:26 am ET Updated Nov 23, 2014

What's a Financial Intervention?

I recently read an article about a "Financial Intervention." It was fascinating.

Normally when we hear the word intervention, we would think of friends and family gathered together to stop someone from abusing alcohol or drugs. The hope is that when the person sees how much everyone cares, they will seek help for the addiction. A Financial Intervention works exactly the same way. The only difference is the person is displaying destructive financial behavior.

Now that I've been in this business for 20 years, I've witnessed dozens of people making very destructive financial decisions. I've watched helplessly as people ring up tens of thousands of dollars of credit card debt. I've seen retirement funds used to gamble on sporting events. I've even witnessed the spending of the last bit of inheritance to go shopping to "feel better".

When Do You Have a Financial Intervention?
A financial intervention should take place as soon as someone's financial decisions become destructive to themselves or people around them. It doesn't matter if the spending was caused by an addiction or psychological problems.

It's almost always is a result of out of control spending. Shopping can become a financially destructive behavior. Shopaholics are craving self-esteem or relief from depression. They shop to make themselves feel better and receive a temporary "high" after making their purchases. I once had a client that had this addiction. She would order boxes of shoes in every size and color whether they fit or not. Many of these individuals have garages and closets full of stuff they've purchased.

Gambling excessive amounts of money to get the big win is very destructive behavior. I had a client, we'll call him John. He was a very nice guy that had a beautiful family and home. John called me one day for a withdrawal. He said he was that he was laid off from his job and needed to use the funds in his retirement account to pay bills. This went on for over a year. He drained almost $200,000 from his IRA. It was only after a phone call from his wife years later, that I learned of his uncontrollable gambling addiction. They were divorced as a result. He lost everything.

Sometimes, like in my example about John, a person is able to conceal their destructive financial behavior. Making a financial intervention all the more challenging or not even possible till it's too late. Of course, these are just a few examples. There are many different behaviors that would qualify for a financial intervention.

What's The Purpose Of An Intervention?
The purpose of a financial intervention is to get the message across that here is a group of people that care about you, and have been powerless to stop a financially destructive behavior. The individuals have gathered in a group because individually their attempts to beg, plead and threaten have gone unheeded. Just like with any type of intervention, you begin with telling this person about the destructive behavior and let them know they are loved and cared about. You cannot demand the person to change their behavior. They'll come away feeling judged, rejected or even worse, resist more. 

Furthermore, the intention of the group should be to offer outside help, and to stop any enabling behavior on their part. If the group lacks the knowledge, then offering help from therapist, clergy, debt counselor or even a financial planner. For someone struggling with this type of financially destructive behavior, seeing a group of people they love and care about gathered in a room can be a life changing thing.

Bottom Line
If you know someone that is showing truly financially destructive behavior, try to approach the person and let them know that they are hurting themselves. If they resist, then it may be time for an intervention. Don't wait. Do it sooner rather than later. It might just be what they need. Don't be discouraged if the intervention is dismissed. Often, people come back for help at some point, sometimes when they have no other choice.

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