# 5 Steps to Protecting Your Family Finances While Helping a Loved One Suffering with Emotional and Mental Health
By Michael Lewis, CFA, MBA (opens new window)
Allow me to introduce myself. My name is Michael Lewis, a 30+ year veteran of Wall Street and a parent of a child in recovery. Our child is now 5 years and 6 months sober; but it took 15 years to get there. Along the way, we learned that there was a previously undiagnosed mental illness. We learned that such a dual diagnosis is not uncommon; over 60 percent of adolescents in community-based substance use disorder treatment programs also meet diagnostic criteria for another mental illness.
When we first discovered that our family was battling substance use disorder, we went through every emotion imaginable; guilt, hate, fear, grief, despair, and loneliness to name a few. In addition, we knew little about the disease, the treatment choices, and the associated costs.
How can anyone be expected to make a decision under these circumstances!
Poor decisions lead to a waste of time and money; two resources that are of great demand and limited supply. If we wanted to provide support without our family experiencing long-term financial hardship, we needed a plan.
In this article, I will share with you the steps we took to get past our stigmas and put us on a path to family recovery.
# Be Aware of The Hidden Costs
The financial implications stemming from addiction and recovery are significant, life changing and a critical component to the ongoing recovery of the individual and their family.
Speaking with other families involved in recovery, most have given everything they have to help their loved one regardless of the emotional and financial implications. They love their children, and when push comes to shove it’s hard to look these children in the eyes and say “no” to doing anything in their power for relieving that pain.
On average, non-government subsidized residential treatment centers will cost $8,000 to upwards of $50,000 per month of treatment. Given the relapse rate for addiction is 40% - 60%, most families will pay this cost twice.
There are additional costs of therapy for the addict and therapy for the family. Most families are advised not to allow the addict to live with them, so an additional cost of a halfway house must be included, at a cost of $1,000 per month.
Then there is the cost of subsidizing the loved one as he transitions out of the halfway house into independent living. Many do not have a job, and the family may find themselves having to pay for rent, groceries, a car, insurance, medical, etc. Over time, the total cost of recovery can escalate into the $250,000 + range! That equates to almost $1,000,000 at retirement.
Families must take action to be sure that their loved one receives lifetime support without jeopardizing their own future. Here are some lessons we learned from our own journey.
# Forgive Yourself
Whenever I make my wife mad, the best way to move forward is to apologize and get her a gift. And that strategy usually works. But when the object of your affection is a loved one who is battling addiction, guilt (of which there is plenty to go around) leads to financial enablement. Enablers may have good intentions, but their behaviors often lead to wasted time and money; neither can be afforded.
Here are common indicators:
- Enablers avoid conflict to keep the peace
- Enablers are in denial about the seriousness of their loved one’s addiction
- Enablers bottle their emotions
- Enablers think the problem will improve, given time
- Enablers lecture, blame and criticize their addicted loved one
- Enablers take on the responsibilities of the addicted
Financial enabling can take many forms:
- Giving extra cash to help your loved one out
- Co-signing a loan
- Co-signing a lease
- Allow loved one to have access to your credit cards
- Providing access to your vehicle
Enablers may be of good intentions, but the behavior will often lead to prolonged delays in recovery accompanied with significant legal and financial consequences.
# Ask for Help
Addiction comes with two stigmas:
- Fear of being seen as a bad parent / husband / relative
- Fear of being seen as a bad provider
Families cannot afford any delays in getting the information and help required to make life and death decisions in a timely fashion. I recommend families create a board of advisors:
- Educational consultant
- Financial Advisor
For many families, the financial realities set in when they are faced with sending a loved one to a recovery center. The expense is significant, and the need is immediate. Unless you have the financial resources to cover the expenses from your checking and savings accounts, any additional financing decisions will have long term consequences. All potential sources should be examined:
- Loans from family and friends
- Cash value of life insurance policies
- Liquidation of financial assets
- Accessing equity in your home
- Accessing retirement accounts
- Credit cards
Carefully consider the costs, penalties, fees and tax implications associated with each choice before committing.
# Have a Plan
While we may not have been fully aware of the true extent of the impact our child’s addiction would have on our lives, two things were certain:
- Whatever plans we had were no longer useful
- We needed to make difficult choices if our family was to survive
All we knew is we wanted our child to be safe and healthy. What we did not know was:
- What does safe and healthy look like
- What were the required steps and resources
- What changes were required to provide us the greatest chance of success
A financial plan details the actions that need to be taken, the expected outcomes, and the ability to evaluate the effectiveness of the results achieved. With a plan, we knew what we needed to do, what our child needed to do, and what all the doctors / therapists were expected to do. We can hold everyone, including ourselves, accountable. Here are some steps you can take:
- Review your budget and identify discretionary expenses that can be reduced or eliminated
- Consider postponing major expenditures such as vacations or home improvement projects
- Re-examine college plans
- If you need a car, purchase used instead of new
- Re-evaluate your life and health insurance needs
Recovery is a lifelong journey. Without a plan, families run the risk of spending what they don’t have on treatments that are unnecessary resulting in financial ruin for everyone.
# Review your Legal Documents
Families should determine the best way to approach finances when a person with substance abuse disorder is involved. Money can be a relapse trigger, and changes may be necessary in order to ensure that the family’s finances are protected in life and after death. Consider the following:
- Update your will
- Create a trust
- Review beneficiary assignments on all financial accounts and insurance policies
- Review legal and medical power of attorney designations
Supporting a family member with substance use disorder or mental illness is a lifelong commitment. If you do not take measures to protect yourself and your family, the financial devastation can be permanent. It doesn’t have to end this way, but families need to make hard choices and take decisive action. Don’t go it alone. Reach out and get help.
# Author - About Michael Lewis
Michael Lewis recently transitioned from a 30+ year career in financial services as a Chartered Financial Analyst (CFA) and expert on investment products, strategies and technology to building a private Financial Planning practice. His practice is dedicated to empowering his clients to make smart financial decisions through the combination of technology and professional advisory experience. He received his Master of Business Administration from Duke University.
His major career achievements include serving as a portfolio manager for a leading Canadian Investment Firm with ~$1 Billion in assets under management, managing multi-million-dollar budgets, and developing customized risk management solutions. You can learn more about Michael and his practice, Tutor Financial, here (opens new window).
# Do you or your child need support right now?
If you or your child are in a crisis situation please contact the National Suicide Prevention Lifeline, which provides 24/7, free and confidential support for people in distress, as well as prevention and crisis resources for you and your loved ones.
- Phone: 1-800-273-8255
- Online: Click here to speak with someone now (opens new window)
If you're not in crisis but would like to connect with an online counselor (through our partnership with Betterhelp), please use one of these links: