There are a lot of people that are getting hurt by the financial crisis lately.  The problem that we face is that a lot of these people will be asking for help to get themselves through hard times.  Often, they request that we do something that also financially exposes us as well.  If you are strongly inclined to help someone out of their financial predicament, you have to make sure that the risk to you is limited.  Always have any financial transaction that you have with your friend in writing, and always be prepared that may not get your loaned money back.  I've compiled a list of several common situations that you can help a friend with, that you can limit your own exposure to:

1.  Cosigning for a car.  You have input over the car you cosign for.  Take the initiative if you want to help your friend, and put a limit on the sales price and loan time your willing to co-sign for on a car.  Your friend does not need to get the newest or most expensive model car; your concern should be to just get a dependable car for them to get by for the next few years.  Make sure that the amount is something that you can pay for if your friend defaults, and make sure that the amount of time that your cosigning for is relatively little, as it will show up on your credit report as a loan.  Tell your friend how an inexpensive car will make it easier on them as well, that their car payments will be cheaper each month.  Consider having a contract written out as to who gets the car if your friend stops making payments on it as well.  Making this a formal transaction like this should motivate your friend to continue making payments, if they were considering otherwise.  Also keep in mind that if your friend does decide to skip town, that he is likely to keep the car, be hard to find, and stick you with the payments.

2. Cosigning for a credit card, or revolving credit line.  Sometimes you will have a friend request you to cosign for a credit card, but to protect yourself, you have to turn them down.  If you really want to help your friend get their credit established, you can point them to getting a prepaid credit card.  In a prepaid credit card, the credit card holder deposits the money into the credit card themselves, then can borrow against it.  After a few years, they can request the deposited money back, and convert it to a "regular" credit card.  Many prepaid credit cards actually don't report to the credit bureau, and some won't refund the deposit back unless they close the account.  When searching for a prepaid credit card,  you must confirm that the company you are dealing with does this before doing business with them.  You simply cannot cosign for any kind of credit line.  The problem is, after you've cosigned, it doesn't take any time at all for the credit company to start raising the credit limit.  The $500 credit card you helped your friend get a few years ago may now be loaded to it's $10,000 credit limit.  You may also find your friend hasn't paid on it in several months, racking up fees, and bouncing the interest rate up to 23% or more. 

3. Talk to your friend about getting a second job.  It can be a touchy subject, but having your friend pursue a second job is likely the best fix for his situation.  A lot of people will make the argument that they deserve a life and deserve free time.  When we create debt however, we are spending money that we don't have, and technically money we didn't "deserve" in the first place.  Sometimes you will find that they will be in a situation that they cannot get a second job, such as not being able to afford a baby sitter, which comes to the next point:

4.  Volunteer to help your friend.  There are many things you can do to help your friend in hard times.  Being a babysitter while your friend works a first or second job can be a great help to them.  Also, if you have the knack, helping fix things in their house or helping repair their car.  You can also empower your friend by teaching them new skills that they may be able to apply to a job, such as using a computer.  Teach your friend about being frugal, and ways to save money on purchases, and teach them how to save and invest.  Also consider helping your friend do internet research to see ways to get them out of their situation.

5.  Having your friend move in.  This is certainly a huge move for anyone, and shouldn't be taken lightly, as this will effect everyone involved.  Put your living arrangement in writing so that there will not be any misunderstandings.  Be sure to include items such as how groceries and utilities will be divided.  Also include the rent, if any, that you will be charging your friend.  Also include an "exit" plan to any arrangements that you have with your friend.  Often you will find that while some can be your friend, the may not be a great person to live with. 

It's very noble to help a friend in need, but you shouldn't risk your own financial security to do it.  These methods, while minimizing your risks, will still empower them to reach their financial goals.