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Thanks much for your comments, TJ.  I am thinking out loud in my response here, and what follows are my thoughts only – and in no way at the same level of my main goal for this blog (letting God speak on this subject through the Bible).  Also, if you will indulge me, I will list some things that you likely already know in order to provide a complete logic chain for others who may read this.  And finally, please excuse my shorthand bullet point approach.  Here are some actions to consider:

1. Cry out to the Lord for a miracle in the situation (see here and here for “Crying Out, Seeking God”)
2. Understand that you will not change her, as only God is able to do that.  But you can and should pray for her (James 5:16 – “the effective prayer of a righteous man can accomplish much”)
3. As part of better understanding your situation, I would look into three things:
   1. Confirm that she has scoffer traits
   2. Look at her family background for an N history (“sins of the fathers”)
   3. Take a peak into any spiritual warfare (the best book is the one by Karl Payne called “Spiritual Warfare”)
4. Divide your response approach into four categories
   1. Protection from her personal attacks
   2. Managing the consequences of her poor decisions
   3. Positive ways you can be loving and kind in the midst of the challenges
   4. Looking to God to meet your own heart needs
5. Specifics on the above
   1. For protection from her personal attacks…
      1. Find/create a “corner of the roof” which will give you space to “avoid her” when necessary
      2. Develop the ability to recognize when she is lying to your and herself about your inadequacies
      3. Take up the full armour of God and be very clear about your worth in God’s eyes
   2. For protection from the life consequences of her “insanity” (ie – loss of friends, money, etc.)
      1. Understand that God is able to easily
         1. make up for any damage she has caused, even though His solution might show up at a completely different time and in a completely different way
         2. use the “constraint” created by the loss which she has caused as a means of a deeper ministry or goodness to you
         3. deal with her while at the same time protecting you
      2. Manage specific situations through consequences – it is impossible to be precise due to not knowing any specifics, but it could include things like – “If you spend money on X, then I will make money unavailable for Y”. Note: the point here would be to not have a shouting match, but a quiet consequence that you can stick with and that will give her a choice between doing what she wants in the situation or avoiding consequences. It needs to be something you have full control of, as the N will fight like crazy to both get what she wants AND avoid the consequence. Think of it in terms of how you would handle the same situation with a child. The child may cry or scream at the consequence, but the parent should just quietly stand firm. The “corner of the attic” is one of the consequences you can apply, but I would not announce that one.
   3. For positive ways to be loving and kind
      1. There are ALWAYS opportunities for this, you just need to be willing
      2. God wants us to overcome evil by doing good
      3. She may not deserve it, but if you do it as unto the Lord you can through His grace find ways to love the unloving/unlovable.
6. Finally
   1. Pray that God would break the generational sin patterns that may exist
   2. Recognize
      1. that God’s solutions may come in the form of lots of little solutions rather than one big monolithic “answer”
      2. that any “restrictions” in your life that arise from this situation are opportunities to go deeper with Him

Just some thoughts!