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How To Make Good Financial Decisions When You Are Trying To Help Others

Even Love And The Best Of Intentions Can Lead To A World of Unnecessary Financial Pain

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by Paul Kindzia in Happiness, Personal Finance
January 22, 2019

One of the greatest things about having financial resources is the ability to help others.  Sometimes we all need a helping hand, or compassion, or assistance.  Life is sometimes hard and unpredictable and even the best laid plans can still lead to bad results.  Helping others can bring a lot of joy, happiness, and fulfillment.  It can warm our hearts, make us grateful, and make us feel needed.  But making poor financial decisions can lead to a lot of problems not just for ourselves, but for the very people we are most trying to help.

Helping others can often end in a financial paradox which could be described by the following:

“No good deed goes unpunished.”

Over the years, I’ve seen many people do a lot of good for the sake of others.  I’m an optimist.  I also believe in helping others.  But over those years, I’ve also seen plenty of bad results from bad decisions all stemming from the desire of one person willingly trying to help another.  It wasn’t the “trying to help” that got people into trouble.  It was “the way they ended up trying to help” that caused the problems.  They lost perspective on the bigger picture.  They got too emotional during the decision-making process.  They got stuck on one path or one solution and failed to see a myriad of other options, many of which were optimal compared to the one that was eventually selected.

This situation often comes up in parenting children or caregiving for parents.  When you love a parent or a child, it’s hard not to get wrapped up emotionally in the decision making.  My wife and I have provided a lot of care-taking for her 80+ year-old mother.  I can attest to the difficulty in keeping perspective on the bigger picture and selecting optimal solutions when emotions run high.

Here are six tips on how to help others without causing long-term financial harm to yourself;

  1. Value Optionality – Valuing optionality means placing a high emphasis on keeping as many good possible solutions and options available to you now and down the road. It is very easy to forget that circumstances can quickly change when dealing with children or parents.  Many times, we can’t even say with a high degree of confidence where we predict things will shake out in as little as 12, 24, or 36 months.  Too much will change due to circumstances or other reasons.  Thus, leave yourself as many good options as possible.  What is certain is that SOMETHING is going to change.  You just don’t know which factor will change.  Don’t lock yourself down with one solution that may quickly become obsolete or even restrictive from more optimal possibilities tomorrow.
  2. Match Decisions To Time Based Circumstances. The biggest error I see consistently in financial decision making when people are trying to assist others is that they make long-term decisions based on short-term circumstances.  There is nothing wrong with a young couple buying a house in a good school district with a 30-year mortgage when they are starting a family.  They are matching long-term decisions with long-term circumstances.  But buying Mom a house in the neighborhood when she is likely to need assisted living within 12 to 18 months isn’t a great use of time or financial resources.  There are better options.
  3. Put Your Oxygen Mask On First. Have you ever been on an airplane and the emergency pep-talk includes, “In the event of an emergency, put your oxygen mask on first before assisting others.”  Why do they provide this advice?  Because it is better for everybody.  The fact is, you can’t help anybody if you are passed out and without oxygen yourself.  Your strength and well-being is essential to helping others.  If you aren’t well, you can’t help others and you can’t help yourself.  It’s bad for everybody if you think about it.  It is no different when making financial decisions while trying to help others.  Never put yourself in financial harm’s way.  The person may need some level of help now.  But they may also need more important help slightly down the road.  If you put yourself in a bind and are strapped down the road, you harmed everybody.  You can’t help them later when they have even bigger issues because you already backed yourself in corner during the short-run.
  4. Think Outside The Box – There are often many different options on solving a problem. Some of them may be unconventional, or unique, or creative.  But consider all of them.  Brainstorm on every single option possible.  This is essential when you are dealing with short term circumstances with unknown long-term possibilities.  If you are caring for an aging or health impaired parent and the prognosis is uncertain for the next 12 to 24 months, try and think of as many possible solutions that would solve the problem for just 12 to 24 months because in all likelihood, you will be dealing with all new circumstances at that time.  My mother-in-law is 82.  I don’t need to make decisions that are meant to solve 20 or 30 year problems.  I need to solve short-term problems creatively and compassionately.  Doing this helps #1 above (value optionality).
  5. Know Your Real Financial Limits And Constraints – We all have financial constraints and limits. We can only do so much with what we should work with.  Acknowledge this truth up front and then gain confidence in the facts.  I often see this mistake made when parents are feeling compelled or pressured into believing that sending their kids to the most expensive college translates into the optimal solution or “the most love.”  It often ends terribly.  The college takes all the money.  The tuition bills and student loans cripple all parties involved for the next 10 or 20 years (or possibly for life).  If you have financial limits, that doesn’t mean that you don’t love your children or your parents.  It just means you have financial limits.  Going above your financial limits means putting yourself in financial harm’s way.  That gets back to #3 above – (put your oxygen mask on first).  You can’t help others if you yourself are a train wreck financially.
  6. Ask Yourself What Can Go Wrong With Each Option – We all want to think optimistically. Nobody wants to be a Debbie-Downer.  But life doesn’t always go as planned.  Things go wrong even with the best of plans and intentions.  Leave yourself some wiggle room if things go wrong.  Don’t paint yourself into a corner that you can’t escape from.  Some options don’t have as severe of downsides as others.  Pay attention to these and take note.  If you are down to two different options and they both accomplish the same thing to address short-term circumstances but one has limited downside risk and one has large downside risk, choose the low risk option.  Don’t ever risk blowing yourself up financially to be the hero of the day.  Then you will end up needing the assistance and the cycle starts all over again but this time it is you needing a helping hand.  The result is that you can’t help anybody if you end up in a bad jam yourself.

Life is full of uncertainties.  There is no way to plan for everything.  You also won’t have unlimited funds or financial resources to solve all your own problems and those of others.  This will force you to make trade-offs.  Be smart with your money.  Use your limited resources as efficiently as possible.

“Real love never comes down to how much money we had to spend on somebody else to prove it.” – Paul Kindzia

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These are the EXACT same steps I used to PERMANENTLY get rid of my mortgage, student loans, credit card debt, and auto loan debt.

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