Are you aware of the 4 Dreaded D's of finance? You should be. They can hit you and or your family at any time in your life. If you have not heard reference to the 4 D's, they are:
-- Disease or Disability
-- Downsizing or Disqualification
Death (without adequate insurance) can be devastating financially but so can divorce. I have always counseled that until a couple is divorced financially, they are not divorced. Disease or disability of course can cause loss of income and exceptional medical expense, and downsizing or disqualification means the job no longer exists. As a long time counselor for pre-bankruptcy, I have seen these "Dreaded D's" over and over. They are afflictions that can attack anyone at any time. They could even add another dreaded D to the description -- "Devastation" because that is exactly what the Dreaded D's create.
Take care of yourself first
But there is a fifth dreaded disease that does not start with a "D" at all. It is called, "not taking care of your self first." I cannot tell you how many folks I have counseled got in over their head because they were helping someone else who had one of the four "D's". Either that or they were taking care of someone who should have been responsible enough to take care of themselves.
Family members tug at our heartstrings and can so often lead us where angels fear to tread. Benjamin Franklin strongly suggested that we should never do something for another that they should be doing for themselves. Years ago I wrote an article asking just what do we owe our children. The conclusion was that what we owed our children is a responsible attitude.
A "helping hand" so often becomes a crutch to a dependent and the person with the good heart is so very vulnerable to getting sucked dry. And the worst of it is that the person with a good heart will not listen to advice until it is too late. If you know of someone who is considering helping someone out, the best you can possibly do is suggest they at least talk to a financial or pastoral counselor first. It is possible the helping heart might be able to see the options of developing a long-term responsible attitude, but normally the impending doom on the loved one usually overshadows such wisdom.
If you or someone you know is struggling with this issue, the individual must first ask the key question, "Can I afford it?" Do not delude yourself into thinking this is a temporary loan. If the individual repays the loan, great; but chances are when you give the money away, it is gone forever and you must assume you will never see it again. But additionally you should not be offering money except from excess funds. Never give away basic budgeted money or money from a necessary savings or investment. This includes simply co-signing a loan. You must be prepared to assume the entire amount.
The second key question is, "What is the individual's background?" The potential borrower who is hard working and frugal is a very different scenario from the person who is always getting fired and is late on their bills every month. You as a lender must view the individual asking for money just as a potential creditor does, even if you know you may never see the money again. A good question may be, why didn't they ask a normal lender in the first place?
A third question can easily be, "Are there other people who will be affected by your decision?" For example, offering assistance to a very responsible dependent but who has very irresponsible younger siblings could be an error in the making. What will be the result of such an action? You certainly do not want your good intentions to boomerang.
A forth question may be whether or not you want to attach any conditions. Is this a loan or a gift? What is the repayment schedule? What happens if the loan is not repaid? There is a difference between what you know in your heart what you will and will not do, and what is discussed in a transaction. They should be identical; however, real life does not work this way.
The dread four D's cannot be avoided in most cases. They are part of life. But not taking care of ourselves first is simply a bad and unnecessary decision most times. Use the key questions above to avoid complicating a bad situation even further.
Mike has been an Internet Guide/Writer in the field of Credit/Debt Management for over 10 years. His site was awarded Best Of Net by Forbes Publication from 2000 to 2005 with site visitation doubling to over 500,000 average views per month in the last year. Earning an M.S. in Counseling from Creighton University, NE, and with his Practicum in financial counseling to military families, Mike has offered debt elimination seminars to businesses and community colleges for the last 9 years, has had radio interviews, as well as been referenced in numerous publications, both in the newspaper and throughout the Internet financial community. Readers will probably be interested to know Mike also offers a free debt elimination mini-course via email. You can enroll at Debt Free In 7.5 Years. Visit his site at LearnCreditManagement.com for more vital information on debt management.© 2009 Mike Killian
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