In general, my husband and I like to be available to help others. We’ve let relatives live with us, given money to those who need it, and engaged in other activities designed to help others. Recently, though, we’ve eased off a bit.
We are preparing for what might be some upheavals in the life we built together, and we question what we can truly afford when it comes to helping others with their finances right now. This reality came crashing down on me when a relative recently heavily hinted that he needed a cosigner (not that I’m very fond of the idea of cosigning and I would have been reluctant to do it anyway).
I thought about the ability to cosign and realized that, between the lower income that comes with summer (since my husband doesn’t teach as many classes at the university), and the possibility that we might move, we’ve had to make some changes. While we still want to help others, the reality is that it’s time to cut back a little, whether it’s donations to charity or financial help for friends and family.
Putting Your Finances First
Sometimes it makes sense to put your own finances first. It might seem selfish, but ultimately it might be what’s best for you at this point in time. But how do you know when it’s time to cut back a little? How do you know when you need to put your finances first because you might not be able to afford helping others out of their financial jams?
Financial attorney Leslie Tayne has a few insights into making sure that you don’t put yourself at risk over someone else’s financial situation:
- Your Budget: “Establish a monthly budget,” says Tayne. “Once you have established a sound budget based on your finances, you can then determine if you are in a financial position to lend a financial hand.” Even though I prefer a more flexible spending plan to a traditional budget, the sentiment is the same. You have to be honest about your situation, and recognize the realities, before you can decide if you can afford to help someone out right now. “Make sure all of your financial obligations are met before considering loaning someone money or buying them a gift,” Tayne continues.
- Your Credit Situation: Can your credit situation handle more strain? Could you be putting yourself in danger of having conscripted credit if you cosign for someone else? “When sharing credit with someone else who ends up being unable to pay, [you could] end up paying the price by ultimately becoming responsible for the debt,” Tayne points out. Consider when you might need credit in the near future, and how helping someone financially could cause problems.
- Your Future: Don’t forget to consider your future. It’s popular to point out that there are loans for college, but not for retirement. If you are taking away from your own future stability, think twice about helping others with their finances. “If you are planning to give money to help support a friend or family member, make sure your generosity is not going to end up putting you in a financial hole,” Tayne says. “In the end, you might end up needing financial support.”
It’s not fun to be selfish, and you might feel bad. However, you need to be realistic about your financial situation right now. If you can truly afford to help others out, go for it. But don’t be helpful to the point where your own finances are at risk.
Over time, if you keep yourself financially solvent, you’ll be able to do more good for others. Just because you can’t help right now doesn’t mean that you won’t be able to help someone later.