Providing financial assistance to others, while many times laudable, is fraught with peril. You want to help but don’t want to enable poor decision making or harm a relationship. Below is President Abraham Lincoln’s take on the matter:
“You are now in need of some ready money; and what I propose is, that you shall go to work, “tooth and nail”, for somebody who will give you money for it… Now if you will do this, you will soon be out of debt, and what is better, you will have a habit that will keep you from getting in debt again. But if I should now clear you out, next year you will be just as deep in as ever. You say you would almost give your place in Heaven for $70 or $80. Then you value your place in Heaven very cheaply, for I am sure you can … get the $70 or $80 for four or five months’ work.”
Can you identify with President Lincoln’s response? Relationally, it is a difficult situation. On one hand, a friend or family member is without, and you have resources to help. On the other hand, helping might harm. To avoid that, you might consider these questions:
1) Am I helping or enabling? Is the potential beneficiary in need because of laziness or fantasy, matters of their own making, or factors outside their control?
2) What is the least favorable outcome if I err on the side of lending/giving less? How serious is that? How likely is it to occur?
3) Is there an emotion driving my response? If so what emotion (guilt, pity, etc.)?
4) Have I been given excess resources for such a time as this?
5) Is a reluctance to respond a reflection of greed or self-righteousness, or is it truly what I believe to be best for the potential beneficiary?
6) Am I too close to the situation? Am I seeking wise outside counsel?
7) How will my response affect my relationship with the recipient?
8) Where might this lead the recipient 3-5 years from now?
9) Can I afford to provide the assistance?
10) Is this assistance best structured as a gift or a loan?
11) If a loan, are the repayment terms realistic?
12) If a loan, am I ready to forgive it in the event of default and treat the assistance as a gift?
13) How would I feel if I was never repaid?
14) Should I charge interest and if so at what rate?
John Dodd is an active member of the Jewish Federation Professional Advisory Council (PAC).