Emotional Decisions Are Costly
by Howard Freedman
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Howard can be reached at email@example.com
Preparing your child for college puts most families on an emotional roller coaster. It starts with pride, hope, despair and possibly guilt when it comes to paying for it.
Knowing that a child may seek their dream school which may not be financially possible adds another layer of angst in which satisfying a child may be less painful yet sometimes unrealistically the cost of education could be more expensive if you are not blunt about your ability to pay. if your heart rules your head, It may take sacrifice, impact a family’s retirement savings or the equity in your home. It could also mean co-signing a promissory note on which there is no guaranty if and when it would be repaid. These thoughts are not meant to be negative or a harbinger of what is to come. They are merely a realistic assessment of the situations that most families should anticipate. Moreover, they should never let their emotions drive the financial decisions that can turn out to be much costlier than anticipated.
One of my greatest challenges is asking families to follow-up with me after the student receives their financial aid award. They merely are happy that the financial aid is done and pay high costs just to get this albatross off of their neck. Sadly, they should never let their emotions drive the financial decisions that can turn out to be much costlier than anticipated.
The problem is that either elation or despair may force them to make emotional financial decisions without considering the long-term ramifications. You may relate this to the way you may feel after you buy that shiny new vehicle. After negotiating the best price, you are ushered into the financial office when you are in a good mood. This is the time that you may purchase an expensive extended warranty, higher than normal financing and throw in a couple of extras that you had not anticipated. The reason you did this was that of convenience, your positive state of mind and the fact that you were subtly pressured to do so. Your emotions ran wild and forced you to spend more than you planned.
The cost of college can be just as expensive, yet families may not take the time to crunch the numbers and realistically determine who will cosign and be responsible for loan repayments. Although this step is often overlooked, I implore all families to turn off their emotional roadblocks and prepare for a serious talk with the student. It is time to evaluate lenders and their repayment terms and to gain commitment from the students to ensure that the cost of college is within both the student’s and family’s budget.
Be clear about extraordinary expenses and challenge the student to find ways to reduce costs. This can be done by taking advantage of work-study, part-time work or becoming an RA in the dorms. Regardless of the steps, families must realize that this is a partnership where each member is working for a common goal to finish college without overwhelming debt. Families also need to consider other siblings and retirement savings that should not be jeopardized.
Before beginning this process, I suggest that you take a deep breath and take the time to talk things over with the student. Be honest, forthright and fair so that each student knows the reality of your financial position, types, and costs of borrowing and why long-term strategizing will minimize the emotional decisions and possibly reduce the cost of college.
Emotion lets feelings obstruct good business and sound financial decisions. Making good decisions takes an investment in time without regard to hurt feelings or unwarranted guilt. It is business about one of the most expensive decisions you will ever make.
Taking the time to work things out will be well worth it.