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The ultimate gift: paying off someone else's debt

Embrace your inner philanthropist by giving money relief

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Interested in embracing your inner philanthropist? Why not whittle down a deserving person's debt load?

For those shouldering heavy financial burdens, making an endowment can be especially meaningful. To relieve even a little financial stress could be the most valuable gift of all.

The ultimate gift: deleting someone's debt

Why debt assistance can be so special
One joyful recipient of another's goodwill is Jennifer Phelps of New York City. Phelps says family friends stepped in to pay a debt that she was stuck with after her children's father got into legal trouble and then died, leaving her the tab: "Since he never signed divorce papers, I was still married to him, and so making me the legally responsible relative."

How did she feel about her benefactors? "Trust me, these folks were lifesavers," says Phleps.

It's no surprise that pressing debts can have a profound impact upon a person's well-being. Anxiety erodes even pleasurable thoughts. "They spend a large part of their day worrying," says Michael Norton, associate professor at Harvard Business School and co-author of the recently released book "Happy Money, the Science of Smarter Spending."

If the obligations were to magically diminish or even disappear, all those hours spent fixating on their debt load would be freed up, says Norton.

Choosing the right recipient
So who would you help and why? Travel blogger Madeline Boughton from Newark, N.J., has someone in mind: her sister, who has Type 1 diabetes. "She is 28 years old and has not always been employed with health insurance," says Boughton. "Each episode of sickness comes with a hefty bill of ambulance and hospital fees. She is trying to work and live a normal life, but is burdened by medical bills that she cannot afford."

Giving the thing that makes people happy makes you happy. In this case it wouldn't be a product, but debt relief. You know you'll make a difference in someone's life so you'll get the most happiness in return.

-- Michael Norton
"Happy Money, the Science of Smarter Spending"

With debt topping $13,000, her sister would openly accept it. "She would say, 'Thank you, that's great!'" says Boughton. "I would tell her that it came from me. In our family, if you have it, you give it."

Most people know at least a few individuals who would be grateful for such a gift. Carly Fauth, head of marketing for the financial website Money Crashers out of Milford, Mass., says her choice would be a mother of five, who serves as the ambassador for her local Department of Children and Families. One of this woman's children is autistic and two are high-risk foster infants with special needs.   

"I would love to be able to pay off any of her debts," says Fauth. "I'm sure, like the rest of us, her family has some debt. It would be great to lighten her load a little bit because she's a true inspiration!"

Paying someone's debts: do's and don'ts
Alleviating a person's financial troubles can be a wonderful gesture, but there is a right and wrong way to  do so. For example, as eager as Boughton would be to help her sibling, she wouldn't extend the same help for a person she was dating, nor would she accept it. "That would be awkward," says Fauth. "I would feel indebted to that person and guilty if we had to part."

Michal Ann Strahilevitz, professor of marketing at Golden Gate University, says to avoid giving a cash influx for debt when the person is:
  • Living too extravagantly. Enabling bad money behavior is very different from helping someone who had great misfortune.
  • A compulsive spender. Your donation will be for naught until they get psychological help.
  • Insulted by the gesture. Some would be profoundly upset by what they would think of as charity.
  • A co-worker or employee. It's not appropriate and you could get into legal trouble. .
  • A love interest. Gifting cash could be perceived as a sugar daddy/mama situation.

When giving openly, sensitivity is key. "Ask how they would feel about a cash gift to help with their debt," says Strahilevitz. Listen to their response and respect it. "It could be seen as a rescue and some people don't want to be rescued. Others do."

When to be anonymous
While Boughton would make herself known, others may prefer to be unidentified. Fauth, for instance, would give anonymously. "I think that would make her feel more comfortable. She would be extremely gracious, but would feel that there were other people out there who deserve it more than her."

Being a secret philanthropist is easier than ever. According to the research firm Massolution, individuals have raised $5.1 billion on crowdfunding sites such as GoFundMe and Razoo so far in 2013, nearly double what it was in 2012. These are forums for people who are in need to ask the community at large for help. Their debts range from credit card balances to student loans. Givers can and often do keep their identities quiet.

"Anonymous debt donation is appealing for a few different reasons," says Marie Kare, senior marketing manager at Razoo. "People who've received help from others to pay off their debt will likely empathize with strangers who are in a similar situation. They know they're making a direct impact on someone's life through their donation." Being incognito also provides the freedom to donate in small increments without the judgement of others.

That warm glow of the heart
Givers, too, receive a powerful emotional reward from altruistic gestures. Social psychologists have deemed the feeling that people get when being altruistic as the "warm glow." Essentially, there's a payoff to generosity.

To gain the glow, all you need to do is help someone. "The personal satisfaction received from helping a business stay in business and helping an individual move on with his or her life is immeasurable," says Raanan. To maximize the glow, help someone close to you.

In the 2011 study, "It's the Recipient That Counts," researchers discovered that giving to someone you know produced the best emotional outcome, concluding, "the next time you find a few spare dollars in your pocket, you will be happiest if you treat your best friend."

"There's a part of gift giving that signals caring," says Norton. "Giving the thing that makes people happy makes you happy. In this case it wouldn't be a product, but debt relief. You know you'll make a difference in someone's life so you'll get the most happiness in return."

Says Kare, "It can make those who give feel happy and fulfilled -- especially when giving to the people and causes we care about most."

See related: No, thanks. 12 gifts that cost too much to receive3 ways to curb holiday spending stress

Published: December 24, 2013


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