Debt Killed My Dad. Learn from His Mistakes - and Mine.

Worried elderly man
According to his death certificate, my dad died of myocardial infarction, otherwise known as a heart attack.

His health had been deteriorating for some time, so it wasn't a total surprise. He gained weight and was diagnosed with Type 2 diabetes. He had two bypass surgeries -- one triple, one quadruple. It wasn't hard to understand why he had heart problems. His diet was unhealthy; he didn't get enough exercise; and he was constantly under stress.

We thought there wasn't much any of us could have done. In retrospect, there was one area where I might have been able to help, though at the time I didn't think about it in those terms. His financial health deteriorated more than his physical health, and that was one of the primary sources of stress.

It Wasn't His Heart Alone That Killed Him -- It Was His Debt

My dad racked up credit card debt faster than a NASCAR driver at Daytona, and he never could get his spending habits in check. Just as you can spot the indicators of heart trouble, there were plenty of signs something was wrong with his finances. He took cash advances on one card to make payments on another. He took out a second mortgage just to make minimum payments on his credit cards, all of which had interest rates in the 20 percent to 30 percent range. He constantly worried about how he would scrape together enough money to pay his bills.

I saw the stress of his debt weighing on him. I have no doubt much of the reason he gained so much weight in the first place was because he was gravitating toward unhealthy comfort food to help him forget the stress, and the emotional drain from constantly worrying about money robbed him of the initiative to exercise.

One of my biggest regrets, which I shared in my book "Soldier of Finance," is that I never had the courage to confront my dad about his debt. I think somehow I believed things would just work themselves out. They didn't.

If you know someone who is struggling with debt, there are signs that you can watch for -- and things you can do. Here are three indications that they are headed for unnecessary and dangerous stress.

1. They're Constantly Fretting About How They Will Pay Bills

You can tell when it has become a problem for someone you know. For one thing, it creeps into their conversation. They begin making comments that allude to their desperation. Watch for other signs. I can remember walking into my dad's house and seeing a list of credit card debts next to his computer. It was clearly on his mind. Worry is difficult to hide.

2. They Use Credit to Pay for Credit

If someone is using one credit card to pay the minimum payment on another, or taking out a cash advance on a card to make a payment, there are multiple problems. First, making minimum payments doesn't usually reduce the balance on a card in any significant way. The lion's share goes to paying interest. By using another card to make the payment, you're only adding to your total debt, making future minimum payments even higher. It's a no-win cycle.

3. They Frequently Borrow Money -- Sometimes From You

When they ask, it always sounds like an opportunity for you to help. The loan will solve their problems and take the pressure off by allowing them to consolidate their bills into one payment, which will allow them to return your money to you. The problem is that it never works out that way.

I once loaned my dad $8,000 to help him pay off some debt. Not only did he run up new debt as fast as he paid off the old, but when he realized that he couldn't pay me back, he took out a life insurance policy with me as the beneficiary. Instead of eliminating debt, he added another monthly payment.

If a close friend or relative exhibits these symptoms, there are things you can do. Here are three suggestions to get you started:

1. Gently Confront Them With Your Concerns

Do your best to keep from sounding judgmental by emphasizing that you are concerned about the stress their financial habits put on your relationship, and more importantly, the danger to their health. It won't be easy, but if you really care about them, be honest with them.

2. Stop Enabling

When my grandmother passed away, both my dad and I inherited some money. True to form, dad wanted to borrow my share to pay off his debts and planned to pay me back in monthly installments. My girlfriend -- who later became my wife -- confronted me the way I should have confronted my dad. "It won't help him, and it won't help you," she said bluntly. She was right, and I knew it. It was the first time I ever told my dad no, and it was the hardest thing I ever had to do, but it had to be done, for his sake and for mine. Learn to say no. Don't even agree to co-sign a loan. You'll only add to the problem.

3. Offer Real Help (Not Loans)

This might be as involved as sitting down with them and helping organize bills, develop a plan for debt reduction and help them stick to it. But at the very least you can introduce them to a financial adviser to help them get things under control. Above all, offer your encouragement and support. Changing lifelong habits is never easy, but it can be done.

I wish I had spoken to my dad early on. I never did, but I believe I have learned from both of our mistakes. I hope you will, too. Don't wait or sit back silently, hoping something will change. Become an agent of change. When you see the warning signs, speak up.

10 Financial Rules You Should Break
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Debt Killed My Dad. Learn from His Mistakes - and Mine.

This is the granddaddy of them all. Start to type "emergency" into Google (GOOG), and the first suggestion is "emergency fund." The rule is to make sure you have six month's of living expenses tucked away in cash in case you losefyour job or suffer a financial setback. Of course it's important to have a financial safety net, but when you earn virtually nothing on your cash, this rule can cost you. For example, if six months of living expenses for you is $25,000, you'd be sacrificing close to $1,000 of income a year by keeping this money in a checking or money market account.

For years, I've broken the mold on this financial rule by telling clients they shouldn't have their emergency fund in cash. Instead, choose a short-term bond fund that pays 3 percent or higher for your safety net. If you need the money quickly, you can easily sell the fund and get access to the cash. If you don't need the cash –- and these emergency fund accounts are rarely used –- you can still make money on the assets.

Not so fast. There are many good reasons to contribute to a 401(k), such as tax savings, tax-deferred growth and a possible employer match, but there are also good reasons not to contribute as well. Don't blindly dump money into your 401(k) if you don't have an emergency reserve of some sort and there is a chance you will be laid off. It is taking longer for most to find a job, so if you think you may be out of work, make sure you have the resources to pay rent and buy food until you land a new job. 

​Also, if your employer doesn't provide a match and you are in a low-income tax bracket, it may make more sense to pay the tax now (since you are in a low tax bracket) and invest in a Roth individual retirement account instead. Use this 401(k) vs. Roth IRA calculator to crunch the numbers.

You cannot cut your way to wealth. Too many people and financial advisers focus on trimming expenses when they should be focused on the other half of the equation -- income. I'm a proponent for living within one's means, but too often that creates an artificial barrier or ceiling. "This is what I make, so I have to cut back to save more," is often the thought process. Rather than living within your mean, work on increasing your means.

There are many ways you can make more money, including asking for a raise, boosting your skills –- your human capital –- and getting a promotion, starting a side project in the after-hours or going back to school and starting a new career. What you make today is not necessarily what you can make tomorrow. Cut unnecessary expenses and then use your energy to increase your income.

You should only save for your children's education if you can afford it. That means when you're on track to having enough assets for your retirement. Assuming you have the retirement assets and now want to save for college, most advisers will recommend a 529 college savings account.

Not so fast. These 529 accounts have some real advantages, such as tax-free growth of contributions if they are used for approved higher education expenses. This tax-free growth is a big benefit. However, if you withdraw money from this account and do not use it for approved higher education expenses, the gains will be subject to ordinary income tax and a 10 percent penalty.

The big risk is if you fully fund your child's college education but he or she decides to not go to college, drops out, finishes early or goes to a less expensive school. You have the ability change the beneficiary to another qualifying family member without penalty, but if you have just one child, there may not be anyone you can transfer the funds to. You would then have to liquidate the account and pay the tax and penalty. If you are undeterred and still want to pay for your child's college education, start with a small contribution into the 529 and fund up to a maximum of 60 percent of the cost in case one of the above scenarios occur.

The average age of cars on U.S. roads is 11.4 years. So if you're average, then it may make sense for you to buy a car -– especially a car a year or two old –- instead of leasing. However, if you do not intend on driving the same car for over a decade, a lease may be a much better option. A new study by found it was better to lease than buy based on its criteria. And under certain circumstances, you may be afforded a larger business deduction with a lease compared to a purchase.

The certified financial planner designation is the gold standard when it comes to financial planning. I wouldn't think of hiring a financial planner if they weren't a CFP practitioner. However, just because you are working with a CFP doesn't mean you shouldn't research your adviser, his or her areas of expertise and how he or she charges. The CFP tells you he or she has advanced training in areas related to tax, investing and retirement planning; has passed a comprehensive and difficult exam; and has agreed to adhere to a high code of ethics.

The onus is on you to know what you need and to make sure your CFP financial planner can deliver. Don't get lulled into thinking that just because he or she have three letters after his or her name that he or she has been screened. Ask tough questions before you trust your money to anyone -– even a CFP.

Most financial pundits will advise taxpayers to have just enough taken out of their paycheck so when April 15 comes around, they will neither owe money nor receive a refund. The rationale is if you get a refund from the Internal Revenue Service, it means you paid too much in over the year -- and the government has had use of your money without paying you any interest. Keep the money and invest it yourself is the theory.

'Again, that's the theory, but reality is much different. It all comes down to psychology. I look at paying a bit more to the IRS as a forced and automatic savings account. Sure you won't earn interest, but human nature tells us you probably won't save the money anyway. There is a greater chance you will squander $100 a paycheck then if you receive a $2,400 check from the IRS. One approach takes a plan and discipline each month to save and invest while the other doesn't. A check from the IRS isn't an interest-free loan; it is an automatic savings plan.

Nobody wants to endure an IRS audit, but too often I see honest and ethical taxpayers avoid claiming certain deductions or taking certain positions that are completely legitimate because they fear it will increase their chances of an audit. First, your chances of being audited are small –- about 1 in 104 chance. If your return doesn't include income from a business, rental real estate or farm, or employee business expense deductions, your chances are even smaller -– 1 in 250. Second, if you and your tax preparer are not crossing the line, you have little to worry about. In fact, thousands of taxpayers get a check from the IRS at the end of the audit. Don't let a small chance of an audit keep you from taking advantage of every tax strategy for which you qualify.

Do what you love, and you'll never have to work a day in your life, or so the saying goes. It sounds good and feels good, but it's not necessarily true. Sometimes –- often, actually –- doing what you love can be a great hobby but not a good career. There are a lot of things I enjoy that I'll never make a dime doing. A better approach is to find something you enjoy, are good at and that you can get paid to That is the financial trinity you should aspire to find because it ties your interests with your skills with the marketplace

Follow this rule, and I'll send you straight to detention. We know college costs are soaring, and we don't want to bury our kids in college debt, so most parents prioritize college saving over retirement saving. Big mistake. If worse comes to worst, Junior can get a loan, work while in school or go to a less expensive school. Basically, Junior has decent options, and you have tough choices. 

​If you haven't saved enough for retirement, you are stuck. There's very little you can do other than slash your expenses, work longer or both. Save for your own retirement first. That's the financial rule you should follow. If you have amassed so much wealth when your children head off to college that you can afford to help them, go for it. If you haven't, you'd be doing your kids a disservice by jeopardizing your own retirement by paying for their tuition.

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