One of the downfalls of being a Personal Finance nerd is you can spot the mistakes other people are making. I try not to judge, and sometimes wish I could ignore the mistakes and avoid the conversation. But I want to help people, and if a few tips or a gentle nudge is all it takes then I am game. If you know someone that is Bad With Money and want to help out – keep reading.
What does “Bad With Money” mean?
- Debt – Not only are you not saving money, but your financial situation is compounding in the wrong direction, Credit Card companies love you. 15%+ Interest is your jam. The $150 shopping spree costs $200 before it gets paid off.
- Spending – Everything is a need if you don’t have discipline. $15 lunches everyday, happy hour every night. New rims on your car? Hell yeah, those stock rims are junk.
- Whats an Emergency Fund? – “I have less than a $1,000 to my name after paying bills every month.” Having an emergency fund will save you from a ton of stress and is a huge part of your healthy financial base.
- “I don’t need to save for retirement yet” – People have a hard time switching from “yet” once they start down that path. Time is an opportunity, don’t waste it.
Unfortunately these are all real world examples and I bet you know people doing the exact same thing. It might even be you! But its OK, everyone has to start somewhere and identifying there is a problem is half the battle.
The Subtle Approach
This is the most common way I give advice, people don’t know that I think they are spending their money in a ridiculous fashion.
“I found this new app”
Yep, I have pushed the various apps/services I discover on to friends and family. Have had multiple people start using Acorns and Refinance with SOFI. Its a win/win/win, they get a referral bonus and a way to save money or pay off debt faster and Mr. A.E. moves one tiny step closer to FI.
Another technique is to bring up a recent financial stat that gets the conversation started. My favorite one ties directly to not having any sort of emergency fund.
“Forty-six percent of adults say they either could not cover an emergency expense costing $400, or would cover it by selling something or borrowing money.*”
That stat blows my mind, especially for anyone with kids or pets. $400 is nothing if you have an emergency or even a normal car repair. If you are in the 46%, get moving in the right direction and start an Emergency Fund today.
The Unsolicited Advice Approach
There are a few scenarios that this approach works well with
When someone shares they just acquired some cash, I always ask what they are going to do with it. If the answer is “I dunno” – which it usually is, I through some options out there to get them thinking.
When I recommend that people invest it, the question that comes back is “Where?” I usually recommend a Roth IRA – people don’t realize how easy it is to start one. In 15 minutes you can have it setup and funded.
Listening to people try to pick stocks is always entertaining and a little dangerous. Last week the person sitting across from me googled “best stocks” and was reading a list from 2014.
Since I am a huge Vanguard fan, I push their funds whenever someone is thinking about investing. Focus on lower risk profile of investing in a fund and the very low expense ratios vs actively managed funds.
The Blunt Approach
If it is a close friend or family member, you can be more direct, especially if they can impact your life financially. That 46% percent figure includes your parents, grandparents and siblings. Family is the first stop when someone needs help. Being blunt is never the first option, but I have used it before when the other approaches don’t work.
Another thing that falls into this category is making sure people that you will be responsible for have the necessary insurance and a will. You can’t really dance around the topic, I have flat out asked my parents if they have everything setup if the worst happens. 10-15 minutes of awkwardness is worth the peace of mind for me.
One of the biggest barriers to helping people financially is it is a very personal topic. It is hard to accurately address the situation without knowing a lot of information. The best thing you can do is push the information and hope they make a good choice.
Obviously you don’t want to pry to far, but people will give up a surprising amount of information if you take the time to ask. If you are willing to share your experiences as well it can go a long way.
If you are bad with money, you just got hit with the subtle approach by reading this post!
Some products that can help you:
Personal Capital: Personal Capital has a ton of great Free features, you can track your spending, net worth and even analyze your portfolio. It has top notch security and I am able to connect all of my accounts. Saves a ton of time
Sofi – I saved a ton of money using SoFI for a Student Loan Refinance. They are great to work with, the process was super easy (compared to my previous refi) and I got a great rate. If you have student loans be sure to check them out.