How do I save a friend from a money mistake?
“Ask Brianna” is a column from NerdWallet for 20-somethings or anyone else starting out. I’m here to help you manage your money, find a job and pay off student loans — all the real-world stuff no one taught us how to do in college. Send your questions about postgrad life to askbrianna@nerdwallet.com .
Spend less than you earn. Take advantage of your employer 401(k) match. Save a few months’ worth of expenses for emergencies. If you’re all about financial wellness, you may already live by these principles. You may also notice that people around you don’t.
I feel torn, for instance, when friends say they can’t afford their student loan bills but shop with abandon anyway. Is it up to us personal finance buffs to give advice when friends make visible money mistakes? How do we do it without being offensive or annoying?
“The ‘helpers,’ if you will, often turn the help on like a giant fire hose,” says Amanda Clayman, a financial therapist in New York. “That very often ends up overwhelming and even shaming the person who has been struggling.”
And that can discourage open dialogue or a willingness to address money issues. These
steps will help you share your wisdom with others while staying on speaking terms.
STEP 1: ASSESS YOUR RELATIONSHIP — AND KNOW-HOW
A key consideration of whether to speak up is your relationship with the person in question: Is she a childhood friend or an acquaintance in your running group who happened to divulge her medical debt? The closer the relationship, the more it probably makes sense to assist, despite the risk of creating tension. Speaking up early may prevent the financial mistakes from getting worse, and you won’t find yourself years down the road explaining why you withheld helpful information. Let your friend know you’d be happy to talk through money concerns, if he or she is open to it.
But make sure the advice you plan to offer will, in fact, be helpful. Assess your own financial strength — your cash flow, credit score, debt, insurance coverage and savings — perhaps by taking an online financial health quiz .
Also, be careful about offering specific investment advice, says Eric Rosenberg, a personal finance blogger at Personal Profitability. Your friends could lose money — and blame you — if a stock you recommended loses value. You’re safer giving general advice, like suggesting they start saving for retirement as soon as possible or that they see a fee-only financial planner to develop a personalized action plan.
STEP 2: PICK YOUR BATTLES
Rosenberg says he’s most inclined to jump in when he sees close friends making choices that have a long-term impact on their finances. Accruing massive high-interest credit card debt and not saving for retirement are some of the biggest red flags, he says. A friend who occasionally splurges but doesn’t feel trapped by debt and is working toward long-term goals is less of a concern.