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Helping friends help themselves

September 7th, 2012 at 06:06 am

I have a friend. Yay! OK actually he's been my best friend since we were 8 years old (that's awhile back!) He's the kind of guy that would stick his neck out for you no matter what. We pretty much share everything about each other's lives because we can trust each other completely. So it KILLS me to find out he's struggling financially. Well not struggling per se...but he just has never had a plan. He's the kinda guy that if he had the tools I would have no doubt that he could succeed.

That being said I've tried a few things to get him rolling on a plan. He knows we worked the baby steps and he's read TMMO and even gone through FPU with his spouse. I understand Dave isn't one size fits all so I'm not pushing him to follow Dave's plan. I've said I don't care what you do but do something. I think procrastination is his worst enemy.

So here's a quick synopsis: He's 35, wife is 46. Two kids (his stepkids) in college. Net income: $12k/mo. Net expenses: $6k/mo. Debt: $84k (47k student loan, 20k car 1, 12k car 2, 4.5k credit card.) No liquid savings and not currently contributing to retirement (has $150k in retirement.) I'm sure you can already see my frustration just on this little bit of info.

I don't know if anyone else has someone they know in a similar situation. Based on the numbers that float around about people not saving enough and not putting enough away for retirement I'm sure there are a lot more people out there like my friend. I just really want to help him...even though I can only provide the map. I can't drive him there...he needs to put it in drive and go. I'm just trying to think of ways to help him get to where he wants to go. Any advice as always is appreciated. Smile

11 Responses to “Helping friends help themselves”

  1. Monkey Mama Says:

    Well, it's insane that he is not contributing to retirement at that income level. Does he have a 401k available?

    Maybe do the math on how much taxes he would save and match he could earn if he participated in a 401k plan? Ask him if he rather pay $3500 to the government, or keep it because he moved $10k to his retirement plan. {Granted, I live in California so these numbers tend to be bigger than average}. But say he got a $1500 match. That's really only paying $5k in the end, to increase retirement by $10k. Maybe he would be more motivated if he understood the numbers. There is a lot wrong here, but this part really jumps out at me.

    So, if his expenses are half of his net income, where is the rest going?

  2. snafu Says:

    You're a good friend but unless BF & his spouse are willing to make a plan and stick to it, you will remain frustrated. I suggest asking him to tally up how much he's paid in interest on CC, 2 car loans, student loans, $84K debt and even mortgage 2012 January - Sept. That will be a big sum and might jolt him into action.

    In the last century, employer pension plans automatically deducted between 7%-12% right off the top. Now it's the responsibility of the individual and statistically a huge failure. It's been made clear that the majority are still living w-aaay beyond their means, couldn't come up with $1,000. cash to met an emergency.

  3. I-78 Commute Says:

    He has a 401k (and his company matches 25 percent up to 10 percent of salary) and he has about $150k in there. He follows financial news pretty closely so I have a feeling it was a knee jerk reaction to Europe. Either that or he really is going to walk Dave's baby steps (which I don't think he's nearly as desperate as we were when we had the $120k in credit card debt.) I'd like him to be at least contributing up to the match so he doesn't continue to let free money elude him.

    I don't really trust the expense number either. If he's got that much cash left over and it's not in savings or retirement he must be missing it in his budget. I think he means well but I think he's letting a lot of things slip through the cracks and it's costing him. The student loan is a parent plus loan at 7.9 percent which really kills me. The cars are at 3.99 on the 12k and 2.49 on the 20k and the credit card is 0 percent B/T (which really wasn't depending on what he paid on the transfer.)

    It's frustrating.

  4. I-78 Commute Says:

    I'm with you snaf...he's got to do this with his wife. He's asked me for some advice and I've given it so I think I need to step back and let him run with it. Hard to do but have to do it.

  5. Monkey Mama Says:

    Tell him not contributing to the 401k is like paying 50% in interest to the government and his employer. Yeesh! So put it in cash or something conservative. There has got to be some sort of cash option. Not that I recommend that for the long haul, but ask him what his 401k investment choices are and help him find something he will be comfortable with in the short run. (admittedly, 401k options can be scarce, but I somehow doubt he looked at his options. People tend to equate retirement savings with stocks. I have had people told me they wouldn't invest in an IRA because the stock market is high. Ignorant that you don't have to put that money in the stock market by any means).

  6. Monkey Mama Says:

    BUT, I agree with you and snafu. When he asks you can try to open his eyes, but otherwise there is nothing you can do unless he is really committed to make a change.

  7. I-78 Commute Says:

    MM: I've been harping him on that one. He sent me his list of funds that his plan can use (and they're a really good mix.) Some Vanguard, Dodge & Cox, Oakmark, Fidelity...index funds, bond funds, growth funds, all levels of capitalization (only one international fund but it's broad...Manning and Napier.) Most if not all have very low expense ratios (I think there's one value fund that's high but it's returned double digits over 10+ years.)

    It just adds to the frustration.

  8. creditcardfree Says:

    Yep, you can lead a horse to water, but you can't make him drink...it is true with friends and money. Keep the lines of communication open and he may come around at some point. That is my only advice. I have a friend deep in debt who keeps spending and refinancing, so I understand the frustration!

  9. My English Castle Says:

    Some folks get paralyzed because they can't pick the "right" fund--but doing nothing like this is worse than letting it just sit in a money market in a 401K. He's throwing the freaking money away. Any idea what's at the root of the problem?

  10. I-78 Commute Says:

    Thanks ccf...I think there could be a forum just for friends who frustrate us!

    MEC: I think you hit the nail on the head. I think he's overthinking it and it's paralyzing him from making a decision. I told him to just fill out the form and he's not going to miss it. If he's having a hard time figuring out where his income is going at least this 10 percent would be going to his (and his family's!) future.

    I've talked to him about sitting down with a financial planner to at least get a handle on things but he really seems to want to do this on his own. I said if that's the case you have to take one step at a time but you have to take that first step. I think that happens to a lot of people.

  11. Jerry Says:

    I have heard that referred to as "paralysis by analysis" and it could be what leads him to not make any progress. Still, there is never any insurance of making him do anything unless it comes from within -- not that you are trying to "make" him do something, but you know what I mean. I hope he gets things situated!
    Jerry

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