Bank Deal: Earn 1.00% APY on an FDIC-insured savings account at Barclays Bank.
Is money a taboo subject with your friends?
I’m not sure about anyone else, but I don’t think it’s taboo to talk about money. I do, however, recognize that it may be awkward and thus considered a bit wrong by someone to talk to others about how they should handle their finances. Thinking back on conversations we’ve had recently, money has often been a part of the subject matter.
I’ve heard friends and family members say they want to improve their finances and then they mention something that completely contradicts their stated goal. It’s kind of like when you hear people say they’re watching what they eat and then you notice that they’ve ordered and eaten their appetizer, entree, dessert, and even sampled on some of yours.
Do you let things like this slide? If not, when do you speak up and make a suggestion? And if you do feel compelled to talk to them, how can you encourage them to actually do something?
I wanted to go over a few topics that have come up in casual conversation when hanging out with our friends. Hopefully you can relate, and may have an insight that could help with these sticky situations.
Vacationing on credit cards
Our friend invited us to join him and his wife for a conference and show in Los Angeles this summer. Since we’ve never been to LA, we thought this might be a great excuse to go, see some other friends we’ve haven’t seen in a while, and have a good time.
Honestly, it sounds like a great idea. I was already thinking about finding a cheap flight and start budget for the trip when our friend interrupted my thoughts. He mentioned that he was putting it all on his credit card to get some rewards.
At first, I thought that seemed fine. After all, we typically reserve hotels and rental cars with a credit card and then pay it off once we get home. Later in the conversation, though, he told us that he’s still in debt from some of his elaborate vacations. He mixes business and pleasure, extending work trips for fun, and it had resulted in five figure debt.
I kind of backed off of even approaching the topic of funding a big purchase with your credit card. I couldn’t think of a way to begin the conversation without putting him on the defensive (which is a natural reaction). As you’ve probably figured, I hate to see people carry high interest credit card debt, and I worry when they use dent to pay for their wants.
Saving up in advance may force you to delay your purchases, but once the purchase has been made, the hard part is over. You can enjoy your TV or vacation and not worry about how you’re going to pay it all back. We mentioned to him is that we’d definitely like to go, but we’ll need to check our budget and set aside money. I think was probably the best approach in this situation because we’re not going to convince someone in one conversation to change their spending habits. We can, however, show him how budgeting can make it possible to have a debt free vacation.
Creating a budget (and sticking to it)
I’ve heard a few of my friends say that they find it impossible to budget. Like the latest diet or fitness routine, they start off gung-ho with a ‘perfect’ budget that accounts everything to the last penny. They soon wind up going off budget, however, and either wind up back where they started or worse.
This is something I completely understand. I empathize with them on how hard it can be to budget. The most common mistake is that their system is too strict and there is not cushion between what should happen and what actually happens.
I feel a bit better about how we usually handled this because we gave them a couple of tools that have helped us personally with our finances. I also told one friend some of my mistakes with my first few attempts at budgeting and how automating our bills has made it much easier to stay on track.
I think this has been the easiest financial topic for helping other to change their personal finance habits since many people can relate to how hard it can be to start.
Building an emergency fund (only for emergencies!)
Another topic I hear a lot is creating an emergency fund. It can be hard to stay on top of bills while setting aside money in a savings account, but you have to do it. I’ve had some friends lose their jobs or have their hours cut, so I know how important this can be.
I had a friend that was living paycheck to paycheck and wanted to have some money tucked away for an emergency. She had just recently gotten her jobs (yes, she went from no jobs to 2 jobs) and didn’t want to wind up back in the predicament that she just got out of. Whenever people ask for ideas or advice, I take it as a green light to give them some tips that can help them right away.
I suggested that she cut down on things that she doesn’t really care about and use that money to start her emergency fund. It wasn’t a big step (she’s going to stop buying so many magazine at cover price), but it’s a sustainable way to fund her savings.
I also talked to her about using money management tools like Quicken or Mint to see where she could adjust her budget and save some more money. We compared options for different savings accounts. Even though ING Direct (where we bank) offered a high interest savings account, she felt more comfortable at her local credit union (another good option).
The good news is that I was chatting with her again a couple of weeks ago, and she now has two months of expenses tucked away. It felt good to help a great friend and she appreciated the suggestions. If only it was like this every time!
How do you handle money discussions with your friends and family? What are some ways you’ve helped others? What are some mistakes you’ve made when talking about finances?
- How to Become a Millionaire
- How to Get Out of Debt
- The Best Dollars I've Ever Spent
- How Our Estate Plan is Structured
- How We Paid Our Mortgage In Less than 10 Years
- Money Making Ideas
- How to Manage Your Asset Allocation with Multiple Accounts
- Consumption Smoothing - Save While the Saving's Good
- How to Save on Groceries
- How Much Life Insurance Do You Need?
- Eleven Great Books About Money
- Dave Ramsey is Bad at Math (692)
- Dish Network Customer Service SUCKS (534)
- $8,000 Homebuyer Tax Credit (429)
- Pay Off Mortgage Early or Invest? (424)
- How to Claim the First-Time Homebuyer Tax Credit (352)
- Termite Control: Sentricon vs. Termidor (325)
- How Much Should You Pay a Babysitter? (284)
- Ethanol Blended Gas = Lower Mileage? (272)
- Reduced Credit Limits? Share Your Experience (256)
- $15,000 Homebuyer Tax Credit (242)
- Buying Furniture off the Back of a Truck (227)
- Will Mac OS X Lion Kill Quicken 2007? (191)