How to help a financially reckless friend build better money habits

My friend is a financial mess. How do I help him be more responsible without being a buzzkill?

The situation

“My buddy Jay and I are well into our thirties, but he still spends like a 24-year-old. Big bar tabs, expensive sneakers, splashy vacations. Yet he’s barely keeping his head above water. When we’re out, he shuffles through a stack of credit cards, trying to remember which ones aren’t maxed out. Recently I asked my fiancé if she would fix Jay up with one of her single friends. She told me no way would she would pair a friend with such a financial mess. Jay’s money habits are really hurting him. How can I help?”

—Oscar, El Paso, Texas

The solution

It warms my heart when friends look out for friends like this, even when being a good pal might require knocking your buddy upside the head. (Not literally, of course!) From what you’re saying, it sounds like Jay is squandering the chance at a solid financial future—and maybe even at love. In fact, a survey by the Australia-based comparison website revealed that three-quarters of Americans found runaway credit card debt unacceptable in a romantic partner. (The tipping point? Any amount over around $11,500 is detrimental to your sex appeal.)

Unfortunately, Jay isn’t an outlier in the thirtysomething set. The average amount that people between the ages of 32 and 37 have saved for retirement is just under $32,000. That might sound like a lot to someone in his (nifty looking) shoes, but new research from the National Institute on Retirement Security finds that only 5% of millennials with jobs are socking away enough to retire on. Nearly 60% of Americans ages 35 to 44 own their own home, but to reach that milestone, you need to save a down payment and have good credit. The sad truth: If you get behind now, it gets harder and harder to catch up as you age.

This is why you’re right to be concerned about a friend who’s living like the grasshopper when he should be saving like the ant. If Jay were a recent acquaintance, I’d advise you to butt out unless asked. But this is a guy you’ve been with through many years of ups and downs. If you approach him as a caring friend, he may open up to you. Here are a few tips to guide your conversation with Jay.

  • Determine that your friend’s money habits are destructive, and not just different from your own. If our friends are making choices different from ours, we tend to think they’re bad with money, while we’re able to explain away each indulgent purchase we make. (“I bought those silver cufflinks to wear to a wedding.”) However, if in Jay’s case you’re seeing signs of true financial distress—he frequently complains about being broke, or he shows up for drinks with you in a taxi because his car has been repossessed—you might have an opening for a conversation.
  • Focus on your own experiences. Jay is likely to feel defensive. One way to disarm him is to talk about yourself instead of him. Are you saving for retirement? For a down payment? Share your experiences. Was adjusting your financial priorities hard at first? Was there stuff that you had to cut out of your budget? Do you have regrets about not saving more earlier, or paying off debt sooner?
  • Try to get the big picture. Once you have laid the groundwork, it might be easier to talk about what Jay wants for his own future—and what he can do to get there. As your friend opens up, you may learn new details about his financial life. Sounds like he’s been credit card surfing. Is he also ignoring a mountain of student debt or medical bills? Is he missing out on the employer match for his 401(k)—or has he failed to sign up at all? With a bird’s-eye view of his financial situation, you and he will be able to talk about tackling his basic financial priorities. The key is to listen, and not judge.
  • Be a resource, not a know-it-all. One young New Yorker I know told me that a friend of hers in dire financial straits proposed finding a cheaper apartment. When my acquaintance started going through Craiglist to help out, her friend got upset. “I was hoping you’d try to talk me out of it,” she said. “I’m not ready to move. I love my place!” My point? You probably have all sorts of bright ideas about where Jay could cut expenses—maybe starting with those designer kicks. But this is his life. If you pull out a spreadsheet of your buddy’s spending and start going through it line by line, you could anger him and squander whatever progress you’ve made. Instead, point him in the direction of resources that can help him. My book Get a Financial Life is a good primer on the basics, from managing debt to saving for retirement. And there are other resources out there. If he’s swimming in debt, for example, encourage him to check out an organization like the Financial Counseling Association of America or the National Foundation for Credit Counseling.
  • Do not—I repeat, do not—lend your friend money. It doesn’t sound as if it’s come to this, but friends who are hard up sometimes ask for help. You might even feel the impulse to offer it. (This includes paying his way when you do stuff together.) My strong advice: Don’t. Whether it’s a gift or a loan, it will create a sense of obligation that will distort your friendship. You might feel extra critical of your friend’s future spending choices after you’ve thrown some of your own money into their pot. And your friend might feel shame or even resentment about the help. Finally, your money won’t solve your friend’s problematic spending. In fact, it could aid and abet more bad money behavior.
  • Model good behavior. Just because you won’t loan Jay money doesn’t mean you can’t help in other ways. Lead by example: Make sure you have your own financial house in order. Do you track your finances with a tool like Mint? If so, suggest your buddy do the same. Offer up activities that won’t break the bank for either of you. Maybe you both take a Vegas trip every couple years. For you, this is a special vacation that you save up for. For him it could be just another weekend that he throws on a credit card, and he may feel enabled to continue that behavior if you’re along for the ride. Why not inaugurate a college buddies camping trip instead? When you spend time together, don’t hit an expensive restaurant. Have him over for a home-cooked meal.
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