How to Give Financial Advice to People Who Ask But Won’t Listen

Recently a friend of mine from childhood, who now lives in a different part of the state, was in town on a road trip and stopped to have dinner with me. While we grew up in the same middle class neighborhood, her family was definitely more “middle class” versus mine which was “upper middle class.” So when she asked me for some financial advice due to a potential windfall from a recent family death, I paused before sharing my typical spiel.

Said friend currently owns property with a mortgage (her parents helped her with the downpayment), but otherwise lives paycheck to paycheck. She makes $60k a year and to her that’s a lot (I did not mention that my income is north of $150k right now, but that’s neither here nor there because that’s a short-lived situation anyway.) She mentioned that she was considering investing in Primerica Financial Services, which I hadn’t heard of before, but sounded a bit like a god-awful pyramid scheme. She acknowledged that it sort of a pyramid scheme, but she was interested in it anyway. If you tell me that and ask for financial advice, I’m going to give it to you.

My advice was fairly simple. I asked her if she had any retirement savings and she said yes, she had invested in 401ks at other jobs before, up to the match (great) but then went on to tell me that she had no idea where any of these accounts were. “Is there one 401k account somewhere that I can just call up?” She asked. I tried to explain to her that she should call her old employers, locate where her accounts are, and ideally roll these over into a Vanguard IRA. In the meantime, if she were to get the small windfall, to invest this in a Roth IRA in order to continue saving for retirement. She wanted access to the money sooner than that, so I recommended a taxable Vanguard STAR fund, but to consider putting it into a Roth anyway and forgetting it ever happened.

When she was asking me about stocks, it became apparent that she understood practically nothing about personal finance. It also became apparent to me that I’ve learned quite a bit in the last 10 years of my life since starting this blog – not enough to be a CFP but enough to hold my own in advising on basic money moves. I enjoyed providing advice and helping her, but I have a feeling she isn’t going to take a bit of my advice. Oh well. At least I tried.

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3 comments

  1. G says:

    This post is kind of an interesting story, but for a title of, “HOW TO GIVE FINANCIAL ADVICE TO PEOPLE WHO ASK BUT WON’T LISTEN”, it doesn’t seem to quite match the title. The title seems to imply that there is a different “HOW TO …”, i.e. you give advice one way if you believe they will listen vs a different way if you believe they will not listen. I didn’t get from the story a particular HOW to give advice for someone who wouldn’t listen. The story I read would be better titled, “What advice I would give to someone who is very unorganized and ignorant about personal finance”.

    That said, I also think the advice you gave missed some of the point in her situation. You didn’t mention the amount of the windfall, but you called it a “small” windfall and you told her to invest it in a Roth IRA (you didn’t say “part of it”, implying that the whole windfall could go in there). Since the Roth limit is $5500/yr, we must not be talking about an amount much more than that. That amount in and of itself isn’t going to make her rich in a Roth, even if she keeps it invested for 30 yrs. I think she has more pressing financial issues.

    Living paycheck to paycheck like you say she is doing is never good. It can be a big emotional drain just trying to pay everything each month. Someone on this road is likely in consumer debt (e.g. credit cards and/or car loan), and 30 years down the road it can end badly with a bankruptcy. I think she would be better served focusing on making her paycheck to paycheck situation/mentality better. She needs to use the (approximately) $5000 windfall to do some combination of start to pay down consumer debts she has, and put money into an emergency fund so that if she has something like a major home or car repair, she doesn’t have to go further in debt to pay for it. While she has the momentum of this money to get a jump-start in these areas, she needs to get on a monthly budget to figure out where her money is going every month. $60k income should generally be enough to develop a plan to pay off her consumer debts and get out of her paycheck-to-paycheck mentality. If she does that, then in the future she’ll have other money of her own to invest in that Roth.

  2. Clare says:

    I’m a huge fan of your blog and read every post. Mostly because I can relate to a lot of it. I wanted to share the below podcast with you because it’s about a San Francisco woman who found herself paralyzed with anxiety in a marketing role at a major startup. I’m not saying this is your life or your feelings, I just thought you would find it an interesting story as I did.

    http://www.wnyc.org/story/mental-illness-death-sex-money/

  3. Angie says:

    Why not recommend that she pay down the mortgage? If she is living paycheck to paycheck, recasting her mortgage could make a big difference in her monthly expenses, or at least it could give her decreased expenses as she approaches retirement.

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