Close Friends and Money Advice

Growing up in a small town gives you the opportunity to know everyone you grew up with by name.  I graduated from a high school with a graduating class fewer than 100 people, I knew everyone’s name and as we all went our separate ways had a pretty good idea what their plans were going to include.  Most of my close friends chose to head off to an in-state university, while a few chose to head off into the working world.  It has been 15 years since I graduated, but with the internet it is much easier to see what others are doing with their lives today, most actually post it on Facebook. It takes all of 2 or 3 minutes to find out girl 2 lockers down from me in high school is married, currently pregnant, works as a teacher, and lives in the same state as we both grew up in.

My close friends are different.  What is great about the guys that were my close friends 15 years ago is we are still close friends today, I consider them my best friends, they even stood up in my wedding for example.    Being such close friends, it also causes me to know more about their financial lives, also a little funny is that my close friends make up a modern day version of the YMCA.  We have a doctor, lawyer, banker, construction worker, fire fighter, and for good measure we can add a fisherman.  Off track on the topic I that always makes me smile.  As someone who reads and lives personal finance I really enjoy learning what challenges and decisions my friends face, I’m not there to judge, far from it, but rather as a friend I tell them what I would do in their situation.  It’s what being a good friend is all about, there is trust there that one cannot earn in the matter of a blog post, and it was earned throughout the years of knowing one another.

During a conversation with my friends I heard some interesting personal finance matters, ones that I don’t necessarily see in my life.  For example, a close friend has moved in with his girlfriend of many years into his future mother-in laws house to save money for a down payment so they can have a house of their own.  The plan is fantastic, what a great way to save money by eliminating one of the biggest expenses you have, rent.  I personally found by essentially eliminating my mortgage payment I was able to take that extra money and eliminate my student loans.  The plan is great; the execution itself is what worries me.  Both individuals work extremely hard and make good money from what I can see from the outside and what my friend has shared with me.  Here are a few things that caused red flags to come up for me:

  • Vehicle Rich, Means Poor.  Currently they have 3 vehicles, one of which was purchased via loan during the same time that they were saving money for a house.
  • Only the Best.  My friend has a tendency to want the most expensive item because it is the best, for example he does not purchase a sweatshirt, instead he purchases a $140 hooded sweatshirt from the best clothing store with the best brand that only the NFL players wear.
  • Sports Memorabilia.  My friend attends many charitable functions to support causes he believes in, for example in a charity event I attended with him last year, he bid hundreds of dollars on a beautiful framed picture of one of the professional sports stadiums.
  • Dream House.  Over the weekend my friend shared with us he was looking at a house that included a 5 car garage and his girlfriend kept using the term, finding our dream house.  I asked one simple questions:  What are you going to do with a 5 car garage?  Answer 3 cars, boat, and storage or a man cave of sorts.  I also couldn’t stand hearing the term “dream home” being thrown around when looking for your first home, I had to mention something.
  • Price.  I’m sure they make good money together and they assured me that they had a large down payment for the house, but what I worry about is at what cost?  Are you putting all of you savings into a nice house just to become house poor?  Will this big purchase force you to  use your credit card more often or take vacations you can’t afford because you are stressed?

All of our conversation was over a few beers and I only brought up matters up that really concerned me.  My casual mention of having too much home was mentioned twice, but it was not meant to judge or give advice, I was hoping this would trigger them to think out the process in more detail.  The thing is we are all different people who have different wants and needs, I don’t expect my friend to yell at me for blogging for free about personal finance and nor would I expect to listen to my 10% rule on cars and paying off debt.

Friend, if you are reading I love you like a brother and I hope nothing but the best for you.  If I was in your situation here is what I would do:

  • Downgrade my vehicle to something that is paid off.  If you own a 2015 Ford F-150, get it down to a 2005 Ford F-150 that’s paid for.
  • Limit Yourself.  Getting the best and most expensive may seem great at the time, but when you are looking at houses and rings for your future wife, take a step back and consider those as your only priorities for getting the best.  Cut back on a few things for now, until this is accomplished.
  • Ease up on Charity Purchases.  Until your house is purchased let’s not buy another auction item at a charity, let’s make it the rest of 2015 without buying any of it.
  • Budget Dream House.  Let’s set a price 20-30% below what your mortgage broker says you can afford in your pre-approval and look at houses in that price range.  This will prevent from being “house poor” and still get a house that fits into your budget.  You guys are young and should enjoy yourselves; I just worry that if all of your money is in the house you will put yourself in a situation to get into debt.
  • Less Price, More Future.  As we all know we can have a job today and gone tomorrow and one way to prevent ourselves from emergency situations is to live below what we make.  This can be done by not getting the biggest and most expensive house on the market.

Do you have any suggestions for my friend?  Think you would handle the situation differently?  




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23 Responses to “Close Friends and Money Advice

  • Hey Even Steven!

    I have a friend just like the one that you mentioned. He works in IT writing computer code and his wife is a doctor. Needless to say, they both pull in pretty good money. So far, so good.

    But, they also live on a golf course in a home that was close to $1m. He is a gadget whore and a total Apple fan-boy. Must. Have. Everything. Apple. He’s one of those who will stand for hours and hours in line to get his hands on the newest Apple *whatever*.

    Honestly, I’ve mentioned to him MY desire to retire early (and the associated frugal lifestyle), and he simply said, “Oh I couldn’t do that. I gotta have all the latest gadgets”. I then dropped that line of conversation.

    I’ve realized that it’s not my job to convince other people that retiring early is in their best interest. Quite frankly, early retirement isn’t for everyone. If they want to buy big homes, expensive cars and have the latest electronics, that’s cool – have at it. I’ll be out exploring our world during the day while they are still cooped up at work.

    I think you handled the situation well. You threw out a few key terms (“too much house”) a couple times to see if it would stick, but you didn’t attempt to criticize their financial choices, which would have put them on the defensive.

    We are all adults and should be capable of making decisions that are in our best interest. I personally like the technique of throwing out keywords to see if it sparks conversation. If it does, I take that as an open door to talk more about *what I’m doing* to save money and retire early, hoping that the person that I’m talking to can apply that to their lives. If it doesn’t spark follow up questions or comments, I leave it alone. Their life. Their choice.

    Good on you for letting it go. 🙂
    Steve @ Think Save Retire recently posted…Jobs are funny things, and so is quitting!My Profile

    • EvenStevenMoney
      1 year ago

      Everyone is certainly different, I like the term Apple fan-boy lol. I didn’t even mention early retirement I honestly was just concerned that he would be in debt for the rest of his life trying to get the next big house, truck, boat, etc.

      It really is their lives, I hope they make the right decision for their finances.

  • I would focus on what their budget says is affordable, not the bank or mortgage broker. I think there are some times when buying “the best” or high quality makes sense. A hooded sweatshirt, probably not, but tools or appliances might make sense.

    3 vehicles and a boat might be a bit much, the man cave I can handle. Did they look at tax, insurane, and other mainenance costs on an annual basis for all that? It can really add up fast.
    Vawt recently posted…The Homemade Laundry Soap ExperimentMy Profile

    • EvenStevenMoney
      1 year ago

      That’s a good point on the additional expenses for the house, just because you can afford the payment doesn’t mean everything else isn’t going to add up and make your home buying prospects come a bit more down to reality.

  • I think one of the biggest things to try and change is wanting the most expensive. While I do believe that spending a little more on most objects will allow you to have higher quality items that last longer, just because it is more expensive does not mean it is better. At some point, the quality just doesn’t warrant the price, or the quality just isn’t there but you are spending more anyways.

    If you fix the issue of always wanting the most expensive, I think that will help in all the other areas, like the big house, the new cars, etc.
    Thias @It Pays Dividends recently posted…The Weekly Dividend Payout #4 – Feedback Loops in InvestingMy Profile

    • EvenStevenMoney
      1 year ago

      That’s exactly what I’m worried about for my friend, always wanting the most expensive, when it comes to buying items that have less importance in your life, whether it’s sunglasses or an expensive watch, so much of that can be avoided.

  • It is tough to talk to your best friends about money if you know they have completely opposite views on the topic.

    Some of my best friends have told me before that they wouldn’t save because:
    – they can’t take their money with them in your grave so they should as well spend it now,
    – if they’d die tomorrow, at least they would have enjoyed it,
    – they don’t want to live like they “are poor”
    – if they didn’t spend all this money, their spouse would leave.

    There’s really not much of a constructive debate that could happen and I couldn’t criticize them either.

    But the truth is, you can’t force people to do things they don’t want to do.

    I think you did the right things dropping all these keywords to your friend, listening to him and sharing your opinion. You could maybe drop a few more if you think it would be valuable.
    Now unfortunately, the ball would be on his side to decide whether or not to take action on your suggestions.
    TheMoneyMine recently posted…Financial Independence Interview with EvenStevenMoneyMy Profile

    • EvenStevenMoney
      1 year ago

      Many of the things mentioned are just mindsets rather than actual reality. I mean to say that I live a poor life is pretty far from the truth. I’m sure I’ll mention something from time to time to make him think about it a little more.

  • You laid out some pretty solid advice Steven. It sounds like your friend is going all out in everything he does and spends. Might be a good idea to re-evaluate the plan. Of the things you mentioned what the most important. If the home rises to the top, maybe that could be the focus and other things should be scaled back to achieve what’s most important.

    • EvenStevenMoney
      1 year ago

      Agreed if that’s his most important thing to him he really should focus on that and scale back on the other stuff.

  • I was thinking the same thing…what do 2 people need a 5 car garage for? I don’t even know why 2 people need 3 cars? I have friends who spend extravagantly and who make good money. I generally keep my opinions to myself since we all have different priorities, though I’d probably point out things like the ones you did. However, if I had a close friend who I thought was on a verge of a financial crisis due to their spending, I might try to be more active in giving advice…but even then, I think it’s tough to tell someone how they should spend their money.
    Andrew@LivingRichCheaply recently posted…Frugal Dating GuideMy Profile

    • EvenStevenMoney
      1 year ago

      Yeah I guess it depends on how serious it is for the financial crisis, although I think at that point it might be difficult to bring them back as it would be to keep them out.

  • I think the advice you offer is great. I might also add that he shouldn’t do any of this (e.g. buying the house) until he is married. Buying with his girlfriend can be a recipe for disaster.
    Jason recently posted…A $200 BudgetMy Profile

    • EvenStevenMoney
      1 year ago

      I don’t mind buying a house and having your girlfriend move in, but agreed that buying together is asking for trouble.

  • Buying your dream home as your first home is a TERRIBLE idea. We didn’t know what we wanted in a home until after we lived in our first home for 7 years.
    brock @Cleverdude recently posted…Health Care System Fail : It’s Your Money and your Health at StakeMy Profile

    • EvenStevenMoney
      1 year ago

      Exactly, I couldn’t agree more. Dream home, come on things change in your life.

  • That is some very good advice! One “exercise” I might add is to evaluate Opportunity Costs – especially for the Dream House.

    The difference in payments and interest between a moderate house and dream house is $__. Okay, if you buy this house, what CANT you buy? How many vacations could you go on? How many extra years of work? You favorite most expensive restaurant is ___, and you could go there 782 times.

    Don’t just focus on what you are getting…focus on what you now CANT get! It’s depressing 🙂
    Luke Fitzgerald @ FinanciallyFitz recently posted…Tuesday’s Long Read! Plus, New Feature on FinanciallyFitz…My Profile

    • EvenStevenMoney
      1 year ago

      I like that exercise at least for myself, sometimes I look at an expensive item and the brain starts working on how what I would do with it, instead of what I can’t now that I have the expensive item.

  • Talking money with friends can be SO hard, except with the ones who are especially open. We have to remind ourselves that some people truly ENJOY working, and don’t mind doing it for a long time to enjoy a certain lifestyle. I meet people like this all the time on airplanes, and I ask them tougher questions than I’d ask friends because I know I’ll never see these folks again. I’m convinced that a certain slice of the population is happy to trade their life force for work to be able to live large. That said, in terms of living large, do they even make 5 car garages??! That sounds made-up. 🙂

    If your friend doesn’t enjoy working, I often feel like it’s still important to let them make their own mistakes. Most of us only learn by doing, and can’t just let others make those mistakes and then learn from them. In our 20s, we spent WAY too much money on dining and travel, along with a few luxury items. But I wouldn’t trade that time, because 1. it was fun, and 2. we needed to spend that money to finally realize what a shocking amount we’d spent, in order to alter our life path. If someone had preached financial austerity to us in our 20s, we would have tuned them out or even stopped being friends that that judgy mcjudgerson. 🙂 It sounds like you handled things just right in mentioning some things about your situation without giving advice. It’s hard not to give advice sometimes!
    Our Next Life recently posted…How We’ll Learn to Stop Worrying and Love The Budget // Managing Our Finances in RetirementMy Profile

    • EvenStevenMoney
      1 year ago

      They sure do make 5 car garages, I actually chose not to look at the pictures of the house, I knew I couldn’t handle it. Yeah learning from all of our mistakes can be tough and we want to share some of the things we have learned, but advice not used is tough to give sometimes.

  • I’ve been told I can be very blunt. One of my friends just leased a Mercedes and he didn’t hear the end of it from me for at least a week. Another friend is looking to buy a house but works a ton of hours and travels for work, and never would actually be there or have time to take care of it. I tried to show him renting for a while would pay off for him, but he said his wife wouldn’t hear it…

    I don’t think there really is any advice that’s going to change your friend’s mind. People become set in their ways and that’s fine. Everyone is different. Maybe you’ll be able to take advantage of the dream home and have all the dinner parties and holiday parties there 🙂 Maybe go on rides on the boat.

    • EvenStevenMoney
      1 year ago

      Sorry for the late response. You know sometimes it takes someone being in your face about something to realize what’s going on. It’s kind of like a sales pitch, it’s a numbers game keep going at them with suggestions and who knows they just might hear you one of those times;)

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  • The Friday Feast ~ the 21st of August - :

    […] that many of us deal with a lot – talking with friends and family about money.  Even Steven published an article that discusses a situation he had with one of his close friends who are clearly living above their […]

    1 year ago

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