Feels Good - Helping a Co-worker Get Financially On-track

[38Chevy454]

Recently have had some discussions with a couple co-workers and it feels good to help them get financially on-track toward retirement and just financial aspects of life in general. Did not talk direct money values with them but learned enough to give them general advice.

Basically my directions to them are (copied this from an email I sent):

1) Pay yourself first = save at least the 401k amount to get the company matching contribution, pre-tax is usually best. IRS allows up to $17.5K pre-tax for individuals, plus additional $5.5K for over 50 years old individuals. This is the most crucial aspect, have it automatically deducted and invested in 401k before you even get paycheck. Hence the pay yourself first, before any other expenses.

2) Live below your means = have only good debt, which is mortgage and maybe car. No credit card debt, or store credit debt. Credit card debt is 18-24% interest and not deductible. This can be very costly! Car loan is not deductible, but if you buy a 2-3 year old car, to have a good reliable car that can be OK. House mortgage is deductible and is OK debt. Also includes aspects such as keep driving the older car, live modestly so you have some margin at end of the month.

3) Invest those 401k funds = according to your risk tolerance, I would suggest at least 60% equities (into diversified stock mutual funds) if not higher if you can handle the volatility. Over time, stock market will give best return, just don’t panic when it has a drop, ride it out until you are close to retirement.

4) If you have any kids and want to save for college for them = NM has a great deal on the 529 college savings plans in that NM allows you to deduct your contributions against your NM state taxes. 529 is able to grow tax free like a Roth IRA, so you can withdraw for college expenses without any tax liability. This is after-tax money for initial investment, but you get the partial state deduction, so that helps a bit.

5) If money left over, consider Roth IRA = after-tax money invested, but it grows tax free and no tax liability when you withdraw it later for retirement. This is hardest to do since it is after-tax money out of your take home pay; note that not having credit card debt allows more for potential Roth IRA savings.
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Curious if you all have any additions or critiques to my suggestions. I know many here will not like the car loan, but no chance these folks can pay cash outright and my suggestion is to buy slightly used car or keep the older one longer time. I think they understand this is important to being able to save. They have credit card and store debt to pay off first and need to concentrate on this and their 401k's. The NM 529 plan has unique case for this state that makes it more attractive, but I think it holds for most states that 529 is usually the best for college savings.

Also remember these are the first steps. As has been discussed many times here, there are not really good educational resources available for this, unless a person makes the effort to educate themselves. I consider this as my push to get them started down the right path and towards getting their financial health on-track. I did not want to just tell them read up in a book of which several good ones. That may come later as a suggestion, for now it is to start changing their mindset.
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[2B]

I don't have any issues with what you told them. I would recommend they read Millionaire Teacher to see about index investing.

I've had discussions with many people over the years. Unfortunately, I think my success rate in getting them to get their financial house in order has been under 10%. It sounds good to LBYM and save for retirement until they decide they "deserve" a new car, vacation, etc.

 

[harley]

I had a co-worker that was very interested in my FI. We spent quite a few lunch times discussing pretty much everything on your list. I was feeling pretty good about passing along my hard earned wisdom and helping one person escape wage slavery.

Then March rolled around, which was bonus time. I got my ~$5-6K. DW and I had a nice date, dinner and a movie I think. The rest went into savings. When I got back to work after the weekend, there was my grasshopper on his brand new $15K Kawasaki something or other. Not only hadn't he saved the bonus, he'd gone $10K into debt.

Luckily I'm a classy guy (lol!) so I didn't say anything, but I did find other ways to spend my lunch times. I also didn't say anything when he got a ticket and lost his license for exceeding the speed limit by over 30 mph, and spent the next year riding the bus an hour each way to work.

Some lessons have to be learned personally. Now, 9 years later, he's still working. The bike was stolen a couple of years after he got it. I was hoping he'd at least save the insurance money, but he just bought a new (and faster) bike, going even deeper into debt.

I hope your efforts pay off better than mine did.

 

[cardinal93]

My success rate has been low as well...

Now I recognize that only those who DESIRE to be saved can be saved. Wanting to be saved is not enough...because wanting requires only that u can dream or wish, which is a pretty low bar.

Desire connotes sacrifices, that u are willing to do something to get what u want.

It gets back to the old saying that u can lead a horse to water...so next time find a thirsty horse who is also willing to find his own water supply.



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[Chuckanut]

38Chevy54, You are to be congratulated for helping this coworker.

You have given them the seeds they need to grow their money tree. It is now up to them to plant the seed and nurture the tree to maturity.

 

[Car-Guy]

When I was working, I had many fellow employees ask me my opinion on savings/investing strategies numerous times over the years. After a while, I began to feel that I was making a mistake of just telling them what was important to me without realizing how different someone else's circumstances/goals/etc might be. Sometimes I'd feel guilty about imposing (that's how it felt) my personal savings/investing habits/goals on them (although I'm sure (hope) they were smart enough to make their own financial decisions)

Later in life, I started to just focus on "suggesting" that they max out matching 401k's and paying off CC's in full each month and I stayed away from recommending any specific investing strategies, except as generalized discussion points.

 

[WhoDaresWins]

I keep my mouth shut about investing philosophy unless specifically asked for my input.

Two friends/former co-workers have asked my opinion in the past but neither took my advice about looking at low-expense funds and index funds at places like Fido, Schwab or VG. One friend got a sudden large influx of cash (six figures from the sound of it) from stock she inherited from her father when the company was bought out by Berkshire Hathaway a year or two ago. I suggested she read and study before she invested the proceeds but she had an account with a full-service broker and she seemed relieved that he was going to manage the investing for her and she said she didn't care about any fees as she had no desire to do it herself. She is very computer savvy and I sent her links to VG and told her to start reading Bogleheads.

The other friend often talked to me about her whole life policies that apparently everyone in her family has and how they were perpetually strapped for cash meeting the large premiums. These policies are at reputable insurance companies and I don't know how long she has had them so I don't know if they are a good deal or not. I asked her if she and her hubby had IRAs and they do not. She asked me to research some fund or another on one occasion that their accountant wanted to put her hubby in. I can't recall the name but it was very complex beast (not an annuity though) and I told her to "Run". It had a large front load and high annual fees, etc. I told her that her accountant was likely making a big commission selling this investment and her response was "Well, he has to make a living." I also sent her all kinds of links to VG and articles about watching fees and commissions when investing.

I prefaced my comments with the fact I am a novice investor and know what little I do from reading and also from the school of hard knocks. I suggested to both friends that if they wanted professional advice they consult fee-only advisors and gave them a couple of local names I found on the Garrett planning website or that they l contact VG's advisor center.

 

[travelover]

.............I hope your efforts pay off better than mine did.

My success rate has been low as well ............

I keep my mouth shut about investing philosophy unless specifically asked for my input. ............

I guess it is a good thing that I was never in sales because the only person that ever took my advice was DW - and now I handle all the transactions.

 

[Mulligan]

My success rate has been low as well...

Now I recognize that only those who DESIRE to be saved can be saved. Wanting to be saved is not enough...because wanting requires only that u can dream or wish, which is a pretty low bar.

Desire connotes sacrifices, that u are willing to do something to get what u want.

It gets back to the old saying that u can lead a horse to water...so next time find a thirsty horse who is also willing to find his own water supply.



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Isn't that the truth. And I am just talking basic personal finance stuff, as even I am no investment expert myself. It is more lack of self discipline or truly not willing to make any sacrifice than it is brain power.


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[Walt34]

The lack of success in most people's ability to plan ahead and defer immediate gratification for long term gain suggests strongly what the consequences of the "401(k) experiment" will be. Unmitigated disaster.

But perhaps the generation behind them will learn from that, as happened with many of the people who came of age in the 1930's.

 

[rodi]

My last two years at work I had several coworkers talk to me about finances. They knew I had a plan, I was working the plan, and when the plan succeeded I was going to be out of there.

They also saw that I brought my lunch from home. I had a used cellphone (too cheap to buy a new one). They knew I maxed out the 401k, and was making extra payments on my house.

Every now and then someone would say they couldn't possibly do it. These were mostly people making a lot more than me (I was p/t - only working 4 days a week.) They complain that the kids cost too much (I have kids), the spouse didn't work enough (my husband was under-employed and/or retired for much of this time). I just said that I had a great life - even if I had an old car, brought my lunch, and walked the canyon trails at lunch rather than going to the gym to workout with a personal trainer.

In that 2 years I know I had an impact on 3 people. One was an intern that we hired when he graduated... I strongly encouraged him to max out the 401k. I pointed out that he was used to living like a pauper in college... That he should keep his pauper lifestyle and save in the 401k and pay down his student loans. He listened - had roommates, brought his lunch to work... discovered free things to do in his new city rather than spending money.

The other two were closer to my age and had mortgages/kids/etc... I kind of nagged them till they both maxed their 401k and maxed their ESPP. By the time I left they'd both done that.

 

[Walt34]

In that 2 years I know I had an impact on 3 people. One was an intern that we hired when he graduated... I strongly encouraged him to max out the 401k. I pointed out that he was used to living like a pauper in college... That he should keep his pauper lifestyle and save in the 401k and pay down his student loans. He listened - had roommates, brought his lunch to work... discovered free things to do in his new city rather than spending money.

The other two were closer to my age and had mortgages/kids/etc... I kind of nagged them till they both maxed their 401k and maxed their ESPP. By the time I left they'd both done that.

Ah, perhaps there is hope after all. Great to hear a success story once in a while.

 

[cardinal93]

That's a good story rodi.

Just like diets, the true test is whether they can keep their eyes on the prize and stay the course. When I see all the fat people all around me, I understand the biblical saying that the spirit is willing but the body is weak.

This is because healthy living, just like financial living, is not like a piece of clothing u take on and off whenever u want. It is a lifestyle choice with continual sacrifice, where the rewards are perceived to be greater value than the sacrifice.

At some point in their lives, most people will become unable or unwilling to continue making those sacrifices.

The ones on this board are the outliers who have passed through the eye of the needle. We perceive the needle is the size of a dwarf door...small but manageable with enough effort. The rest perceive the door to either be hidden or impossibly small to squeeze through...never minding that thousands of other people have passed through that needle before. They ascribe our success as magic, fortune and a host of other things that they think are beyond their control.

I feel compassion for them. I have spent countless hours studying retirement planning...and have spent countless hours trying to help co workers and friends. I haven't seen a single one make any lifestyle change.

But that is their choice and I wish them well.

Cardinal93


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[dallas27]

While i hope all goes well, i can see a resurrection of this thread maybe in six months, or years, when you are blamed for the others decision.


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[travelover]

While i hope all goes well, i can see a resurrection of this thread maybe in six months, or years, when you are blamed for the others decision..........................

Good point. Anytime you suggest an investment, even in general terms, you get to own the wrath for a down market.

Plus, any time you point out that someone is getting shafted by their current "adviser", you get the wrath of the person that chose that adviser in the first place.

 

[WhoDaresWins]

One saving grace for the financial security of folks where I worked is the mandatory 9% contribution to our pension plan on our gross pay that was skimmed off before we even saw our paychecks. The match did not start until year 5. I also contributed a couple of hundred bucks a pay period to a 457b plan with one of the less bad choices afforded to us. When I retired I had quite a large stash in that plan, and I rolled it into an IRA at VG.

 

[skibum]

When I started at megacorp in the early '80's after college, a mentor insisted I enroll in the fairly new 401k with the max 12% contribution, 4% match, and 50/50 stocks/bonds. In response to my protests, he demonstrated how I would be saving more than twice what I could take home due to company match and deferred tax. My standard of living easily developed around the unseen contributions, which grew to 4, 5, 6, figures before I new it. The excellent advise at this pivotal time put me on the right path, saving for retirement in my 20's, just like all the investment examples show huge rewards to the early saver.

I have taken it upon myself to provide the same guidance to a few dozen impressionable new hire college grads over the years. The message has evolved a bit to include more equities, index funds, and Roth IRAs. Everyone has different circumstances as noted, so I'm cautious not to over impose, but otherwise fairly determined to make the case. A few are financially savvy to begin with, a few get it quickly, most eventually see the light. I hope I have returned the favor several times over, and set many more on the path to financial literacy, security, and independence.

 

[ChicagoGal]

It is a lifestyle choice with continual sacrifice, where the rewards are perceived to be greater value than the sacrifice.

When asked, I try to frame it as more of a choice (or series of choices) than a sacrifice. As in, you can spend X today and have Y tomorrow, or you can spend 70% of X today and have 300% of Y tomorrow. I encourage people to do the math for themselves (or help them, if they need it) to see various outcomes based on specific choices they can make.

For me, working a few more years so that I can take nicer vacations now (and later) is worth it. Working a few more years beyond that so that I can have 4 Starbucks coffees a day, not so much. Other would (and do) value different things differently. All about choices!

 

[38Chevy454]

Small update. One of the co-workers upped the 401k percentage to get the max company match, before she was approx 2/3 of the match amount. Also told me that the husband was going to evaluate his 403b options and likely make some changes. But the biggest success is that they are reviewing the family budget and going to concentrate on getting debt paid down. She realizes that changes are needed now to benefit future years. Hopefully she sees some initial success that will spur further progress.

I agree with others that it really reduces down to people making changes and understanding delayed gratification. Most in society today miss this lesson.

 

[jkern]

I had a co-worker that was very interested in my FI. We spent quite a few lunch times discussing pretty much everything on your list. I was feeling pretty good about passing along my hard earned wisdom and helping one person escape wage slavery.

Then March rolled around, which was bonus time. I got my ~$5-6K. DW and I had a nice date, dinner and a movie I think. The rest went into savings. When I got back to work after the weekend, there was my grasshopper on his brand new $15K Kawasaki something or other. Not only hadn't he saved the bonus, he'd gone $10K into debt.

Luckily I'm a classy guy (lol!) so I didn't say anything, but I did find other ways to spend my lunch times. I also didn't say anything when he got a ticket and lost his license for exceeding the speed limit by over 30 mph, and spent the next year riding the bus an hour each way to work.

Some lessons have to be learned personally. Now, 9 years later, he's still working. The bike was stolen a couple of years after he got it. I was hoping he'd at least save the insurance money, but he just bought a new (and faster) bike, going even deeper into debt.

I hope your efforts pay off better than mine did.

You can lead a horse to water, but you can't make him drink. I've had similar experiences, some people just can't curb buying stuff.

 

[KB]

It's nice to know that it sometimes pays off to try and help people with their finances.

About 2 years after I retired, a former co-worker emailed me and thanked me for helping her see the light about her finances. She had been in debt, had a lien on her property and was just a financial mess. She always shrugged her mess off by saying, 'oh well I'm not good with money'.

She finally realized she could change her habits and got out of debt, got the lien off her property and started saving and investing in her 401K. I can't tell you how thrilled I was to hear from her.

 

[project2501]

Financial advice in the work place? I thought corporate slaps on the wrist for that. Besides your talking outside the box for majority of coworkers. As much as you want to help them, I"d avoid being cut over it.

It's hard enough to convince management some ideas are just not the way to do it. Even harder to convince coworkers about finance.