How to encourage a friend

[Tommy_Dolitte]

I have a buddy that is going through some serious issues. Graduated top of the class, good-looking (you know all the right stats), but has not saved a DIME during the last 7 years.

He asked me yesterday how much he should have saved--w/o going into a lot of detail, I shared that at our age (late 20's), we should have a minimum net worth between $100 - $175 M.

The look on his face was one of defeat. How do I help empower him. I feel like I left him hopeless.

Any encouraging stories?

 

[haha]

I have a buddy that is going through some serious issues.  Graduated top of the class, good-looking (you know all the right stats), but has not saved a DIME during the last 7 years.

He asked me yesterday how much he should have saved--w/o going into a lot of detail, I shared that at our age (late 20's), we should have a minimum net worth between $100 - $175 M.

The look on his face was one of defeat.  How do I help empower him.  I feel like I left him hopeless.

Any encouraging stories?

 

In my late 20s I had 0. I have a lot more than that now.

Mikey

 

[cute fuzzy bunny]

Yeah, I spent it as fast as I got it in my 20's, which was dumb. I could've ER'ed without the late 90's stock market windfall if I was a little smarter than I was with my money.

Back to your friend...laugh heartily at the good looking, high achieving bastard!!!

 

[retire@40]

There's no magic.  Tell him to get a jar and drop $10 in TODAY.  Tomorrow add another $10 and keep adding $10 every day until he can add even more on a long-term consistant basis.

When he has a few hundred bucks in the jar, he can open a Roth IRA (if he qualifies) or any other type of account that he won't touch until he retires.  Then he can have auto debits from his checking account going to the retirement plan account(s).

 

[Dawg52]

Same here. I didn't have much either in my late 20's. Tell him to always buy used cars. I use to buy a new one every 4-5 years. What a mistake. My last one was 2 years old and 5 years later is running just fine.   

 

[Mr._johngalt]

In my 20s, I didn't have squat (except a lot of debt, a mortgage,
2 kids and a non-working spouse). Same in my 30s. Same in my 40s, mostly. I came, I saw, I earned, WE spent. Then in my
40s came the ER epiphany. I guess the message is that even with
no real plan and no real savings program, an acquisitive spouse
and other disadvantages, it can still be done. Well, not everyone
can do it, but still................

JG

 

[Zipper]

Tell him to find a wonderful woman and have a family.

Make his wife and kids the #1 priority.

Take life one day at a time.

And before you know it he'll have grandkids that worship him!

 

[MJ]

I didn't have a real job until I was 28 so I was somewhat penniless until I started making money as an IT professional.

MJ

 

[vic]

I have a buddy that is going through some serious issues. Graduated top of the class, good-looking (you know all the right stats), but has not saved a DIME during the last 7 years.

Any encouraging stories?

Plays golf too? Sounds like a future manager. That will give him some extra nest egg money to put aside.

Sounds like he is well ahead of many others. He started at least thinking about it some time well before retirement. If he does not have a ton of credit card debt, he is probably doing quite well compared to the average joe.

Vicky

 

[MooreBonds]

How do I help empower him. I feel like I left him hopeless.

Any encouraging stories?

Well, point out that (according to many peoples' views on this forum which I haven't personally subscribed to ) your 20s are supposed to be your 'glory years' where you have all of your fun and piss away most of your money on fun and frivolity (i.e. not being a cheap bastard like yours truly and a few select others so you can reach FIRE when you're 39 ). So, like most others in the world, he isn't very atypical.

Granted, if he wants to ER before he's 40, then he's got a tough road ahead of him....but the only day that it's ever 'too late' to start saving is tomorrow.

You could work up a variety of graphs showing him what $10,000/year saved up would be worth after so many years, etc., etc., to give him some visual incentives. Also, don't forget to show the value of starting today versus just one year later: In that graph of $10,000/year for 20 years, point out that if he waits just one more year to start saving, the difference of waiting just one year 20-25 years from now results in several times his initial investment. Also point out other 'unknowns' that might impact his budget and net worth such as possibly having a wedding, kids, cars, emergencies, job losses, etc.

Congradulate him that he didn't wait until his mid 50s to 'wake up' like, sadly, many Americans do, and realize that he hasn't saved anything. Encourage him to work up a budget of what retirement would look like, and help him see that he will need a hefty portfolio to fund his retirement (note: I'm not talking about the $3 million that many professional sharks salespeople claim you need - I'm referring to the fact that even a scant $1 million portfolio will seem enormous to a 20-something who hasn't saved a dime, much less a $2 million portfolio that will likely be required to satisfy the urgings of someone who has found a need to spend all of his earnings in his 20s.

Offer to show him some of your notes/goals/ways of saving. Give him plenty of info on savings options (i.e. make sure he understands his 401 (k) options, make sure he's funding a ROTH if his income isn't too high, make sure he has taxable investments, etc.). Not only teach him how to fish, but go fishing with him a few times to make sure he has the hang of it .

Oh, and who could forget: e-mail him the link to this forum!

 

[Marshac]

He asked me yesterday how much he should have saved--w/o going into a lot of detail, I shared that at our age (late 20's), we should have a minimum net worth between $100 - $175 M.

First off, i'm screwed. I'm 25, and according to my Excel chart, I will have a net worth (only counting fairly liquid assets - liabilities) of $0 come October (hopefully sooner if I can help it). College is expensive, and i'm still paying for it. My SO is still in school, and she won't be done for 2 more years. After that we will have a pretty kick-ass household income, but I will almost be 28 by then.

Second, what do you mean by 'should'? By whose standards? The goals of many on this board are atypical, and for someone who plans to retire at age 67, $100-175k by late 20s is a bit much.

I currently save (either by 401k/roth contributions, actual savings, or debt retirement) 50.6% of my gross income, and have recently begun to reevaluate this. Once my debt is gone, I'm going to buy a mid-90s truck, and a pair of seadoos (with trailer of course!). I need to have some fun, and saving 50.6% isn't very much fun. It's one thing to be thrifty, it's another to let life pass you by.

 

[Zipper]

When you are in your 20's you are supposed to "eat, dink, and be merry.

It worked for me.

 

[soupcxan]

Once my debt is gone, I'm going to buy a mid-90s truck, and a pair of seadoos (with trailer of course!).

I feel your pain. Just tell me you're going to get the seadoos used (and pay cash)...they depreciate even more than a boat the minute you drive them off the lot. Another hole in the water that you throw money into...but they are a lot of fun!

As for enouraging a friend...an ER mentality is a lot like the matrix. No one can be told what the matrix is - you have to see for yourself.

 

[cute fuzzy bunny]

When you are in your 20's you are supposed to "eat, dink, and be merry.

Did plenty of dinking, but I screwed up on that last part...I thought it was "Be Mary". No wonder that was a confusing time for me.

 

[laurence]

First off, i'm screwed. I'm 25, and according to my Excel chart, I will have a net worth (only counting fairly liquid assets - liabilities) of $0 come October (hopefully sooner if I can help it). College is expensive, and i'm still paying for it. My SO is still in school, and she won't be done for 2 more years. After that we will have a pretty kick-ass household income, but I will almost be 28 by then.

Second, what do you mean by 'should'? By whose standards? The goals of many on this board are atypical, and for someone who plans to retire at age 67, $100-175k by late 20s is a bit much.

I currently save (either by 401k/roth contributions, actual savings, or debt retirement) 50.6% of my gross income, and have recently begun to reevaluate this. Once my debt is gone, I'm going to buy a mid-90s truck, and a pair of seadoos (with trailer of course!). I need to have some fun, and saving 50.6% isn't very much fun. It's one thing to be thrifty, it's another to let life pass you by.

I TOTALLY relate! We make sure to reduce our expenses as much as possible, we put about 35% of gross away for retirement, but you have to have fun now, too! Thus, the Jacuzzi, the mega-grill, the HDTV, the home theatre.....I just make sure I get a good deal and enjoy. We give ourselves an allowance each month for fun, which includes eating out, toys etc. and we spend it any way we want. When it runs out, we stop until the next month. Stress level is WAY lower than it used to be when we would just watch every dime and try to go spartan. BTW 35% is about 40k, but we are in a good 20 year mortgage so more than 10k in principle gets paid on the house, so I guess 50k net worth increase per year, plus interest. Half of each year's raises goes into investments, and the other half acts as COLA adjustments where needed.

Back on topic. Just tell the guy to set up an automatic withdrawal to Roth IRA, max 401(k) matching, tell him to buy the house he loves and stay in it, buy his cars 2 years used, and everything will work out fine.

 

[unclemick]

I - of course - heard the more raw - cous version. No quotes please!

 

[Marshac]

Just tell me you're going to get the seadoos used (and pay cash)...they depreciate even more than a boat the minute you drive them off the lot.

Of course! Craigslist

 

[haha]

Did plenty of dinking, but I screwed up on that last part...I thought it was "Be Mary".  No wonder that was a confusing time for me.

Just remember TH, regardless of the pain you have endured, Mikey loves you.

 

[Mr._johngalt]

Did plenty of dinking, but I screwed up on that last part...I thought it was "Be Mary".  No wonder that was a confusing time for me.

Not bad!

JG

 

[ex_CFO_now_RVer]

I had credit card debt and no savings till I was 29. 21 years later I ER'ed. It can be done.....gotta LBYM.

 

[cute fuzzy bunny]

Rent the jet-skis. Almost everyone I know that owns them stops using them regularly after a year or two, spend a buttload of money on maintenance, and end up selling them and taking a huge bath on them.

Better still...find a friend that has a couple of them. Barring that, CONVINCE one of your friends they should get them.

Remember the old adage...the very BEST boat is a FRIENDS boat!

 

[unclemick]

Heh, heh, heh, heh.

My neighbor has seven Waveriders - kids will be out of school in two weeks - sooo they will be at 'da camp' for the summer.

Only spring for gas - once in a while!

 

[Marshac]

Rent the jet-skis.

They run for $300/day here to rent (lake Chelan), so you only need to use a $3k used seadoo 10 days before buying it pays off.

This would be a pretty sweet business actually.... buy some seadoos that are a few years old from Craigslist, and rent them for a whole week for $600. In doing so you would seriously undercut your competition, have thrilled customers, and it would only take 1.5 months to pay off the seadoo, leaving you at least 1.5 months in which to profit... years 2+ are pure profit from then on.

Hmmmm.....

 

[laurence]

I've looked into renting myself and found prices to be quite high. Maybe the liability insurance overhead? I have a friend that owns two sea-doos, just bought a ski-boat. Says I can borrow the sea-doos anytime!

 

[charlie]

I thought it was "eat, drink and make Mary"

Cheers,

Charlie