Good friends are spending too much

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RetiredHappy

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My husband and I live relatively "large" but we can afford our lifestyle. Our close friends who travel with us alot and they don't spend nearly as much as we do. We usually provide the accommodation to them for free as we book 2BR/2BA. We are on one of our month-long trips away together, and a couple of days ago he mentioned they will likely run out of money in 7 to 10 years and then they will probably sell their $2M home (have a small mortgage) and buy a smaller home, to raise another $1M or so to fund their following few years. I have been pretty much in shock. Based on their current expenses and we know them intimately, all these will get them to about 87/85 yo at most. They don't have LTCI. Maybe reverse mortgage thereafter but how can anyone live like that? They have been withdrawing about $75K a year to supplement their SS and a small pension They both have longevity in their genes and have no children. I guess they believe in "Die with Zero."
 
Close to $2 million in home equity doesn't seem to be too bad.

They could sell and rent and the house $ would make $70k per year at 4%.

They will find their path and maybe have to slow down. It happens.
 
Are they asking for suggestions or just a friendly ear?

(In their shoes, it would make more sense to downsize now, free up the capital and invest it, but you know that).
 
They have champagne taste and will never be renters. Outwardly they spend and live like they have a lot more than they have in retirement savings. They only drive high end European cars, country club lifestyle (as do we). At some point they are going to need to have a more humble lifestyle.
 
Aerides said:
Are they asking for suggestions or just a friendly ear?

(In their shoes, it would make more sense to downsize now, free up the capital and invest it, but you know that).
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I don't think they were asking for suggestions. He simply opened up about their financial situation while we were talking about the stock market. She is oblivious.

They just moved into this home 3 years ago and they paid $1.1M and home prices in their particular development have appreciated unbelievably. It was exclusive before and it's become even much more exclusive now. They won't want to move out unless they run out of money. My husband suggested that they would not even need to sell the home when they run out of money and they should simply take a reverse mortgage on their home. I am not a fan of reverse mortgage but they will be able to continue to live in that home and their country club lifestyle. I suggested that maybe they should move to a nice home and give up the CC lifestyle and membership when that happens. It's not something he wants to think about at this point.
 
I can relate somewhat. I have had champagne taste for decades and often spend like a drunken sailor. No shame in it from my POV. I've always recognized (or felt) that as I get older, my "ability/desire" to blow my dough on things I like/want will naturally slow down. Well that has certainly happened in my case. When I retired, over a decade ago, I had a lot of pretty expensive hobbies and I was burning the candle at both ends. I can't do what I did 10 or 15 years ago. (Not even close) And I expect in another 3 to 5 years, I won't be able to do half of what I can today. Ex. 10 years ago I never expected to have dumped my classic cars and to be down to just two cars (albeit nice cars). Same with my other hobbies... Way, way, down... (And not because I can't afford them)

Sooooo, one of my motto's has been, enjoy it while you can! Oh, and yes, I do plan to keep enough in reserve that I'll be able to live comfortably, just in case :nonono: I make it to my mid 90's.
 
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I have at least two friends who spend beyond their means. I know, because they have told me, asked for advice, and then completely ignore it. One is pushing 80 and still working because she blew through everything. The other basically had next to nothing (lived with her BF) took SS as early as possible, and is blowing through an inheritance she recently received. Yes, I wish I could help them, but that is not in my control.
 
Well at least your friends are going broke having an exciting lifestyle. One of our former neighbors blew through over $2MM playing Keno at a local bar.

She inherited her large home and two rental properties all free and clear. All gone. Now she rents one of the apartments that she used to own. Even had her car repo'd.
 
Giving friends financial advice is always a bad idea. They have plenty of money and are choosing to spend it unwisely. I’ll save my sympathy for people with real financial problems.
 
Yeah, it's sad to watch. The guy I'm dating is a bit of a financial train wreck. Lots of credit card debt, no emergency fund, is moving to a new apartment because the current one won't hold all his Stuff (extra expense involved because in his city leases require you to vacate one week early so they can clean, paint, etc. so he needs to store his stuff and board two cats). He's recently had car issues and lost his phone, paid to replace it, found it again but has now lost the new one. (In the 6 years we've been together I've never seen the inside of his place because it's apparently overrun with Stuff. I've seen his car and I believe it.) He's got subscriptions to Sirius, Amazon Prime, a local car wash, a gaming site, and who knows what else.

Occasionally I find true wisdom on FaceBook and one item was supposedly a Polish proverb "Not my circus, not my monkeys". It's not easy when (a) you care about them and (b) it affects how much they can contribute to joint activities.
 
latexman said:
Stop paying for their accommodations. Tell them you can’t afford it any longer. Then they’ll probably be less inclined to keep up.
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They are not trying to keep up with us. Heck, when we all decided to sell and buy another home, they bought a more expensive home than ours. We stayed in the same community but in a different home. They bought a more expensive home than ours in a different community 45 minutes away.
 
Luvtoride said:
Tough call, due to your close friendship. I would try not to get involved in their finances as they will have to figure it out.
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Run away from those discussions. You have nothing to gain from their self-destructive behavior. In many ways it is the American way. The best thing to do is keep your wealth as stealth as possible. What would you do if they "asked for help" in some way? It is not a fair question to put the burden on you to say no so my advice is to stay out of their way.
LiveBelowMeans said:
To each his own. Don't worry about it. They will adjust as necessary. $2 million in house equity gives them a lot of leeway.
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2M is not that much, especially if they are house rich and cash poor. I know a few who live this way. They put up a nice facade but the truth is they are insolvent with respect to their lifestyle.
RetiredHappy said:
Not really any point to make. It's just that I will not discuss it with friends and it is bugging at me and I'm wondering if there is a way to get both of them to reduce their spendings.
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Of course it bugs you. These are your friends you care about. That doesn't mean you should concern yourself with getting involved in the spot they got themselves into. We have friends and family members who live above their means. LTC is a big deal when you need it. That was one of my biggest concerns when I was building up our assets. I did not want to end up on the wrong end of loved ones' pity and concern. Dying without dignity was a major fear in my case.
RetiredHappy said:
I don't think they were asking for suggestions. He simply opened up about their financial situation while we were talking about the stock market. She is oblivious.

They just moved into this home 3 years ago and they paid $1.1M and home prices in their particular development have appreciated unbelievably. It was exclusive before and it's become even much more exclusive now. They won't want to move out unless they run out of money. My husband suggested that they would not even need to sell the home when they run out of money and they should simply take a reverse mortgage on their home. I am not a fan of reverse mortgage but they will be able to continue to live in that home and their country club lifestyle. I suggested that maybe they should move to a nice home and give up the CC lifestyle and membership when that happens. It's not something he wants to think about at this point.
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I know the type. Our wealth is stealth and if our friends and family knew how much we really have I am sure things would be quite different now, relationship-wise and friendship-wise. I only told one nephew who I trust how much we have because he will be our backup executor if we all perished together and nobody else was available. I told him flat out that almost all of it is tax deferred or has a lot of capital gains associated with it so raising cash is expensive but if a medical emergency above and beyond insurance happened we would be willing to pay the taxes and help out with a life-and-death situation but that's about it. He gets it and knows better than to tell any other family members we had this conversation. I also hinted that we may be willing to fund higher education beyond what his 529s can fund if his kids turn out to be gifted and Ivy League-bound. He is financially responsible and showed me what he has (he is ahead of me at his age) and has enough fear and smarts not to squander money while still living a nice lifestyle.
 
athena53 said:
Yeah, it's sad to watch. The guy I'm dating is a bit of a financial train wreck. Lots of credit card debt, no emergency fund, is moving to a new apartment because the current one won't hold all his Stuff (extra expense involved because in his city leases require you to vacate one week early so they can clean, paint, etc. so he needs to store his stuff and board two cats). He's recently had car issues and lost his phone, paid to replace it, found it again but has now lost the new one. (In the 6 years we've been together I've never seen the inside of his place because it's apparently overrun with Stuff. I've seen his car and I believe it.) He's got subscriptions to Sirius, Amazon Prime, a local car wash, a gaming site, and who knows what else.

Occasionally I find true wisdom on FaceBook and one item was supposedly a Polish proverb "Not my circus, not my monkeys". It's not easy when (a) you care about them and (b) it affects how much they can contribute to joint activities.
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And you’re still dating him? Must be some positives in there?
 
We live in communities where 90% of the people have more money than us, similarly with our close friends. We live amongst billionaires and people worth hundreds of millions. There is really not such a thing as stealth wealth here. It is just that we are very surprised that our friends are living beyond their means.
 
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athena53 said:
Yeah, it's sad to watch. The guy I'm dating is a bit of a financial train wreck. Lots of credit card debt, no emergency fund, is moving to a new apartment because the current one won't hold all his Stuff (extra expense involved because in his city leases require you to vacate one week early so they can clean, paint, etc. so he needs to store his stuff and board two cats). He's recently had car issues and lost his phone, paid to replace it, found it again but has now lost the new one. (In the 6 years we've been together I've never seen the inside of his place because it's apparently overrun with Stuff. I've seen his car and I believe it.) He's got subscriptions to Sirius, Amazon Prime, a local car wash, a gaming site, and who knows what else.

Occasionally I find true wisdom on FaceBook and one item was supposedly a Polish proverb "Not my circus, not my monkeys". It's not easy when (a) you care about them and (b) it affects how much they can contribute to joint activities.
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I have a friend in the same situation and she has to pay for most of the activities, especially the expensive ones like travel. He is one of those individuals that’s just not good with money, overly generous and can’t delay gratification. He admits he is somewhat ADHD. He is a very good person and treats my friend so well and is super kind and caring. They make such a nice and compatible couple except she has to pay for so much. She doesn’t seem to mind even if she has to help him out as he ages. She is very financially comfortable.
 
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