Helping some family members plan

[Koolau]

Generally good advice so far. What I found with BFF who died half a Mil in debt was that he basically KNEW what to do. Megacorp made it easy AND lucrative to save in the 401(k). He even had a pretty good idea of how to do it. He simply could not turn down the opportunity for the next new toy. He and his family eventually paid at least some price for his (their) profligate life-style.

Maybe you could do some kind of "scared straight" on them (I liked the idea of the cat food - only OPEN the can before you hand it to them).

 

[pjigar]

I don't want ot lead by example because I don't want ot disclose my finance.

You can "inspire" people by fear or greed or purpose! I tend to use greed a lot. I would tell him/her how many percent of income (20-60% range) I saved over my work life so far, and they can obviously see how we live our life both in terms of time and lifestyle. Beyond that, I play the magic of compounding game with her/him. If you invest $1000 a month at 10% annual rate, guess how much money will you have after 5, 10, 20, 40 years? Most people can guess in a ball park for 5/10 years, some even for 20 years. They are always wrong for 40 years. Magic.

I have accepted that if I want to inspire people then I have to disclose some of my cards (not out right numbers) and I am OK with that. I share my saving rate, my holdings (after 2-3 chats and if they are curious), even my starting salary (inflation-adjusted) when I am giving a career advice, etc.

 

[mrfeh]

You can lead a horse to water...

 

[Yegey]

I have a lot of problems inspiring people. I am just not particularly persuasive. I was unable to inspire my parents to invest through education or fear. I am however persistent. Over a 5-7 year time span, I was able to convince them by investing little by little Eventually they notice the growth and become greedy. In my parents case, I had to use their avarice side. It was fortunate that I did this in the 90's. I had to explain the lost decade later on.

However, I have way less pull in this instance. I am less concern with their allocation and more about the saving rate. It took me over a year to convince them to increase their retirement plan contribution. The next goal is to get them to get their SS and add may be Roth contribution and may be taxable (for the higher income person). I don't think I want to appeal to their avarice side, which can lead to a gateway drug. The best scenario is that they blindly contribute to their Target fund and end up with a pile of money 20+ years down the road. Various studies have shown that target fund investors are less likely to make changes than others, perhaps they just don't watch their investment.

 

[Koolau]

I think most people have a good idea about what needs to be done, financially (at least in general terms) to reach Financial Independence. They have simply chosen to ignore what they know and instead do what they want to do - finding something/someone to "blame" their foolish behavior on .

 

[Gallaher]

I think most people have a good idea about what needs to be done, financially (at least in general terms) to reach Financial Independence. They have simply chosen to ignore what they know and instead do what they want to do - finding something/someone to "blame" their foolish behavior on .

Eat that dessert first! Sorry to say Koolau describes some of my kids.

 

[engineernerd]

I think it's actually a good sign that you were able to persuade both to start contributing the maximum to their retirement plans. It may mean their problem isn't so much wanting to spend, more just ignorance and maybe being too busy thinking about other things. Hopefully they won't do what the person Sunset tried to help did!

If they continue to seem distracted and uninterested, maybe don't show them how much they will get in SS benefits, since it might make them feel less motivated? Only reason to show it is to encourage them to keep working jobs that increase their future benefit, instead of working "under the table" for cash, if the lower paid one is tempted to do that.

Good luck! I like the target-date fund, especially if the employer also encourages employees to choose that fund. If it loses value in a crash I doubt they'd blame you first. Hopefully they will still be more interested in other things and won't even notice