Why You Need Financially Smart Friends

Financially Smart FriendsI think about money and retirement a lot.  I believe it’s important that we communicate with one another to share our thoughts on money with friends.  This can help you determine if you’re on the same track as your peers or to learn ideas that can help you save or generate more money.

Discussing money can help you to brainstorm financial problems that you might otherwise not have figured out on your own.

So why is it that my friends don’t want to talk about money?

Just to test the waters, sometimes I’ll lead a conversation with friends into the subject of money – maybe retirement accounts, rentals, or even just saving money.  It always gets squashed quickly and they move onto another subject.  I would love to share some of the things I’ve learned and pick up on some information they might know, but it just doesn’t seem to happen.

Now, this isn’t all my friends – I have some friends (not very many) that are open and we have really good discussions about money.  And I’ll lump my brother in there as we talk about money all the time, but, I would say the majority of the people I associate with still tend to down-play any such conversation.

My inner circle of friends are your everyday middle-class kind of people.  They work hard and make a decent living, but from what I gather don’t save a lot of money or plan too much for the future.  I don’t know for sure though, because like I mentioned, they tend to be very reserved about money discussions.

It’s kind of ironic considering we talk about everything else like it’s no big deal – subjects that should really be the ones you wouldn’t want to discuss!  But for some odd reason, the majority of my friends consider the subject of money to be taboo.

Too many people look at the topic of money as something personal that should be kept to themselves.  I think that can be a big mistake.  If you want to be in better control of your future, one of the best things you can do is to discuss your finances.  This is how we learn and grow.  Maybe you don’t understand just how important that match is on your 401(k), or that you can take out all your initial contributions to a Roth IRA penalty-free at any time, or subjects like annuities, or even the differences between whole and term life insurance.

Now I’m not suggesting that you just follow a tip that your buddy gives you without a second thought.  You really want to thoroughly understand any investments that you make, whether by discussing with a financial planner or by doing complete and thorough research yourself.  However, there is a ton of great info that you can share with your friends that would benefit everyone.

I would love to discuss the advantages of buying a rental house with my friends and how this can really set you up with a great passive income stream in the future.  I would also like to share the downsides to it and the mistakes I’ve made in that aspect.  And I would enjoy learning any money lessons they might provide, but I guess that’s not in the cards.

Conversations about money are also important for motivation.  If you don’t get off your butt and make any changes or put it off until tomorrow, you’ll look back and realize that 30 years have passed and you really shoulda, coulda, woulda.  It makes it a lot more difficult to miss the years of growth if you don’t get things going as soon as possible.  And just having those discussions might be the motivating factor needed to help you make it happen!

On the flip side, I do try to talk about money with people who I know make a good living such as the mentors in my life.  From these friends, I learn some important decisions that can dramatically affect my finances.  I learn from both their successes and mistakes they have made along the way.  But I wish more people in my life would be a little more open to money talk.

Maybe I’m too partial to the subject of early retirement and financial freedom.  I’ve learned that a lot of people just don’t care about that.  However, even if you’re not looking to retire early, you still need to be planning for your future if you want to stop working sometime before you die.

What about you?  Do you discuss money with your friends?  And are they open to talking about it?

Thanks for reading!!

— Jim

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12 thoughts on “Why You Need Financially Smart Friends”

  1. No one that lives paycheck to paycheck discusses money because then they are open to be judged on all their wasteful spending. Let’s face it, everyone spends money on things they shouldn’t but if I couldn’t afford to invest in my future while I was on lavish vacations every year, I would be judged by my money conscious friends. Find some friends that share your retire early philosophies.

    1. Thanks, Joe – that might be true in a couple of my friends, but I also have several groups of friends that very rarely go on vacation or spend money on major frivolous purchases (that I know of). We actually just took a vacation a couple years ago with a few families that are friends of ours and this was their first vacation in almost 10 years. So that’s not always going to be the case. But I do agree that having friends that share the same philosophies on early retirement tend to be the ones that are more open about the subject of money.

  2. Hi Jim,

    Thank you for the great piece, it was well-written and offered honest insight and thought-provoking points.

    As a father, business owner, and financial advisor I couldn’t agree with you more. Shedding old notions of money as a taboo topic can help us build a community of financially responsible, educated stewards of wealth. It is the only way we will mend the current faults with transitioning generational wealth.

    Looking forward to reading more of your work.

  3. It was this fact — how hard it is to talk money with friends — that led us to start our blog, which we’re sure glad we did. We’ve connected with so many great folks through it, and have accelerated our savings rate as a result. But, to your point, it’s true — we only have one couple we discuss many with, and even with them, it’s a little vague.

    We think a big reason is that MOST people are doing a lousy job managing their finances, and they don’t want to discuss something they are ashamed of. We are more than happy to discuss money, and will take basically any bait to do so, but wonder if it inherently comes out as braggy or know-it-all-y to those who have shame around their money choices. It’s such a loaded topic, as you very well know! But at this point it’s sort of chicken-or-egg: if most people are ashamed and don’t want to talk money, then we need to make them unashamed. But in order to do that, we need to talk about money in the first place, so they know how to learn to make better decisions!

    1. Hopefully my blog will also help us to connect with other good people such as yourself! I also feel the same about possibly coming off as arrogant or pompous as well, but I know exactly what you’re talking about. I would love for people to just open up on these kind of discussions… maybe sites like ours will be able to help make that a possibility one day.

      1. I agree with all of us. My parents wouldn’t even discuss money when I asked. My wife don’t know much about investing but we’re great at saving and done our 401k and contributed to our Roth but I would love to be able to talk with my kids about money.

        1. Hi Todd – I hear ya on talking to your kids about money. The more I’ve been learning about personal finance and early retirement, the more passionate I’ve become about getting my daughter understanding it. She’s only 8, so I teach her small lessons here and there – no more than 5-10 minutes maybe once a month or when an opportunity presents itself.

          Stick around this community of bloggers and podcasters and you’ll be able to pick up some sound information that you can use in your life and be able to share with your kids. One of my favorite reads on investing is from a guy named Jim Collins. He wrote a series of fantastic blog posts called the Stock Series that will explain investing in a nice, straightforward way. It’s also a huge eye-opener as to how we’re over-complicating it and costing ourselves a ton of money in the process.

          — Jim

  4. I agree – I talk money the most with my well-off friends. My friends that aren’t doing so well avoid the topic like the plague. Having a blog allows you to find a community of like minded folks. I am now less than 2 months from early retirement (will tell my boss after 1 more week). Only about 2% of people retire before age 50 – so being online helps me find those folks!

    1. Now that’s exciting – congratulations!!! I still have a handful of years to go, but retiring before 50 is my goal as well. I’ve never heard that percentage before, but I like it… it feels like an elite club to be in and I want to be a part of it. 🙂 Hope the conversation goes well with your boss and congrats again!

      — Jim

  5. Hey, great post Jim. I’ve friends who also don’t like to discuss after PF matters but your last sentence really rings true to me, “you need to be planning for your future if you want to stop working sometime before you die.” It pays to be practical if you can get to live a much more comfortable life later on.

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