Should I tell my family/friend that they are making a financial mistake?

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keepingitsimple
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Re: Should I tell my family/friend that they are making a financial mistake?

Post by keepingitsimple » Fri Aug 10, 2018 11:07 am

acegolfer wrote:
Fri Aug 10, 2018 6:42 am
arcticpineapplecorp. wrote:
Thu Aug 09, 2018 8:24 pm
As you can see, asking general questions only gets you general answers. can you give us the example you're wrestling with so we can determine if it might/might not be wise? Context and details matter. As you can see, there are no broad brush strokes with most things in life. Give us the deets as the youngins say.
A few examples (this list does not pertain to a single person):
Monthly spending more than what he's making
Relying on parents for big purchases, cars, homes, etc
Listening to financial media for stock picking
Investing in active funds with >1% expense ratio, bitcoins, commodities
Always saying stock market is overvalued

I'm okay with getting general answers. From your success stories, I'll strategy how to approach each person.
Do keep in mind, when giving unsolicited advice, that if the individual(s) you advise with an alternative plan manage to botch the plan, they'll blame you. And chances are they'll botch the plan. Proceed with caution.

I have found many people don't want advice, even when they ask for it. What many people want is simply affirmation. So if the people asking for advice don't want it, I can only surmise those not asking for it don't want it either.

acegolfer
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Re: Should I tell my family/friend that they are making a financial mistake?

Post by acegolfer » Fri Aug 10, 2018 11:11 am

Thanks for your responses. I found the following very helpful. They gave me ideas on how to approach each case.
Cheryl604 wrote:
Thu Aug 09, 2018 7:56 pm
Can you present the information as: "here's what I've done with my own money," and then let them decide? I like to tell people that they have options and here's what I do, and then leave it at that. If they want to know more, they can ask me.
megabad wrote:
Thu Aug 09, 2018 8:11 pm
In the rare circumstance that I bring something up unsolicited, I usually frame it as an earnest question. "What makes this higher fee active fund worth investing in over a lower cost index fund?" Believe it or not, I often get an "I don't know" or a "because he said it is better" answer and the person begins to question it him/herself without me inquiring further. With immediate family (dependents and spouse), I would less so "tell" them they are making a mistake and more so discuss their decisions and try to make a good decision together (because that is what families do).
Taylor Larimore wrote:
Thu Aug 09, 2018 8:29 pm
In my experience, the best way to convince someone of the many advantages of investing the Boglehead Way, is to give them a good book about investing.

I suggest Jack Bogle's latest edition of "The Little Book of Common Sense Investing."
basspond wrote:
Fri Aug 10, 2018 6:54 am
It is probably too late to change their minds at this point. Better way is if they are really close you would have conversations with them about the things you have learned on your, hopefully successful, financial path. I was greatful, appreciative, and receptive of people who gave me advice when I was starting out. Don’t know how I would have handled it years down my journey.
MikeG62 wrote:
Fri Aug 10, 2018 7:17 am
This is a tough one and you should accept going in that you likely won't have much impact on their decision.

Having said that, it may depend on how you came about knowing what they were doing. If they told you, then the door is more open for a "hey, what is your thinking in doing....have you considered other options like x,y,z".

If you found out from someone else, they it may be much harder and more awkward to broach the entire topic.

Tread carefully and whatever you do bring it up in as much of a non-confrontational manner as possible. If they push back, drop it immediately and change the subject.
carolinaman wrote:
Fri Aug 10, 2018 8:05 am
It depends on the severity of the financial mistake and the relationship you have with the person. But even then, it needs to be done gingerly. This is just me, but if I knew a close friend/relative was about to make a serious financial mistake, I would risk harming the relationship to help them avert the mistake.
Texanbybirth wrote:
Fri Aug 10, 2018 10:15 am
I told my family to not invest in cryptos in December of last year, at least not more than they could throw in the trash. None of them listened, and all of them lost money. (I've posted multiple times on BH that I also lost $500, which I can't just throw away but it didn't hurt.) This was solicited advise, as they were hyping it all up. I don't think I hurt their feelings.

I don't tell people they're making a "mistake". It's more an offer to help if they'd ever like it, and usually comes after they bring up finances one or two times. One family member struggles with loans and prioritizing paying off debt. I've offered several times to sit with them after hearing their complaints. Another struggles with a young family and relatively low income. I've offered to help make a budget and give them overarching goals. Neither have taken me up on the offer, but we're still very close.

Problem is: money has an important behavioral and habitual aspect to it, and people can get very defensive about their mistakes/"habits" (addictions?). Plus these are learned behaviors a lot of the time, and those aren't changed with a seemingly helpful 5 minutes convo. A lot of people post here about trying to help family members (in an unsolicited manner), and it doesn't usually turn out well.
One Ping wrote:
Fri Aug 10, 2018 10:50 am
If we are talking about finance/investments in general or someone asks a specific question, I generally say 'this is what I do' or 'this is what I would do in that situation' and then let the conversation go from there. If they ask for more specifics then we can get into a deeper discussion about approaches to investing or specifics of a particular situation.

But it's always in the context of what I do or what I would do, not what they should do.
And congrats to Jazztonight on your success.

Nowizard
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Re: Should I tell my family/friend that they are making a financial mistake?

Post by Nowizard » Fri Aug 10, 2018 11:15 am

One of my favorite phrases is "Unasked for advice is frequently interpreted as criticism."

Tim

Ependytis
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Re: Should I tell my family/friend that they are making a financial mistake?

Post by Ependytis » Fri Aug 10, 2018 1:01 pm

When I have given financial advice I have been disappointed- it seems like it goes nowhere another words the recipient never follows up with questions. So now I just refer people to this site and let them know I would be happy to answer questions. This way I don’t feel put out or that I am withholding valuable knowledge and no one feels offended. If they decide not to look at this site that’s their choice to make.

stoptothink
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Re: Should I tell my family/friend that they are making a financial mistake?

Post by stoptothink » Fri Aug 10, 2018 1:46 pm

ddurrett896 wrote:
Thu Aug 09, 2018 9:43 pm
acegolfer wrote:
Thu Aug 09, 2018 7:37 pm
Have you done it without hurting their feelings?
Never give an opinion on anything unless it’s asked for. The only caveat is when if will affect me.

For example,I will voice my opinion if my parents were making financial mistakes that will potentially bankrupt them resulting in me having to financially support them. Also to include a course of action and condition that if they don't follow the course, I won't be able to help in the future.
This. If I opened my mouth every time my family was making a financial mistake, it would never close and I would have no relationship whatsoever with them. That being said, if it affects you, I absolutely would. Of course I have my own anecdote. We are already financially helping my in-laws, although they just turned 60 and my FIL is still working. They have lived off-and-on with us, completely free, over the last 3yrs and we regularly pay bills for them. We took my children out of daycare to provide my MIL with a job (she's never had a job in her life). We pay her more than we were paying for daycare, it is provided in our home (our utilities have literally doubled), and we pay for everything (food, diapers, extracurricular activities, any supplies she wants). Instead of taking this money and beginning to pay down their debts (they have a negative net worth in the 6-figures due to student loans, car loans...) or putting it in an EF, she has used it to spoil my kids rotten - literally taking them out to eat and toy shopping every day. It has had a very noticeable negative influence on their behavior. You better believe we had a conversation about it, which resulted in tears and many apologies and discussions about when they are going to have to move back in with us...and then she did the same thing the very next day :oops: .

Otherwise, no, I have never and would never tell a family member or friend they are making a financial mistake without them approaching me for advice.

Boglegrappler
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Re: Should I tell my family/friend that they are making a financial mistake?

Post by Boglegrappler » Fri Aug 10, 2018 2:00 pm

acegolfer:

In my experience, the best way to convince someone of the many advantages of investing the Boglehead Way, is to give them a good book about investing.

I suggest Jack Bogle's latest edition of "The Little Book of Common Sense Investing."

Best wishes.
Taylor
I think that book is one of the greatest around.

Having said that, its unlikely to have much effect on anyone who isn't particularly knowledgeable, thoughtful, or at least eager to be that way.

One of the realities of the financial advice marketplace is that there are people out there who want to "pay" others to take responsibility for them. They often will tell you that they "don't understand any of that investing stuff", or something along those lines. I don't think there is much you can do in that case. You can lead a horse to water.....

epoxyresin
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Re: Should I tell my family/friend that they are making a financial mistake?

Post by epoxyresin » Fri Aug 10, 2018 2:18 pm

Cycle wrote:
Fri Aug 10, 2018 8:05 am
If it comes up you can describe your finances. People are an average of the people they know, but what if nobody ever talks about money? Part of the reason I maxed out my retirement accounts in my early twenties is other similar aged employees and I would discuss what percent we were putting into our 401k and how much we put into our roth.

I wouldn't say what your friends should do or criticize any of their decisions, unless you want them to stop inviting you over.
I agree with this. I figure most of the taboo against discussing money at work is to try to keep you from effectively negotiating your salary. At my workplace, we discuss lots of aspects of how we spend and save money (we also know what everyone's making, so I think that removes some of the taboo of discussing it)

I think one of them moved a lot of his to Vanguard in part because of our conversation (probably helped that the active fund that he left had done quite poorly during the financial crises, which isn't exactly the correct reason to switch, but it's nice to know that he made a good decision for what to switch to). It was never "you're making a mistake by doing this", but rather I think came up when we were discussing putting money in our Roths, and why I used Vanguard.

getthatmarshmallow
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Re: Should I tell my family/friend that they are making a financial mistake?

Post by getthatmarshmallow » Fri Aug 10, 2018 3:00 pm

How close are you to the person? How much do you know about the situation? Is the mistake they are making a mistake because it is non-optimal or a mistake that is likely to lead to disaster? There's a difference between "friend is investing in the target date fund instead of a three-fund portfolio" and "friend is going all in on Bitcoin because she heard about it on the Today show", and one has to be careful not to mistake the optimal or preferred course of action for the only acceptable course of action.

I'm the oldest kid in our family, and although we've all gone on to successful careers, they still look up to me for advice. I bought one of them the little Bogle book for Christmas last year. I think it's sometimes helpful just to educate rather than to suggest courses of action, and to frame as helping them decide for themselves. With your career, you're in a great position to make an opening and leave it at that: "You know, I do this for a living. If you want to run your plan [or whatever] by me to make sure there aren't any pitfalls or unexpected problems, I'd be happy to take a look."

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wander
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Re: Should I tell my family/friend that they are making a financial mistake?

Post by wander » Fri Aug 10, 2018 3:08 pm

I usually do not pay attention on people's finance and do not care how people live their financial lives. But some of my in-laws came and ask for my advice. To answer your question, I should not tell my family/friend that they are making mistake and only talk when they approach me.

white_water
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Re: Should I tell my family/friend that they are making a financial mistake?

Post by white_water » Fri Aug 10, 2018 3:39 pm

Sometimes there is nothing you can to except watch that slow moving train wreck happen. A very close friend had his money with EJ. EJ invested it in 5 1/4 % front end load funds and a few stocks. Friend never heard of or been told about no load funds. He was with EJ because his father was an EJ client.

I showed him my Vanguard index funds and asset allocation, mentioning that Fidelity and Vanguard had no load funds. That was about 17 years ago. He's still with EJ.

Sadly EJ got him twice, in 2008 he liquidated and went to cash, over time let EJ reinvest it.

OnTrack2020
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Re: Should I tell my family/friend that they are making a financial mistake?

Post by OnTrack2020 » Fri Aug 10, 2018 3:49 pm

I typically offer up financial advice to my kids, i.e., you can buy 3 pairs of athletic shorts at Walmart for the price of one pair of brand name athletic shorts. They typically don't want my advice on that type of matter. :shock:

It's hard unless we know the specifics of the financial mistake, such as are they getting in way over their head in regards to the purchase of a home that will impact their life for the next 20-30 years. I would probably say something in that case. If it was a car purchase and really couldn't afford it, I don't think I would get involved because it's for a shorter time frame.

Most people do find a way to dig themselves out of a hole.

mega317
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Re: Should I tell my family/friend that they are making a financial mistake?

Post by mega317 » Fri Aug 10, 2018 3:59 pm

I realized that my whole job involves trying to convince people they don't know as much as they think they know. Not about to do it voluntarily outside of work.

The problem with trying to help your parents avoid bankrupting themselves is that it can look like you're trying to protect an inheritance.

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Re: Should I tell my family/friend that they are making a financial mistake?

Post by mickeyd » Fri Aug 10, 2018 4:05 pm

Instead of offering financial advice (something that I will never do) ask something like this : "Gee uncle Bill, why did you choose XXX mutual fund?" and see where that leads you.
Part-Owner of Texas | | “The CMH-the Cost Matters Hypothesis -is all that is needed to explain why indexing must and will work… Yes, it is that simple.” John C. Bogle

Glockenspiel
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Re: Should I tell my family/friend that they are making a financial mistake?

Post by Glockenspiel » Fri Aug 10, 2018 4:12 pm

Family, sure.

Friends - no, unless they ask your advice.

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aspirit
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Re: Should I tell my family/friend that they are making a financial mistake?

Post by aspirit » Fri Aug 10, 2018 4:17 pm

SGM wrote:
Fri Aug 10, 2018 3:44 am
When EF Hutton speaks people listen. :wink:
Dun & Bradstreet https://www.bloomberg.com/news/articles ... llion-deal are being taken private giving people financial advice they ask for !
:wink: It rarely works in public.

Consider what Taylor said, although I gave family copies of Mike Pipers "Can I Retire?" books when they were on sale here on BHs years back and I was looked at as if I just introduced the plague.
Time & tides wait for no one. A man has to know his limitations.

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Re: Should I tell my family/friend that they are making a financial mistake?

Post by jrbdmb » Fri Aug 10, 2018 4:27 pm

triceratop wrote:
Thu Aug 09, 2018 7:53 pm
On the other hand, my mom is convinced that many people forever lost their savings in 2008 even if they held their stocks and did not sell. She also thinks mutual funds are safer than stocks.
But in general mutual funds *are* safer than stocks, aren't they? (Unless you have at least 500 large cap stocks in your stock portfolio ...)

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triceratop
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Re: Should I tell my family/friend that they are making a financial mistake?

Post by triceratop » Fri Aug 10, 2018 4:30 pm

jrbdmb wrote:
Fri Aug 10, 2018 4:27 pm
triceratop wrote:
Thu Aug 09, 2018 7:53 pm
On the other hand, my mom is convinced that many people forever lost their savings in 2008 even if they held their stocks and did not sell. She also thinks mutual funds are safer than stocks.
But in general mutual funds *are* safer than stocks, aren't they? (Unless you have at least 500 large cap stocks in your stock portfolio ...)
Yes a diversified mutual fund is safer than an individual stock but I guarantee my mom is not aware of the idea of market beta and idiosyncratic risk. The idea seems to be that stocks are a different asset class and are inherently riskier.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

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Re: Should I tell my family/friend that they are making a financial mistake?

Post by UpperNwGuy » Fri Aug 10, 2018 4:34 pm

triceratop wrote:
Fri Aug 10, 2018 4:30 pm
jrbdmb wrote:
Fri Aug 10, 2018 4:27 pm
triceratop wrote:
Thu Aug 09, 2018 7:53 pm
On the other hand, my mom is convinced that many people forever lost their savings in 2008 even if they held their stocks and did not sell. She also thinks mutual funds are safer than stocks.
But in general mutual funds *are* safer than stocks, aren't they? (Unless you have at least 500 large cap stocks in your stock portfolio ...)
Yes a diversified mutual fund is safer than an individual stock but I guarantee my mom is not aware of the idea of market beta and idiosyncratic risk. The idea seems to be that stocks are a different asset class and are inherently riskier.
My 96 year old father is like your mother. He's perfectly happy to be all in stocks without any mutual funds. And he pays an advisor to pick the stocks. The advisor even comes to visit him in the retirement home once a month to give him the latest recommendations. Dad really likes his advisor. I'm not going to try to convince a 96 year old that there is a better way, so I keep my mouth shut.

Loik098
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Re: Should I tell my family/friend that they are making a financial mistake?

Post by Loik098 » Fri Aug 10, 2018 4:42 pm

If you would feel comfortable talking with this other person and sharing advise about such personal things as:

1) how they should eat
2) to stop smoking or lose weight
3) how to raise their children
4) how to interact with their significant other
5) the cleanliness of their home

then you are probably safe to give them financial advise. Such a person might even be angry with you if you knew something and kept quiet.

If you cannot, then it's probably best to steer clear.

ddurrett896
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Re: Should I tell my family/friend that they are making a financial mistake?

Post by ddurrett896 » Fri Aug 10, 2018 4:50 pm

Maverick3320 wrote:
Fri Aug 10, 2018 10:00 am
It's a slippery slope, though. If tax dollars are paying for someone's healthcare, should you as a taxpayer share your opinion that they shouldn't be smoking?
Yes, it affects me so I should voice my opinion.

Broken Man 1999
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Re: Should I tell my family/friend that they are making a financial mistake?

Post by Broken Man 1999 » Fri Aug 10, 2018 5:26 pm

When my father distributed some funds before he passed, I sent my brother and sister the dandy little bookThe Coffeehouse Investor: How to Build Wealth, Ignore Wall Street, and Get On with Your Life by Bill Schultheis. I thought it was ideal for them. I asked them to read it, and I would help them set up a nice investment account.

Sadly, instead they both bought high front load mutual funds with high ERs from the bank where my sister was employed.

I tried, but no dice. I doubt seriously they even cracked their books. You just can't help people unless they are willing to put forth some effort.

OTOH I was able to move my BILs accounts from Edward Jones into Vanguard, and he has been delighted that he is actually making more than his former advisor was making on his investments.

Some of my neighbors use FAs, I make zero comments about investing other than small talk about what is going on in the markets.

My wife has taken over her sister and BILs finances a few times after they get into severe financial straits. She gets them on a budget, catches up all their delinquent accounts, and leaves them with a nice emergency fund. Typically after they are in a good place, they always want to take care of things themselves, and after a bit of time they end up in a mess again. The last time, she told them no more. She said she is spending her time, and they really aren't learning anything. But she has learned not to waste her time with them.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven than I shall not go. " -Mark Twain

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Re: Should I tell my family/friend that they are making a financial mistake?

Post by jlawrence01 » Fri Aug 10, 2018 6:10 pm

The last time that I advised someone about the positives of investing in low-cost mutual funds, the individual asked me to come over and take a look at this.

The individual had a drawer full of 12-16% Certificates of Deposit with a number of banks durations of 10-15 years totalling $500k dating back to the Carter administration. It is hard to beat that.

In other words, never give advice that is not asked for.

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Jazztonight
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Re: Should I tell my family/friend that they are making a financial mistake?

Post by Jazztonight » Fri Aug 10, 2018 6:24 pm

mega317 wrote:
Fri Aug 10, 2018 3:59 pm
The problem with trying to help your parents avoid bankrupting themselves is that it can look like you're trying to protect an inheritance.
Although nowhere near bankruptcy, I couldn’t convince my father to get rid of the young, pleasant, FA in a nice suit who had him invested in all manner of expensive funds.

After my mother died and my father developed dementia, I was finally able to control his estate, move it all to Vanguard, and indeed, protect the inheritance for my sister and myself. It wasn’t easy.
Last edited by Jazztonight on Fri Aug 10, 2018 11:48 pm, edited 1 time in total.
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Re: Should I tell my family/friend that they are making a financial mistake?

Post by acegolfer » Fri Aug 10, 2018 6:26 pm

Jazztonight wrote:
Fri Aug 10, 2018 6:24 pm
Although nowhere near bankruptcy, I couldn’t convince my father to get rid of the young, pleasant, FA in a nice suit who had him invested in all manner of expensive funds.

After my mother died and my father developed dementia, I was finally able to control his estate, move it all to Vanguard, and indeed, protect an the inheritance for my sister and myself. It wasn’t easy.
Congrats on another success.

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Re: Should I tell my family/friend that they are making a financial mistake?

Post by arcticpineapplecorp. » Fri Aug 10, 2018 7:19 pm

acegolfer wrote:
Fri Aug 10, 2018 6:42 am
A few examples (this list does not pertain to a single person):
Monthly spending more than what he's making
They either know they're under water or they're in denial. Either way, I don't think you can help unless and until they ask for/want help. Then the foundation for consumer credit counseling might be helpful. They may have an income problem not just a spending problem (they may not make enough). Don't know enough to say whether this is the case or not.
acegolfer wrote:
Fri Aug 10, 2018 6:42 am
Relying on parents for big purchases, cars, homes, etc
The positive spin on this is that they are "resourceful". I do not mean this to be tongue in cheek. I mean to say that people who get other people to give them money usually learn how to be resourceful in ways that may be very different from what you might consider resourceful (i.e., emergency savings, multiple streams of income, doing without if income isn't there, etc.). Some people have a funny way of (like cats) always landing on their feet no matter what crisis comes their way. It's easy to worry about them, but if their luck hasn't run out, then in their mind, there's nothing really to worry about (in this present moment). The future is unknown and not worth worrying about. If/when the bad future comes, they'll deal with it then, not now. So they won't listen to you because it's not a problem for them, it's a problem for you. Make sense?
acegolfer wrote:
Fri Aug 10, 2018 6:42 am
Listening to financial media for stock picking
Could be ignorance of the promised land (indexing, etc.). Could be financial porn (they're titilated by it). Could be an emotional high (get whipped up in a frenzy over the latest hot stock, fear of missing out, etc. It's all emotional based, not logical). It sounds like they live their lives more emotionally than rationally, which won't help them financially speaking, but adds drama to an otherwise boring or depressing (if living in chronic debt) life. They won't likely listen to you because you're trying to present logic and they're only interested in emotional content which you're not providing.
acegolfer wrote:
Fri Aug 10, 2018 6:42 am
Investing in active funds with >1% expense ratio, bitcoins, commodities
Again, probably ignorance of understanding the impact of costs, differences between speculating (bitcoin and commodities) and investing and not understanding the long term track record of active funds vs. index funds. You again want to use logic to win them over, but they're interseted in the hot stock, commodity, bitcoin, etc.
acegolfer wrote:
Fri Aug 10, 2018 6:42 am
Always saying stock market is overvalued
They don't even know how to value the stock market likely. They obviously don't know that some markets (Turkey's a great example) are always a better value than other markets, so to say something stupid like "the stock market's always overvalued" leads to the question of "Which market exactly are you talking about? All of them?" That's clearly ridiculous. They don't understand that even though markets might "seem" overvalued (which may not be true anyway, markets are generally priced based on factoring all publicly available information so aren't they efficient and fairly valued based on expectations?). You either believe in EMH or you don't. And even markets that might seem overvalued may still produce positive results long term. See this post by Homer J that I quote often: viewtopic.php?f=10&t=229429&start=50#p3567987)
Again, logic wins. This requires thoughtfulness, debate, wrestling with ideas, researching history, etc. People who make quips are not deep thinkers, they're swimming in the shallow pond. You won't get anywhere on this one.

With some of these like bitcoin, commodities, spending more than they make, etc. they probably have to hit some kind of rock bottom before they will realize their way is not the best. Still they could always just think that this is normal and everybody is trying to find the hot new thing. I once had someone actually believe that everybody has credit card debt even though I didn't. He also believed that the average person couldn't save even though I do and my income is pretty average. I didn't correct him because quite frankly he wasn't interested in being educated. Some people want to hold on to their beliefs regardless of how wrong they are (or out of touch with reality) and they aren't likely to change their worldview without being open to doing so.

Can you tell I've been there done that? Your post obviously resonated with me. That's my take for what it's worth. Hope it was helpful, and if not, at least mildly amusing.
Last edited by arcticpineapplecorp. on Fri Aug 10, 2018 9:12 pm, edited 2 times in total.
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Re: Should I tell my family/friend that they are making a financial mistake?

Post by FunnelCakeBob » Fri Aug 10, 2018 7:35 pm

Family - no. Good friends - maybe. Some of my extended family members think they know more about (and have more) money than everyone else and employ the shoot-the-messenger approach if they hear something contrary to their own assumptions or what the "experts" say. Anyone offering unsolicited but well-intended advice becomes the target of blame regardless of what happens.

This is where you have to first know your audience before talking about money.

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Re: Should I tell my family/friend that they are making a financial mistake?

Post by delamer » Fri Aug 10, 2018 7:46 pm

Jazztonight wrote:
Fri Aug 10, 2018 10:32 am
Most people think they know how to invest their money better than you do. However, once in a while you can be of significant help.

Five years ago, I was visiting a colleague of mine in Chicago, and the subject of money and investing came up. I knew she had a lot more money than I do. She, her husband, and I were eating pizza in her kitchen.

When she told me that she has "a guy" who takes care of her investments, I took a bold step and asked her, "Cheryl, can I ask you a personal financial question?" She laughed and said, "Sure."

"Do you have over a million dollars invested with this guy?" She got serious and said, "Yes."

"What if I told you that if you put all your investments in Vanguard, you could probably save enough in a year or two to re-do your kitchen." This got her attention, and she wanted to know how. I gave her a back-of-the-envelope scenario of the expense ratio figures. She said, "Can I get back to you?"

That night she called me in my hotel and asked for specifics. I told her to show me where the guy had her invested, and she sent me a statement as an email attachment. He had her invested in 24 different mutual funds! No wonder she left it all to him.

In an hour or so I put together a spreadsheet listing all her funds and the e.r. for each, and totaled the fees (not counting his commission, which was 1 or 2% a year).

Then I indicated how much a 4 fund, 60/40 Vanguard portfolio would cost. I was right--she'd save enough in a year or two to re-do her kitchen.

She called me a few days later and said she'd told her financial guy that she was transferring everything to Vanguard. Which she did.

So, even though this was a rare occurrence, miracles do happen. I still feel good about it and she still thanks me. (I don't know if she re-did her kitchen.)

Great story!

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arcticpineapplecorp.
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Re: Should I tell my family/friend that they are making a financial mistake?

Post by arcticpineapplecorp. » Fri Aug 10, 2018 9:25 pm

that was a great story by Jazztonight. I would bet if you asked jazztonight s/he had a feeling that his/her information would be accepted, rather than dismissed. If you tune into people you can generally tell if they really want to learn something different/new/better than what they're currently doing (or not). So don't push it, but offer if you truly believe someone will want to learn something new and different.

Rob Berger had an interesting podcast recently about this very subject, it is episode 299 How to help others with their financial struggles:
https://www.doughroller.net/thepodcast/

Maybe give it a listen. What I found interesting is how he didn't try to give too much information at once (I and others can be guilty of this) which causes people to shutdown/leads to overload. Instead, Rob Berger (of doughrollermoney podcast) asked short and simple questions when his friends (who knew he has a successful financial podcast) mentioned investing. Rob would say, "So what do you pay for your investments?" which usually led to "Gee, I dunno". Rob wouldn't press. He'd let the silence hang there until someone filled it (possibly changing the subject). Then the friend came back a week later and said "You know you asked me how much I pay for my investments and I didn't know. So I went and looked it up. I pay...." Which led to further questions (that the friend would have to go look up because he didn't know). The friend was either interested or wasn't. But Rob didn't push. He didn't cajole. He didn't lecture. He just threw out short questions to make the friend think (or go find the answers to because the friend didn't know).

So what I'm saying is sometimes you gotta take baby steps with people (and that's only if they're interested, which many aren't). It can be a long and painful process (it doesn't have to be, but sometimes it is.) That's up to everyone to decide for themselves if they're going to make their lives easier or harder. People make things more complicated than they need to be. I've seen that over and over. People make behavioral mistakes, so even if they have the right investments (index funds) they often do the wrong things (like selling in a panic). People are painfully human, frail, stubborn. It's hard to watch people go through difficulties that you can clearly see the path through, but they have to see it themselves, then want it and choose it for themselves. Even though a therapist may see the way out, s/he can't just tell that to a client. It doesn't work. The client has to come to the path themselves. The therapist can offer space, encouragement and an environment that is conducive to the client gaining insight and choosing a new path.

How many psychologists does it take to change a lightbulb?
Just one, but the lightbulb has to want to change.
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

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Jazztonight
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Re: Should I tell my family/friend that they are making a financial mistake?

Post by Jazztonight » Sat Aug 11, 2018 12:01 am

arcticpineapplecorp. wrote:
Fri Aug 10, 2018 9:25 pm
that was a great story by Jazztonight. I would bet if you asked jazztonight s/he had a feeling that his/her information would be accepted, rather than dismissed...
Yes, absolutely! In the few cases where anyone has paid attention to my Boglehead suggestions, I’d tip-toe along and try to determine if the person might be amenable.

Yes for my son and nephew. No for my daughter and niece. My sister only wanted me to put her share of our inheritance in “the safest place.” After a couple of years, in a rising stock market, I pointed out that her share had grown by hundreds of dollars, while my equal share (invested modestly at 40/60) had grown by thousands. That’s when she gave me the green light to reallocate her share.

But like virtually everyone who’s responded here, my “successes” were few, and most people just are not open to financial advice from us.
"What does not destroy me, makes me stronger." Nietzsche

SGM
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Re: Should I tell my family/friend that they are making a financial mistake?

Post by SGM » Sat Aug 11, 2018 4:06 am

I once informed a relative that she could take a spousal benefit while allowing her own benefit to grow until 70. She was retired and delaying SS while her husband was collecting. She lost the opportunity for a few months as they were both unaware of this when she reached her FRA. She did start getting her spousal benefit and had an additional income for a little over 3 years until claiming her own higher benefit at 70. She expressed no gratitude for the advice which was unsolicited but added to their income with no real effort. They know nothing of investing but have reasonable pensions.

I find it amusing that they showed no appreciation for the recommendation. It hasn't affected what is a great relationship.

I compare that response to friends who increased their retirement savings by $13k a year when I told them about the spousal benefit a few years ago. The husband's birthday is the day after mine so I told him how to do the file and suspend and restricted application. They were very grateful and have treated us to nice restaurant meals. The wife who handles all their investments brings up their additional savings and their Admiral status at Vanguard frequently.

gmc4h232
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Re: Should I tell my family/friend that they are making a financial mistake?

Post by gmc4h232 » Sat Aug 11, 2018 8:12 am

How would you feel if I told you that jack bogle is wrong - about EVERYTHING? Take that feeling and assume that that is how folks feel when you give them unsolicited financial advice. Does that answer your question?

acegolfer
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Re: Should I tell my family/friend that they are making a financial mistake?

Post by acegolfer » Sat Aug 11, 2018 8:21 am

gmc4h232 wrote:
Sat Aug 11, 2018 8:12 am
How would you feel if I told you that jack bogle is wrong - about EVERYTHING? Take that feeling and assume that that is how folks feel when you give them unsolicited financial advice. Does that answer your question?
If someone tells me I'm wrong about something, I always listen. A logical explanation can change my views.

gmc4h232
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Re: Should I tell my family/friend that they are making a financial mistake?

Post by gmc4h232 » Sat Aug 11, 2018 8:29 am

acegolfer wrote:
Sat Aug 11, 2018 8:21 am
gmc4h232 wrote:
Sat Aug 11, 2018 8:12 am
How would you feel if I told you that jack bogle is wrong - about EVERYTHING? Take that feeling and assume that that is how folks feel when you give them unsolicited financial advice. Does that answer your question?
If someone tells me I'm wrong about something, I always listen. A logical explanation can change my views.
Unfortunately not everyone is as willing to listen to logic. There inlies the problem.

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Jazztonight
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Re: Should I tell my family/friend that they are making a financial mistake?

Post by Jazztonight » Sat Aug 11, 2018 8:33 am

acegolfer wrote:
Sat Aug 11, 2018 8:21 am
If someone tells me I'm wrong about something, I always listen. A logical explanation can change my views.
That's why you are acegolfer and they're not! 8-)
"What does not destroy me, makes me stronger." Nietzsche

acegolfer
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Re: Should I tell my family/friend that they are making a financial mistake?

Post by acegolfer » Sat Aug 11, 2018 8:52 am

gmc4h232 wrote:
Sat Aug 11, 2018 8:29 am
Unfortunately not everyone is as willing to listen to logic. There inlies the problem.
If I can convince 1/3 of the ppl that I talk to, I'm willing to take the chance. I just need to find the best approach to enhance that chance, which is the objective of this thread.

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fishandgolf
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Re: Should I tell my family/friend that they are making a financial mistake?

Post by fishandgolf » Sat Aug 11, 2018 10:23 am

Boglegrappler wrote:
Fri Aug 10, 2018 2:00 pm
acegolfer:

In my experience, the best way to convince someone of the many advantages of investing the Boglehead Way, is to give them a good book about investing.

I suggest Jack Bogle's latest edition of "The Little Book of Common Sense Investing."

Best wishes.
Taylor
I think that book is one of the greatest around.

Having said that, its unlikely to have much effect on anyone who isn't particularly knowledgeable, thoughtful, or at least eager to be that way.

One of the realities of the financial advice marketplace is that there are people out there who want to "pay" others to take responsibility for them. They often will tell you that they "don't understand any of that investing stuff", or something along those lines. I don't think there is much you can do in that case. You can lead a horse to water.....
+1

I have an acquaintance who recently retired at age 60. He just gave his entire $2.7 mil. portfolio to Edward Jones. He knows nothing about investing and doesn't want to learn. I briefly mentioned the Boglehead philosophy and he just smiled....his reply.." I am very happy with EJ.....I am not interested in doing my own investing".

delamer
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Re: Should I tell my family/friend that they are making a financial mistake?

Post by delamer » Sat Aug 11, 2018 11:47 am

fishandgolf wrote:
Sat Aug 11, 2018 10:23 am
Boglegrappler wrote:
Fri Aug 10, 2018 2:00 pm
acegolfer:

In my experience, the best way to convince someone of the many advantages of investing the Boglehead Way, is to give them a good book about investing.

I suggest Jack Bogle's latest edition of "The Little Book of Common Sense Investing."

Best wishes.
Taylor
I think that book is one of the greatest around.

Having said that, its unlikely to have much effect on anyone who isn't particularly knowledgeable, thoughtful, or at least eager to be that way.

One of the realities of the financial advice marketplace is that there are people out there who want to "pay" others to take responsibility for them. They often will tell you that they "don't understand any of that investing stuff", or something along those lines. I don't think there is much you can do in that case. You can lead a horse to water.....
+1

I have an acquaintance who recently retired at age 60. He just gave his entire $2.7 mil. portfolio to Edward Jones. He knows nothing about investing and doesn't want to learn. I briefly mentioned the Boglehead philosophy and he just smiled....his reply.." I am very happy with EJ.....I am not interested in doing my own investing".
My intinctive reaction to this is that he might have had $4 million if he’d become a Boglehead.

On the other hand, if he is savvy enough as an earner and saver (assuming no inheritance) to accumulate $2.7 million then who I am I to tell him that he could do better? People like that will be OK.

It is people who come into an inheritance or are dependent on a small amount of savings and who are susceptible to advice from “a salesmen disguised as a financial planner” that concern me.

mega317
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Re: Should I tell my family/friend that they are making a financial mistake?

Post by mega317 » Sat Aug 11, 2018 12:43 pm

**This is not intended as medical advice nor political commentary.**
acegolfer wrote:
Sat Aug 11, 2018 8:52 am
gmc4h232 wrote:
Sat Aug 11, 2018 8:29 am
Unfortunately not everyone is as willing to listen to logic. There inlies the problem.
If I can convince 1/3 of the ppl that I talk to, I'm willing to take the chance. I just need to find the best approach to enhance that chance, which is the objective of this thread.
I'm laughing thinking about a study done in a pediatric medical journal. The cliffs notes is that parents received one of four sources of information about vaccines. I want to quote the entire conclusions section but basically no matter what they did, it either had no effect or made people MORE suspicious of vaccines.
None of the interventions increased parental intent to vaccinate a future child.
Attempts to increase concerns about communicable diseases or correct false claims about vaccines may be especially likely to be counterproductive.
I think no matter your views on vaccines this suggests that it's hard to change people's minds, and maybe has the opposite of the intended effect, even in the face of very strong statistical or anecdotal evidence.

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