I have a friend at work who fulfills any and all of his wants, on a whim.
Whenever he has more then a $100 in his chequeing account, he immediately liquidates it on a want.
If there isn't quite enough to cover the want, then it goes on a credit card.
This would be a decent, if future-less life strategy, if he paid off his credit card every month, and had no debt.
The problem is, he has nearly $30,000 of debt in a line of credit.
He will come to me asking for advice on his most recent want.
I tell him the same thing every time.
- Make an emergency fund of $1000.
- Set a small monthly amount (~$100) for discretionary spending.
- Pay off the debt with everything left over after necessities.
Instead, he will come back to me for more advice.
Then I realized something.
He is asking for permission to spend!
I I think this is why we have such a strained friendship at timesonly give him permission to spend a the small discretionary budget, and. Personally, I don't feel a need to spend money all the time; I am usually happy with inexpensive or free diversions.
It has gotten to the point where I can't even bear to speak to him about money anymore.
Everytime I tell him to save money and pay off his debt, he will leave depressed.
Worse yet, he will come back to see me again with a new toy in hand, happy as a clam.
He knows that this is not a healthy pattern of behavior, but he continues never-the-less.
What can we do to help this wild spendthrift?
There isn't much we can do directly.
But, we can make our frugal lifestyle seem better and better every time we see them.
We can also show them a calendar that states exactly when you're planning to retire, and how it is many years (maybe decades!) before they even thought possible.
Then, explain that the date keeps inching earlier and earlier due to our good habits, and putting windfalls towards it.
Leading by example, we can help those without the natural willpower to save and invest.