There’s No Need To Worry About Other People’s Finances

Although I’ve got a lot of opinionated posts, it doesn’t really matter if you disagree with my stance so long as what you do with your money doesn’t adversely affect others. If your way works for you that’s all that matters. If it stops working for you then you might just find yourself on a site like mine searching for answers.

I’ve learned long ago that you can’t force anybody to do anything. They’ve got to experience some sort of hardship on their own before they are willing to change. Maybe it takes a heart attack to stop eating so poorly. Or maybe it takes a massive market correction to not be 100% allocated in stocks. Whatever the financial situation may be, only experience can really have an affect on someone’s outlook.

The people who are the most argumentative are also the ones who are the most unsure about their finances. They are unwilling to expand their myopic views about how they see the world. For some reason they are also almost always in their 20s and think they know it all. If you’re so inflexible in your 20s there’s a high likelihood you’ll hit a tremendous roadblock later on. When I was in my 20s all I wanted to do was learn different strategies from those who’ve been there. What changed with Gen Y?

I sincerely hope readers find different ways of looking at things on Financial Samurai. To be unable to see varying points of view is an absolute mental failure.

PEOPLE WILL FIND A WAY TO HELP THEMSELVES

Nobody here is stupid. In fact, I would argue that readers here are much more intelligent than average. Over 70% of Financial Samurai daily readers are new and seek answers to their problems through search. “How much should I have saved by 30?“, “Are CD rates about to go up?,” “Should I get my PhD?“, “Great professional resumes,” are a few search phrases that readers have typed in to land here today.

We do not impale our eyeballs with needles because it doesn’t feel good. Nor do we keep on spending ourselves into oblivion if we ever want to reach financial independence. One can argue that we are exactly where we should be financially. Let’s look at some examples.

* Getting promoted and paid. If we want to ascend the corporate ladder we’d get in earlier, leave later, and continuously find value added things to offer our company and clients. We’ll learn to get along with as many colleagues and managers as possible to build a proper support network.

* Quitting a job. Nobody quits a job unless they have enough money to support themselves during the transition. So let’s not worry about young Johnny who can’t hold onto a job for more than one year because he’s bored. Anybody who has read my book or read articles on getting laid off will also agree with the premise that leaving potentially thousands of dollars in severance on the table is unwise.

* Entrepreneurship. You either succeed or you fail. If someone cannot make at least the median annual income of their state in three years then they are a hobbyist instead of an entrepreneur. Nobody will keep spinning their wheels for an indefinite period of time. Furthermore, nobody goes into entrepreneurship without the supreme belief they will succeed or the ultimate determination to work as long as it takes.

* Making more money. Everybody knows that education is one important variable to making more money. With knowledge in marketing, programming, selling, and investing you can do very well for yourself. You’ll do well in school or take classes after work to enhance your knowledge. You’ll read as much content about how to make more money and implement what you’ve learned. Those who truly want to make more money will invest more than 8 hours a day at their jobs. They’ll spend hours before or after work to work on their side hustles. Such side hustles might eventually grow so large that there’s no need to work at all.

* Asset allocation. Although I’m against anybody at any stage of their lives having 100% of their investments in one asset class like stocks, every person who has such allocation has never showed any concern. Their simple response is,  “I’ll just buy more stocks on sale!” even if their portfolio is tanking. They are comfortable with their asset allocation as they have an endless supply of money to invest for now. Only when things get so bad that their portfolio losses outweigh what they can contribute do they think maybe it’s a good idea to be diversified. Before then, their financial nut is too small to matter. Let’s not talk about how a prolonged market slump can negatively affect one’s job stability either.

* Investing. There are many different investing styles that are suitable for everyone. History has shown that investing in the stock market pays off over the long run. What’s important is matching your risk tolerance with your investing style. If you plan to work the traditional route until 60+ then dividend investing is fine as you’ll have a more stable portfolio of large cap stocks. If you’re willing to take more risk while you’re younger to potentially build a financial nut in order to live off your dividends, then growth investing is preferred. I tell investors to take a look at the amount they have in their portfolio at their age to see whether they are where they want to be. If it is, then great. If it’s not, then something must change.

* Getting out of debt. The main reason why people get into consumer debt is because buying things you cannot afford feels wonderful. If it didn’t feel wonderful then people wouldn’t get into consumer debt. At the same time, getting out of debt also feels like a terrific accomplishment. Think about all the people who proclaim their debt-freeness with glee. Getting into and out of debt could seriously be the most alluring thing in finances. Hence, can we ever blame someone for maxing out their credit cards to buy the latest electronic gear or go on fantastic vacations? Of course not.

* Raising a family. Everybody knows that raising children can be very expensive. We also love our children with everything we have. Hence, it’s rare people have more than one child without being able to afford one child. It’s even more rare for a family to have three or more children if they can’t afford two children. We should not worry about other people’s family lives. There are even some families that have 10+ children and are doing fine.

* General savings. There’s all this talk about Americans not saving enough. Hogwash I say. Who are we to determine how much enough really is? I’ve got the opinion that we should all save at least 20% of our after tax income after contributing as much as we can to our pre-tax retirement savings vehicles because I believe people get tired of work after 20 years. We can conclude that people who don’t save “enough” really love to work for a very long time which is terrific for the economy. Spending is necessary to keep profits, GDP growth, and jobs growing. Here’s a realistic savings chart by age I put together.

* Early retirement. All you’ve got to do is save a high portion of your income, grow your financial nut, and build multiple income streams. I’ve seen people who only made $60,000 a year retire well before 60. On the flip side, I know of plenty of people who make multiple six figures a year and can’t afford to retire even after 20 years of such income. Early retirees are willing to sacrifice a little pleasure now for a lot of freedom later. There is no secret to early retirement, only execution.

* Managing your money. There are so many free tools and low cost money management options out there like Mint and Quicken to help track your finances. My favorite is Personal Capital where they track your net worth after you aggregate all your accounts so you don’t have to do so by hand or on an Excel spreadsheet. They saved me $1,700 in 401(k) fees I had no idea I was paying in 2012 through their 401(k) fee analyzer tool. And now I run my portfolios through their Investment Checkup tool once a quarter to make sure my risk levels are appropriate for my objectives. To not take advantage of the internet and technology would be silly.

DO WHATEVER YOU THINK WORKS FOR YOU UNTIL IT DOESN’T

There’s no need to reinvent the wheel. Thousands of people before you have achieved financial independence and thousands more people after you will achieve financial independence long after you are gone. My writing only presents what I think is the right way. Avoiding a ROTH IRA, spending no more than 10% of your gross income on a car, and hunting for lucrative investment opportunities while you are still young aren’t laws. If you think your way is better, then great! Go for it. If things don’t work out, then try something different.

There is no such thing as a person who wants to be financially well off who is unwilling to do anything to get there. Once we accept this tautology, then we realize it’s unnecessary to worry about anybody’s finances again.

Readers, should we care about other people’s finances? Why do you think some people feel it necessary to dictate their way on others given every situation is different? Do we just have an inherent desire to judge others?

Regards,

Sam

Sam started Financial Samurai in 2009 during the depths of the financial crisis as a way to make sense of chaos. After 13 years working on Wall Street, Sam decided to retire in 2012 to utilize everything he learned in business school to focus on online entrepreneurship.

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Comments

  1. says

    Its a great point that most people wont make a change until they go through some personal hardship. That’d why I think parents shouldn’t pay for 100%a of college. Let them flounder a little bit and figure it out for themselves.

    • says

      I agree with parents not handing their kids everything in order to appreciate the effort it takes to make an honest buck. It’s the hardships early (hopefully) that help make the man or woman later.

  2. says

    I know we have talked about this in the past…

    While I believe your readers are above average on the personal finance scale (anyone checking out any personal finance site probably has a leg up or at least the desire to have a leg up) why can’t people be irrational creatures? or worse -just plain stupid? In fact, one could make an argument that our irrational behavior is what makes us different than other animals.

    Think about the monkey and the water experiment (http://wiki.answers.com/Q/Did_the_monkey_banana_and_water_spray_experiment_ever_take_place) vs every single human who has watched someone die of lung cancer yet smoke 2 packs a day.

    • says

      People can be irrational or stupid, but only for a little bit. Everything course corrects b/c we strive to achieve what we want. The pleasure of smoking outweighs the risk of lung cancer, hence a good reason why smokers continue. If a smoker was asked to quit otherwise their child would be beheaded, I’m sure the smoker would quit. Pretty logical no?

  3. Nathan says

    Some people do not plan for tomorrow because they want utility today. I have a few friends who are in their mid 20’s with no savings. They pretend that they will be fine for retirement because they have their whole life to work, so why not spend now, save later.

    Their life is their life, but when they vote for raising social security, heat assistance, SNAP, Medicare benefits etc because they decided not to plan ahead, it becomes my business.

    • says

      Are you saying you don’t like folks who vote to raise other people’s taxes while not having to pay more themselves?

      The majority will ALWAYS beat out the minority through legislation or physical force. Hence, maybe it’s best to just join them.

      • Nathan says

        Samurai, where are your principles? What is the result of a can’t beat ‘em join ‘em mentality? I know, lets beat them to the punch as raise taxes to 100% that way we will all be rich! :p

  4. says

    I am willing to care about other people’s finances if they need help and are willing to ask questions and listen. I don’t think it is my duty to ask everyone around me about their financial health. I think people dictate either because they are arrogant or because they have seen “their way” work before and assume it always will work again. As you suggested, it may or may not depending on the circumstances.

    • says

      I agree. And dictating or being arrogant is something I’m trying to be mindful of given I have opinions and run a PF site. Hopefully readers can see that all I know is what I’ve experienced. If they’ve found a better way, then great. If not, consider what I’ve done.

  5. nbsdmp says

    No lie, a friend of mine has 90% of his investable net worth in Gold for a number of years no…and some on margin. Even though he is constantly reminded to diversify he wouldn’t, he looked smart at $1,700+ but has ridden it all the way down. I even gave him an inflation adjusted 100 year historical chart showing that gold probably should be around $600…he’s lost over half his net worth (7 figures) this year alone. Sad, but a lesson in life to not be greedy or so concentrated in one area. That holds true in finances and life…it is good to have balance.

    • says

      Hmmmm, but should we worry about your friend though? In order to lose 7 figures, he needs to have 7 figures or more to lose. He was willing to invest money that he was willing to lose, otherwise he would not invest so heavily.

      I don’t worry about readers who go against my advice of having 100% of their net worth in stocks. We had a discussion on being heavily weighted in Apple as well with the stock below $400. (http://www.financialsamurai.com/2013/02/09/building-wealth-in-your-20/) The investors are still around and going about their own lives despite a 40% decline in the share price from peak.

  6. says

    Sometimes it is necessary to worry about the finances of others. Of course, we can only give advice, because they will end up doing what they think is right for them. In my case whenever I give advice to people, I make it a point to give them their options instead of personal advice that way they will still feel they are in control.

  7. Doer says

    A little knowledge is very dangerous. I see this phenomena especially in investors in their 20s who’ve only seen a bull market. They think they are professionals with superior knowledge and start extrapolating their returns into the future. When you find out how much they actually have it’s a chuckle! Other times they won’t even say how much they have because they know it’s an embarrassing low amount. Numbers don’t lie.

    • says

      It’s hard to fault young investors who’ve only seen a bull market. Money makes us brash, arrogant, and stubborn. One guy I had a conversation with is in his late 20s and only invests in dividend stocks. He can’t get his head around considering the benefits of other investment styles. He wants to achieve financial independence early, so I simply asked how large of a portfolio he was able to accumulate with his style today.

      He wouldn’t say, saying the amount is irrelevant when the amount is absolutely relevant if he wants to actually live off dividends. It’s quite funny. He knows that his portfolio is too small at his stage in life, and that’s why he’s so defensive and combative.

      Numbers don’t lie folks. The amount is the great equalizer.

      • MBP says

        I too have noticed the herd go towards dividend investing. I think it’s because it’s easy (there’s a lot of dividend related ETFs and big names we all know) so it doesn’t take much intellect to invest.

        You can see dividend investors herd around together and only talk about dividend investing. They think they are going to get wealthy quickly by investing in established big cap names but they are not. Dividend investing takes decades to compound to create a good amount of money. Nothing wrong with it, but delusional if they think they will be able to retire early with dividend investing alone.

        • JayCeezy says

          ^this

          Amazing how the ‘dividend church’ seems to truly think they have discovered something new, and everybody else has seemed to miss. The rest of us “don’t get it!”:-) I’ve been around long enough to remember when this was called “value investing”, and I followed this theory myself; a great majority of my net worth was in the S&P500/Barra Value index (170 of the 500 that paid larger dividends and had lower P/Es). And “my” performance got spanked for the 5 years in the 90s, when Growth ruled and the overall US markets compounded at over 20%/year for that period. Somehow, 3-5% dividend payout now seems like some magic discovery to newer investors. Just one crisis (i.e. the Power Crisis in CA, where PG&E filed bankruptcy and SCE’s dividend was slashed, or the Financial Crisis where banks go out of business or slash dividends just to stay alive) is all it takes to wipe out years of Dividend Growth. I wish them well, and hope they will remember their ‘crazy talk’ after the humbling.:-)

  8. says

    I never understood the syndrome of having to hit bottom or go through a life altering situation to make a change. I keep tweaking or changing things similar to a chess or some other board game. I like to think I am constantly improving my situation. As a planner, I do the best I can and then life makes changes. Hence, I keep making adjustments.

    The theme of “whatever works for you….” reminds me of the flight attendant instructions regarding oxygen masks. You should take care of yourself before you can help someone else. I think it is true for a lot of things.

  9. Pension Retirement says

    I think it is fairly natural to worry about other people’s finances, because as social creatures we’re wired to compare ourselves with others so that we can better fit in. The “keeping up with the Jones” is a natural way to be more like other people and thus be more liked.

    Whether or not people can change without a hardship, I certainly think they can, and many likely do. Those that don’t are probably the exception to the rule. Your example above, most people don’t smoke, and that’s primarily for the health concerns I would think.

  10. says

    It’s simple. Dave Ramsey has a system because it’s simple. No debt. Easy to understand. Easy to follow. It’s not right for me, but that’s why I don’t listen to him.

    People inherently do what they think works for them. When they realize they need a change, it’s not helpful to find someone saying “do what works for you.” They want simple instructions of what to do.

    Give advice. If someone doesn’t like your advice, they can stop reading.

  11. says

    I’m willing to care about someone else’s finances if they’d like me to and invite me to, for support or ideas or help. But there are limitations to that… if someone keeps asking for help, yet rejects all reasonable offers of help, how long are you going to keep offering? Whether the request is about money help or anything else…

    PS – Just to update you, Sam – Mr. PoP had some great showings of our duplex from referrals through one of our favorite renters. The rent increase was a success this time around! And we won’t have any gap in lease. So I’m calling it a double-win.

  12. says

    It’s only natural to care about someone else’s finances to a certain extent. I always hope my friends are making the right money choices and I offer my advice when its appropriate.

    On a larger scale we need to worry because a lot of times the bad financial habits of others end up affecting us. It probably didnt feel too good to be the one guy in the neighborhood in good standing on his mortgage as all his neighbors walked out and fled for the hills!

  13. greg says

    “There is no such thing as a person who wants to be financially well off who is unwilling to do anything to get there”

    Very true. But it does not mean behavior cannot be devoid of reasonable judgement based on one’s own view (but I very strongly agree about not caring about others’ finances). I happen to be a fan of Von Mises:

    “Praxeology deals with the ways and means chosen for the attainment of such ultimate ends. Its object is means, not ends. In this sense we speak of the subjectivism of the general science of human action. It takes the ultimate ends chosen by acting man as data, it is entirely neutral with regard to them, and it refrains from passing any value judgments. The only standard which it applies is whether or not the means chosen are fit for the attainment of the ends aimed at.”

    Human Action: A Treatise on Economics

    • MBP says

      Only delusional people would expect great fortune without doing little to get there. So the argument is is that they don’t want more money or else they would work harder.

  14. says

    I think its human nature to want others to follow our advice. In that sense we care about others finances. I also think that when people follow our advice it is like they are endorsing what we say. It makes us feel more confident in our decisions.

  15. says

    My $.02-

    I worry about the finances of my neighbors. The number of foreclosure around my investment properties has driven down home prices which directly impacts me.

    I worry that my friends and family are financially secure.

    • says

      I hope you call, send a letter, or confront those owners in your neighborhood to ask why they are ruining things for the rest of you. Or you can ask them to sell their properties to you for pennies on the dollar!

  16. says

    I will only help if you ask my opinion and even then I though I am going to tell you the truth I am not going to push my views onto another individual as I dont want anyone to do it to me. People sometimes think what they are doing it the best and the catch all. Each person has to figure out what works for them. Sometimes its hard to see people go through things but they made the choice and sometimes you have to set back and let them learn.

  17. says

    I don’t worry about other people’s finances and I do think that people can change over time. I have friends who were hopeless spenders but they actually starting reigning it in this year. After years of living paycheck to paycheck, they started a savings account for themselves and for their children’s college. Of course, those are very small changes…but still. I never thought it would happen!

  18. Lucas says

    Worry about other people’s finances and care about them are different. There is a small part of me that still is trying to prove to myself that i made the right decision or get people to agree with me to prove that point. But the larger part at this point is really just concerned with other peoples (particularly my family) well being. So yes – trying to beat it over their head doesn’t work. What works is encouraging small changes towards a bigger goals of being out of debt, making smart choices with their money, not living only for the moment, pursuing financial independance, etc. .

    But yes I do agree that most people have to have some major difficulty happen to them to want to change their ways. I am working really hard to make sure that isn’t me :-)

    • says

      I see this a lot in folks who vehemently disagree with my Disadvantages of a ROTH IRA post. They have to prove to themselves they made the right decision through the comments. And I just thank them for paying more taxes to help our country. All is good.

  19. JayCeezy says

    “When people ask for ‘advice’, they are really asking for ‘permission’.” – John Wooden

    I have had the unfortunate experience of having someone request ‘advice’, and then seeing them glaze over, or get their back up, when it involves diligence and large quantities of time. Turns out to be a waste. PF is a mathematical problem. No shortcuts, but people don’t want to hear that.

  20. says

    My parents finances have given me a lot of stress over the years. No matter how much advice I give them they dont really change so I’ve stopped caring as much. I help out when I can but they have to want to change on their own. Some people are quite stubborn even after going through many hardships. People who learn from their mistakes and don’t repeat them get ahead faster!

    • says

      Yep, no need to worry about the parents if they don’t change. But do be stern with them and say that if they don’t change, then plan for where other sources of money will come from as yours might no longer be available.

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