Whether it’s your spouse, the person
you’re dating, your father with a penchant for expensive golf
clubs, your brother in university who only eats Ramen noodles out of
broke necessity, or your best friend who has a tendency to spend $10
on a bottle of water, you probably have someone in your life who
needs a little help understanding the value of money.
Frugal (or at least budget conscious)
people tend to have a hard time being surrounded by reckless
spenders. Nobody wants to get that phone call for a loan –
especially if it’s a result of financial irresponsibility. Rather
than begrudging your loved ones that recklessly spend, try giving
them some real help.
By providing them with the tools and
knowledge to make better financial decisions, you can watch them live
happier and less stressful lives. When they see their better habits
leading to a bigger savings account, they might want to use some of
that cash on a decent dinner to thank you.
Demonstrate the Value
of Money Through Budgeting
By helping a reckless spender create a
money budget, you’ll make them realize what percentage of their money
is going to what category of their expenses. If they’re spending
30% of their income on entertainment and 10% of their income on food,
it will be easy to demonstrate that their priorities aren’t what
they should be.
You’ll also want to take
debt into account, which is something many
reckless spenders fail to do. Debt means that people have less money
than they believe that they have, causing overspending while
important obligations remain unattended to.
If the reckless spender you’re trying
to enlighten isn’t comfortable sharing their financial details with
you, you can always make a mock budget based around a fictional
scenario. You can use approximations of what you believe to be a
similar scenario and show them how to balance a budget based around
these details. They’ll still have to work their own budget, but now
they’ll know how to do it based on your lesson.
Use Yourself as an
Example
People are less likely to make huge
changes in their life based on the advice of strangers unless that
stranger is an established authority. When you’re trying to help
your family or your spouse, you’re in the perfect position. They
already know you and trust you.
Be transparent about your budget. Show
the people around you how you manage your money, and demonstrate your
goals. Let them see how
much progress you’ve made towards your ideal financial scenario,
and tell them how you did it. Make yourself available to give them
advice and help them if they want to get serious about managing their
overspending habits.
Go Shopping With Them
Some people who overspend do it
compulsively. They throw tons of things in the cart that they already
have or don’t need. Sometimes they think they’re getting a great
deal rather than overspending. If you act as the angel on their
shoulder in the store, you’ll be there to help
them change their habits.
You might find that some people think
they’re saving. They believe that using a coupon or buying a
specific size of a product rather than buying a generic brand will
save them money, only to find out at the end of their shopping trip
that they’ve dropped $25 more than they would have if they had
shopped with hard math.
There are also spend-happy people who
purchase
things they just don’t need. They want a
fourth wristwatch or a trendy personal care product that they already
own dozens of variants of. Encourage them to take pictures of what
they have before they go to the store. Have them take their phone out
and do a comparison of products they’re tempted to buy and products
they already have.
You can also take them to your favorite
places to shop. If you found an amazing thrift store with affordably
priced vintage clothes, you might be able to get a luxury shopper to
switch their perspectives on value and brand names. Encourage them to
take an extra stop at the dollar store for certain items. You’ll
really drive the point home if you compare the receipt to a previous
receipt.
Show Them Alternatives
Some people get stuck in their ways.
They want to throw their money at specific things, and no matter what
you say, they’re going to push back. When that happens, show them
alternatives that will make things less expensive or more worthwhile.
The person who spends an absurd amount
of money on their daily lattes from a coffee shop may be better off
investing in their own espresso machine that will allow them to make
their own at home. It’s an investment, and will require a bigger
sum of money initially, but will pay off in the long run.
People who get a little too crazy with
online shopping might benefit from signing up for an online rebate
service, or getting a coupon finding browser extension. They’ll
likely still be spending money in the same way, but at least they’ll
get some of that money back.
You can also introduce them to online
secondhand stores, as well as auction sites. They can find gently
used versions of the things they’re looking for and spend
substantially less. You might even get them hooked on finding the
best deals.
Get Them Excited About
a Goal
People are more likely to save money
and prioritize spending if they’re working towards a goal. Ideally,
this will be a goal that they’re excited about. Maybe your
significant other really wants to purchase a home, or go on a
vacation to a foreign country. These are expensive goals, and they
can only be reached through financial discipline.
Have the reckless spender make a list
of things they’ve always wanted, whether they be material things or
experiences. Find the best possible price for those things, and show
them how much they need to save to achieve that goal. Perhaps they
already have a small sum put aside? Introduce them to the world of
investing. Teach them that with a little bit of financial
self-discipline and knowledge, they can find some smart
investing opportunities and turn even small sums of money into a
sizable income that will only bring them closer to their dream. If
you demonstrate how easy it would be to control the budget and save
up enough for them to accomplish a dream, they may just be excited
enough to do it.
Draw a Hard Line
If nothing is working with a reckless
spender, you might need to make a tough decision. Since necessity is
the mother of invention, a reckless spender may not invent a better
perspective unless they absolutely have to. This means financially
isolating yourself from the other person. Take yourself off any joint
accounts, don’t lend them money, and don’t take over any of their
financial responsibilities.
Some reckless spenders need a big
wakeup call. They may not realize how much they’re overspending if
they’ve been taking your help for granted. It’s not being selfish
or hurtful – it’s tough love. Think of the way birds push their
young out of the nest to help them fly. It might be tough, but
there’s an important lesson to be learned through forced
independence. It can create better habits that will last a lifetime.
Reckless spenders
won’t become penny pinchers overnight. They’ll likely slip back
into bad
habits once in a while. Remember to lead by example and not to be
too hard on those around you who are making an honest effort to be
wiser with their money.
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