Friday, January 28, 2011

Helping Friends with Finances

Everyone’s financial priorities are different and are based on a variety of factors. Education, salary and familiarity with the topic of personal finance all affect the state of a person’s financial situation. Offering to help a friend with their personal finances could be a touchy situation. Finances are very personal and even well intended help could be perceived as insulting and invasive. It is important to explain to your pal the help you are attempting to provide is from a place of valid concern and good intent. It should also be explained that a balanced financial plan is equivalent to a three-legged stool; there must be balance. If one of the legs of the stool is removed, the stool will be unsteady and crash. It is important that the financial stool include budgeting and saving, investing and retirement planning.

Budgeting and Saving

Budgeting is the foundation of financial success and responsible money management. Budgeting should be embraced rather than seen as a dreaded chore. It could be explained to a friend that a budget is the equivalent of a financial diet in that the amount of money going out should be monitored in the same way that calories would. A solid brings awareness of how and where money is spent and is essentially a roadmap and helps separate necessary expenses from optional expenses. Additionally, a savings plan must accompany the budget. Without a savings plan, financial goals may seem unattainable. Following a budget results in recognizing how much money can actually be saved.


The idea of investing can be intimidating. The biggest misconception about investing is that you need a lot of money to get started. The first step is to identify long and short-term goals because the type of investment chosen will depend on the amount of time the investment will be allowed to mature. Stocks and mutual funds are best for long-term investing and certificates of deposit are often more appropriate for short-term investing goals. To help a friend become familiar with their investment options, you could accompany them to their local bank. Branch personal bankers are knowledgeable about a variety of investment products and could be a valuable resource.

Retirement Planning

No matter the age of your friend, they should be thinking about their financial plan for retirement. There’s no age requirement to envisioning what an ideal retirement will look like. Without smart planning, the golden years could easily be spent working instead of enjoying a carefree retirement lifestyle. There are a variety of retirement calculators online that you can direct your friend to. These calculators can provide a realistic and often sobering picture of what retirement will look like with and without a retirement savings plan. The preceding items can help your friend build a solid and sturdy financial stool and lead them to a prosperous financial future.

Editor's Note: This post was contributed by Jane Sanders from Debt Management. You can find more information on her website about financial topics, such as choosing the right debt management service.

Photo Source: StratEssence


This is a problem for most people our age. They don't think about investing for the future because...well, they think it's too far. But with the information overload we go through these days, we experience fatigue at a younger age. This is most especially true for my call center friends. They experiences illnesses that people should be experiencing during middle age! That's why I think it's good to plan ahead. Great post, Glenn!

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