This has been a tough year for me dealing with my friends. Well, not my uber-close friends, but my friends, you can dig the diff, right?

1) One friend purchased a condo at the apex of the housing market, despite my warnings. I know, through other friends, that he used a sub-prime product.

2) At a wedding last weekend, one of my friends revealed that he and his fiancee purchased 1/2 of a duplex using an option ARM loan product. His reasoning was that they weren't able to pay any principle (like 3 bucks to start), and that they didnt plan on being there for more than 5 years. If you're going to only pay interest on a loan in a stable/decreasing property price environment, why not rent? I'm concerned that he doesn't understand that the lowest payment on an option ARM involved NegAm.

3) A housemate lost his job due to downsizing. He decides that he wants to be picky about finding a new job. This would be fine if he had savings to live off of. He has none. He lives paycheck to paycheck and has 2 months of rent (very cheap rent because I did him a favor) prepaid. Prepaid because he has a difficult time paying on time. Good guy, horrible financial situation.

What do you tell these folks? I'm young, somewhat financially savvy, but not perfect. But I know enough to not make obviously wrong decisions. I have no cashflow issues, a year's worth of mortgage payments, food, and basic costs saved up as an emergency fund. I save 25% of my gross income for longer-term investments. That seems pretty basic to me. I try to help my friends understand money issues, but most dont seem to get it

So, any advice aside from "get new friends?'

Dang, you took my answer...

Honestly, I'm not sure there's much you can do. It's like warning my kids about fire ants. I can talk about this sort of stuff 'til I'm blue in the face, but they still had to learn that lesson on their own this weekend, when they stirred up a fire ant nest and got stung a bunch of times.

1. Don't lend any of them any money, ever.

2. Buy them all a copy of your favorite personal finance book, and give as a housewarming/wedding gift. If you think they'd be freaky about it, slip it in anonymously.

3. Lead by example - be the Joneses that they feel they need to keep up with. But instead of a new car, show off your frugal bargains. Hey, I'm a girl and I like to shop. If my BFF shows me a great rug she bought for a few dollars at a garage sale, it's my sworn duty to out-bargain her and find something equally cool for less than she paid.

4. Realize that it's not your responsibility. People make mistakes. You may have the hindsight to know what the mistakes look like, and be able to point them out once or twice but beyond that, it's all you can do. Some people either can't see what you see, or feel that the decisions they are making are right for them at that point in their lives. Learn to pat them on the back, wish them success, and drop the subject.

This is a tough question, Stephen, and one I've wrestled with lately as I've become more financially aware. I used to be one of these people, and I know that it wouldn't have done any good for a friend to give me warnings. Yet is it responsible to sit by and watch as a friend does something stupid with her money? I don't know. Yet I do it. My approach lately (because I do know a couple of people still doing dumb things) is just to be clear that I've been educating myself about finances and am willing to answer questions or offer advice if people need it. The trouble is, one person I see making dumb mistakes knows better. She's worked in the financial services industry, comes from a wealthy background, understands the rules of money, etc. but still she's making poor choices. What can you say to a peson like that? This is why I always say that money is more about mind than it is about math. She has the math part down; it's the mind that's killing her.

Jericho,

Why does this matter to you?

I'm not asking this question facetiously. Really. Why does this matter to you? Even if all of your friends go bankrupt, what real effects will this have on you and your relationships with them?

Often, we say we want to "help", when all we actually want to do is prove that we're smarter and we know better. Usually, we don't end up being much help at all, except making people feel bad about themselves. If somebody makes me feel bad about myself, I have even less willpower or strength to make the right decisions. This sort of like calling somebody fat, when it's obvious to everybody around them (including themselves) that they are fat. It just sends them into a shame spiral and they end up eating more and getting more fat.

It's really tough to help people. Usually, we need help to change our own "helping" habits first.

squished

P.S. I'm really skinny.

Here again, I really believe that people need to make (and learn from) their own mistakes.

Without knowing any of the details myself, you also have to keep in mind that she might be fully aware that she's making what you term "bad" choices, but it might be worth it to her in some weird way, making it a "good" decision as far as she is concerned.

Unless the first two friends come and ask you how they can get out of their housing situation, there is nothing you SHOULD do. (You could tell them they made a big mistake, but the contracts have been signed.) If they appear upset, ask them about that, by itself, and then it might lead to asking for help.

In that case, have a list of credit counselors and refi lenders available. Beyond that, they have to figure this out on their own.

As for the housemate, if he burns through the first month and still has no job, then it directly affects you within a short period of time. So I think it's okay at that point to offer help and suggestions. Better that than kicking him out because he can't make rent. Even then, give him that one month to figure this out on his own.

ever hear the phrase pearls before swine?

My response is closest to what OBMB said, unless your friends come to you seeking help, there's not much you can do. As Gnashchick said, lead by example and let them know you're available for a "second opinion" before they make any other money moves.

Why does it matter? I think it has to do with the fact that I was raised a "solver." I solve problems. Folks all the time come to me for advice and assistance and solutions, and I've always provided it. It's what I do. My job has me solving problems day in and day out, across this country. I'd go so far as to compare it to the Christian value of serving others, cept I've kinda gotten a little agnostic about the whole God thing at the moment.

Not to say I don't have a spine, 'cause I do have one. I've cut folks out of my life when they don't listen (see example #1, but for other reasons). I've pulled friends out from cult meetings (see: Scientologists). But now, when people I know and interact with on a daily basis really screw themselves over, and there's only so much that I'm willing to lead them, because if they refuse to learn to fish, I ain't helping em after awhile (I am getting that way with #3, because he thought it was a good idea to restart his dating life rather than search for jobs...)

So why? Because for some odd reason I was taught to give a darn. It gets frustrating to see em do silly things (And I am not talking about dating stuff, or asking out someone out of your league, but real matters to your survival issues).

PS: My fiancee and I have about 5 extra pounds (darn beer). We used to have about 15 pounds each. Two people working together can accomplish quite a bit =)

Thankfully, thats a decision I dont have to make because I've gone from leaseholder to leasee to the 3rd roommate and a very long-time friend (and smart with money!) as I'm moving out around the time I get married. We've let the guy know that if he doesnt pay rent, he ain't gonna be living there. Doubt its dawned on him though.

It sounds like at least part of the reason you want to do something is that it will make you feel better - less frustrated and more valued. I don't think there is anything wrong with that when for example you are actually solving a problem that they have asked for help with. But when no one has asked for your advice and there isn't anything you can actually do about the situation then I think you just have to grin and bear it.

I wish that it made me feel better. It wasn't a role I chose, moreso it chose me. That and coupled with upbringing, well, there's the problem.

Sure, I have to grin and bear it when they dont want to listen, but I figured there were some stories from others that could be told about similiar issues (rather than some psychological analysis of myself, I already know I'm insane

Well I usually give unsolicited advice myself. And get frustrated when its ignored.

Apparently there is more of a money taboo in England than in the States which is probably why a lot of my unsolicited advice is given to people who want to sort out someone elses finances rather than them telling me about some stupid decision they've made and me offering advice.

For example, a friend of mine loaned someone some money and is trying to get them to make better financial decisions. I basically offered advice that they shouldn't get involved too much and should have low expectations.

On the other hand, I am vaguely aware of some other people having credit card debt but I'm not really sure and so don't pro-offer any advice.

Meh, maybe/maybe not. Perhaps it has more to do with the particular company you keep.

For example, I'm in the US but I have no idea about the financial goings-on of any friends or family. I don't have a clue about how much money anyone makes unless they work in a job where the salary is publicly available i.e teacher etc. I don't know the debt loads of friends/family. We don't share our financial details either.