People always ask me how to get a family member to save. Whether we have been savers our whole lives or are still relatively new to the practice, it's hard not to want this life for our loved ones. Some people need pretty serious savings interventions, but others may just need to make small tweaks to their finances to get back on track.
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How can you get someone to want to make those changes when they think everything is great?
A reader reached out about watching a young family living virtually paycheck-to-paycheck without being even a tiny bit alarmed. They saved a modest amount for retirement and had a very small emergency fund that would get raided regularly. Small consequences were beginning to emerge, but he knew that inevitably the consequences and stress would compound. Most importantly, he feared that the family was unknowingly giving up future choices with their time. His question was how to help them when they didn't see a problem.
A lot of personal finance education is extreme advice for extreme situations. For folks who are not in extreme financial distress this is a problem. They don't see their situations as being problematic compared to the stories being told. Also, the interventions would be more like a baseball bat to the head when perhaps a tap or a subtle nudge would be more appropriate.
If you want to bring this group of people into the savings tent, then think carefully about the books you are buying or the podcasts you are suggesting. Some of these personal finance voices are toxic and off-putting. They can also be perceived as "save at all costs" alarms. Deprivation central. Accumulate as much money as possible.
I will be the first to admit that I am not attracted to a life where accumulation of wealth is the alpha and omega, or where financial virtue is entirely measured in delayed gratification. After all, where does neighborly generosity or charitable giving fit in? A decade or two of such a break-even lifestyle can have serious, far-reaching negative consequences. Helping people to see that and take action is what's hard.
Ever heard of the 1 in 60 rule? When flying, if a pilot is off course by 1 degree, after 60 miles the pilot will be off course by one mile. So it goes with money. Small decisions to let a credit card balance roll month-to-month, to raid an emergency fund, to buy slightly too much house, or to save just 5% for retirement (instead of 10%) could lead to a family's finances veering off course.
People living a break-even lifestyle can get back on track with simple and achievable actions. A simple pay yourself first budget system with parameters around credit card debt might be enough. A more extreme budgeting technique might have the opposite effect, anyway.
If a scalpel, not the baseball bat, is the right instrument, then how do you get the person to the table? Remember, a break-even lifestyle only sends up red flags when a disaster occurs.
Take a couple in their 40s saving enough for retirement, not aggressively, but certainly saving to be on track to retire in their early 60s. They have a mortgage that is a bit of a stretch from what they could afford. Luxuries and vacations have crept up over the years resulting in a luxurious lifestyle into which they have fully assimilated. But it works, and they wouldn't change a thing.
Except something out of their control suddenly changes. He had previously worked from home three days a week. Now he has to go in five days a week, reducing his time with family by a couple hours for the long commute. The nature of the job is unique and is not transferable unless agreeing to a substantial pay cut. What do they do?
Maybe it's obvious to the reader. Cut your lifestyle, sell your house, downsize a car, do what you have to do. This is your time we are talking about!
But really is it that easy? This story highlights the issue. Nothing seems wrong. But then something does go slightly wrong, revealing the precarious nature of their finances.
What if a little earlier in their career they could have been told this story as an inspiration?
A couple in their 40s saves around 20% of their income into retirement and has no debt. They take nice vacations, drive nice cars, and buy nice clothes but manage to still live happily below their means. While they both are content in their jobs, they have a valid concern about the future employment options for one of their industries. Their low overhead choices and maybe small tweaks to spending could overcome that reduction in income.
To recap, they are savers but they are not extreme. They don't want to be extreme savers. They have intentionally built a contented life with low fixed overhead. Living below their means has a double benefit. They can save enough for the future but can also be secure in the knowledge that they are not at the mercy of a job that could change drastically or disappear altogether. Importantly, they love and acknowledge that finances are not a source of stress.
What's attractive about their situation? Is it just the accumulation of cash? Or is it the freedom and choice they have from living a less expensive lifestyle? The latter argument might be the winner.
I recently read article after article about the work from home conundrum. Take this group of people who enjoyed working from home during covid while making the same pay. Life was easier. The job could be done just as effectively. But now they're being called back to a commute or, heck, back to wearing pants again. It will fundamentally reduce their quality of life.
Living below our means offers more choices for people in this conundrum. We can choose to make less money, for instance, to take a different job that offers a flexible work from home set up. We can trade money for time.
Many have relinquished autonomy over how they live their lives by living a break-even lifestyle, and that is not a good feeling. Hence, there has probably never been a more ideal moment for attracting people to a life of saving by demonstrating the freedom earned by living below our means.
People living a break-even lifestyle are adapting incrementally to luxuries and wondering why they still feel so poor when there is little wealth accumulating. When living below our means, we can just as easily adapt to a slightly reduced lifestyle while having the added benefit of feeling "richer" from the savings accumulating.
It's incredible that these small lifestyle choices -- to buy the house that's 20% of income or 14% of income, to take on the $400 car payment or to keep driving that old car for another couple years, to upgrade that vacation by $2,000 or not -- don't register as all that luxurious in the end. Instead, they can take us miles away from the lives we've envisioned for ourselves.
If your loved one is in this break-even realm, maybe the promises of freedom and choices in the near future combined with suggestions for small, subtle and incremental positive financial changes to get there will be enough to elicit real change.
For many people a one-degree correction is just enough to get them right on track.
Sarah Catherine Gutierrez is founder, partner and CEO of Aptus Financial in Little Rock. She is also author of the book "But First, Save 10: The One Simple Money Move That Will Change Your Life," published by Et Alia Press. Contact her at sc@aptusfinancial.com.