If a friend is wasting money, should you speak up or keep it to yourself?

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I sometimes cringe when I hear how some people throw away their hard-earned money.

A few stories that come to mind are:

–Someone in credit card debt got a $100 tuition overpayment refund. He chose to use the money to buy a video game rather than pay off debt

–A friend bought a new computer which was $100 overpriced

–A friend buys a lot of Groupon’s he never ends up redeeming

Each time I hear a story I am conflicted. Should I point out their mistake and help them improve? Or should I let it go and just be a supportive friend?

There are no right or wrong answers here, but I do think there is a prudent course of action.

A lot of people will say it is best to speak up and help your friends out. They believe it is best to intervene and offer profound advice. I want to combat some of this logic and suggest why it is best to keep your opinions to yourself.

Reason to help: your friends want your unasked for advice
Reason to keep quiet: your friends want support

You would think your friends would be happy to know they are wasting their money. In fact, they probably just want you to reassure them they are not doing anything too crazy.

When my friend bought a new printer he couldn’t afford, he did not want to hear me spoil his mood. He wanted to show off how cool it was that he could print wirelessly.

I would not encourage bad behavior, but at the same time I am not going out of my way to point out every flaw. No one should be expected to be perfect, and your friends of all want your understanding.

Reason to help: it’s your responsibility to help
Reason to keep quiet: offer help when you are asked

I agree you have some obligation as a friend to be there in a time of need. But criticizing small purchases and poor habits is not the best way to give help.

Everyone has a responsibility to learn about money. You got smart about money by reading books, taking classes, and keeping up with news. It is fair enough to pass along information to friends and lead by example. It is another thing to take on other people’s daily problems.

And remember: if your friends want help, they can ask for it. Then it is definitely the right time to give a nudge in the right direction.

Reason to help: you are encouraging bad habits by not speaking up
Reason to keep quiet: friends have to take responsibility for their actions

It may feel like you are enabling bad behavior by not speaking up. But I think there is a difference between encouraging bad behavior–by telling bad advice–versus not giving your opinion.

Money is ultimately a personal decision. I am not one to judge when someone buys a luxury car or gets bottle service in a club. If someone wants to blow a week’s salary on a night out, that really is their choice.

I let people enjoy their money, and I hope they would let me enjoy my money.

Conclusion

Be very careful about speaking up.

Most of the time your friends are just sharing stories, and they really do not want your opinion to spoil matters.

You may offer some friendly advice from time to time, but make sure they are interested in hearing it. If they blame you for your advice later, then remember you should keep your distance the next time–your advice was unappreciated.

The only time I would really help out–as a friend should–is when someone comes to me asking for help. Then I think it is good to take the time and give your full effort.

Keep to yourself, and mind your own decisions.



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  • Michael

    Another reason to keep quiet: when other people waste their money, they often are subsidizing your thrifty habits.

    In at least two of the examples you mentioned, money is not actually “wasted”. Rather, people simply transferred more of their money to somebody else than they had to. If nobody “wasted” their money in this way, business margins would decrease, and there would be less incentive for businesses to try to attract marginal customers through special promotions which results in larger savings for the price sensitive customer.

    This is similar, I think, to the concept of hotels charging lower room rates but then jacking up the price of all the extras. Because some people “waste” their money on the extras those who can do without those extras obtain the benefit of the lower room rates.

  • Trevor

    Definitely very interesting since this affected me recently.

    So one of my good friends started investing money in mutual funds over this past summer. He’s planning on going to med school and so he has not really taken many finance courses or anything really relating to personal finance in college, which is a shame. It was awesome to hear he was starting to invest though. I asked him what mutual funds he had just cause I was interested, and when he showed me his statements I noticed that he had a 5.75% up-front sales charge.

    Right when I saw this I realized it was a front-end load, but I wasn’t exactly sure what to say to him. I know that buying loaded funds is essentially throwing money away since they are not shown to perform any better than funds without loads, plus you are at a huge disadvantage when every time you put money in, 5.75% gets taken out and goes straight to the broker and the mutual fund company, and this doesn’t even include the other expenses charged by the fund.

    So you would think I would easily tell him all this stuff, but the problem was that the guy he had help him with all of these investments had been his family financial planner for years and years. So I knew it would cause commotion when I told him that this guy was essentially ripping him off and possibly the rest of his family.

    In the end, I decided to tell my friend since he was just starting to invest and I didn’t want him to make this type of mistake for the rest of his life. He actually took it very well and called his broker to confirm it. The broker did admit that the sales charge went to him, but also said that the reason it was there was because he provided the “expertise” to pick the right funds. He also told my friend that if he wanted to get into any different fund he would let him make the choice.

    So overall it ended pretty well. I am just glad that I told my friend about this stuff now instead of him finding out he wasted so much money down the road.

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