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Why Friends Are Better than Money Experts

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Too many people think talking about money is tacky. I’ll admit it’s uncomfortable and awkward, but anything worthwhile and unique has some built-in hurdles. Instead of talking money with friends, people turn to experts. Experts, however,  don’t much care if you succeed or fail. They have no idea what your life is like. and you have no idea what their life is like. This information differential means you won’t get personalized information that you can use. If you talk money with your friends, however, you’ll get the real scoop. This is why friends are better than money experts.

The Difference Between Experts and
You

Let’s imagine two families that each spend $46,000 a year. If that family makes $46k/year, they are a cautionary tale. But if that family makes, say $250k/year, they are paraded around as frugal experts.

The latter couple is basically the Frugalwoods, i.e. a popular personal financial blogging personality who maintained the appearance of frugality and then got criticized when people learned their income.

I remember one article even says the Frugalwoods should be applauded because “they’ve exhibited a level of self-restraint and stick-to-itiveness that the rest of us can only dream of.” I mean, I guess the rich can only dream of it. The lower income and middle class live this reality every single day. Heck, lots of people live this way.

The Problem with Money Experts

50% of U.S. households earn $50k or less, representing 70% of the population (there can be more than one person in a household). So assuming 25% of these people live within their means (because 25% of Americans have no debt), that’s 22 million households (18% of all U.S. households) living on less than what the Frugalwoods spend per year (assuming $50k after taxes is around $40k).

If money advice was about lifestyle, then these 22 million households should be as equally vaunted as those making more. But living off <$46k when you’re making <$46k is stressful. No one wants to follow advice on how to be struggling, even if the budget is the same. What’s better is living a bucolic Instagrammable lifestyle where one can talk about minimalism and having “more time for the things that matter” on $46k. The only problem is that the only people who can live that life are the rich.  

On Reddit, this sentiment is echoed:
Being frugal really starts to apply when you make enough money that you could afford luxuries, but you turn them down to save money. That’s frugality. The college kid who is eating Ramen every day because he doesn’t have a choice – that’s not frugality, that’s survival mode.

The Problem with Experts

I have nothing against the Frugalwoods. It’s not their fault that they’re feted. The problem lies in the lack of understanding of what is normal for the majority. There are millions of families with even lower than “extreme frugality” budgets, but it’s the rich who are celebrated. That means it’s not the budget that is celebrated but the income and the percentage.

The higher your income, the more impressed with yourself you are. This is the story presented by the experts. And it can be very disconcerting to people who earn regular incomes. I know I have felt discouraged when people talk about their “extremely” restrictive budgets and I find my budget is more restrictive. They pat themselves on the back by comparing themselves to richer people. I compare myself to my immigrant parents and find my budget wanting. That’s why I can’t listen to the experts. It’s too discouraging.

Let’s Stop Pretending Experts Have the Answers.

Someone might say, well saving a lot of money on a high income is more difficult than living paycheck to paycheck on that same income. I don’t even know if I need to explain this but here are 4 reasons why being rich is easier than being poor:
  • There’s a lot of comfort from the idea that you can just solve problems with money if you want to/have to. You can’t do that if you are lower income.
  • There’s comfort in knowing that saving money can produce tangible results soon. If you’re rich, you can live like a pauper and possibly retire in a few years. If you’re poor, living like a pauper means you can retire never. It’s the difference between sprinting for 500m and sprinting a marathon.
  • Being rich makes saving money easier. Living in a rich area means you’re treated better and have better perks. And don’t tell me “avoiding lifestyle inflation is hard.” No, figuring out if you can afford rent next month is hard. Not buying new things when your old things are getting faded is easy.
  • Being rich means you can screw the poor. My friend’s mom once paid a huge markup for a beater because she had bad credit. If I wanted that beater (I was 10 at the time, but let’s say this happened today), the dealer would have offered it to me for less because I have excellent credit and could pay cash. That was the only car available for her, but would have been one of many options for me. Being rich means you have all the options that the poor have and also the options of the middle and upper classes. Being poor means you hope the rich don’t take your options in their quest for frugality.

So yes, being rich makes everything easier. Don’t let anyone tell you differently. It’s more impressive to live on a lower income if you’re lower income. It’s easy being rich.

Why We Should Talk to Friends, Not Experts

This is not to say that the lower or middle class should give up hope and spend willy-nilly.  Saving money is obviously good and should be encouraged even if you don’t get a book deal. What I’m really critiquing is the critiques of the critique. At some point,  you hit the threshold for how little money one can spend.

If well-educated, book-selling, rich “extreme frugal” people are spending more than you, even with all the advantages that the rich have for saving money, then maybe the 22 million households making it work on less have hit the absolute limit. Let’s not chastise them regarding “learning frugal habits” just because their savings percentages are low. The savings are low because of lack of income, not lack of frugality.

Rich financial experts make their money by shaming the poor. It makes the non-rich feel bad, and feeling bad doesn’t actually inspire change.

How to Talk Money with Your Friends

I’m weirded out by bloggers who talk about “nonfrugal” people as if they are some single entity that is obsessed with conspicuous consumption. Some people are like that, for sure. But others are making all the right choices and are constrained by their circumstances. Others are making most of the right choices. Others are recovering from some of the wrong choices. Some people just make different choices.

And most people suffer from the simple malady of not being rich.

The middle and lower class have tips and tricks that the rich can’t even comprehend. Too much of personal finance is higher-income people trying to educate lower-income people but the two sides barely know, let alone understand, each other.

Friends Are Better than Experts at Dispensing Financial Advice

There was an interesting study that shows that we learn financial advice best from someone as uninformed as we are. It’s our peers that are best at teaching us. Part of it is that we are less intimidated by those who are like us. We are more likely to ask questions and work on learning together.

Another reason this makes sense is that you’re speaking the same language. You have an understanding of how your friend lives and they have an understanding of how you live. They aren’t going to recommend crazy things like cutting lattes because they already know you don’t drink coffee. It’s easier to take financial advice from someone who is less judgmental, knows you, and cares about you.

Conclusion – Why Friends Are Better than Money Experts

The experts make their money by doling out generic advice. But that generic advice helps an expert’s bottom line more than it can help you. We should all learn more about personal finance, and we can learn from each other. That’s why friends are better than experts when it comes to personal financial advice.

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