Ask an Advisor: Should I help friends who are bad with money?

by - September 22, 2016

Jasmine: I have a couple of friends who buy, buy, buy nonstop and then complain that they’re always broke, which makes me cringe. What upsets me most is that when they are broke, they ask me for money. And I honestly don't want to give it to them. And I also don’t want to come across as a judgmental, condescending jerk by pointing out their poor spending habits, but I want to help them at the same time. What do I do?

Advisor's Answer: 

Yolande Botha - Head: Wealth Business, Galileo Capital
Finalist in the Financial Planning Institute’s Planner of the Year 2016.

Jasmine, you are one of the few people who are doing the right thing – so keep up the good work!
Unfortunately, most people do not think like you do. The best way to avoid this situation is to make sure that you save your extra money in something like a unit trust which is not necessarily immediately available like a normal transfer from the bank. It can take up to five days to get the money in your account and usually people will try to make another plan if it takes that long.

Once you are making a profit on your unit trust you might also be liable for capital gains tax and friends shouldn’t expect you to give them money when it actually cost money for you to do so. To help you with your feelings of guilt, remember that spending is an addiction like any other addiction – such as drugs or alcohol. If you give your friends money you are helping to feed their addiction. It probably isn’t a good idea to tell them this if you want to keep the friendship, but if the money is in an investment it simply isn’t available.

If a friend has a real emergency and you have the means to help them, I'm sure most of us would gladly help out. But if you have someone who spends on things they do not need and small emergencies pops up all the time, you shouldn't feed the habit. That friend probably needs help in learning how to deal with money. As a friend it could be difficult to broach this subject, but give them a book on financial principles as a gift and hopefully that starts to change their behaviour.

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