A couple of weeks ago, my friend was over checking out our new house. I still can’t believe we bought a house and it was nice for her to finally see it, it has been a few months now.
Of course I was able to direct our conversations to money, I can’t help myself sometimes. Would I be a good friend if I didn’t at least offer my help if it was needed? No. My friend has always been bad with money and the better I get, the harder it is to see her struggle.
She is a 30 year old single mom with 2 kids and always seems to be working or exhausted from working. I worry about her because being a single mom with 2 kids is hard enough without even throwing money into it.
I let her know that if she ever needed any help with budgeting or getting started saving money, I’m her girl. She giggled and acted like I was joking. I reassured her that I wasn’t and I would love to help her out because that’s what I do.
She mentioned that she would be okay because she has a 401k at work and her company puts money in there. Obviously that doesn’t have anything to do with her current financial situation, but I wanted to know more about this magic 401k.
Me: So how much are you contributing to your 401k?
Friend: Oh, nothing.
Me: So your company just puts money in there for you?
Friend: Yep, there’s already almost a thousand dollars in there.
*She’s been working there for like 5 years.
Me: Oh, that’s not very good. Do they offer a match?
Friend: I think so, like up to 5 or 10 percent…I think…maybe.
Me: That’s cool, 401k matches are free money. They can help you save faster and you won’t have to save as much.
Friend: But there isn’t anything for them to match.
Me: Yeah, that’s kinda the problem.
Friend: That’s okay.
Me: I don’t know about that. Have you ever thought of starting to contribute to your 401k and take advantage of the match?
Friend: Oh, I can’t afford that I don’t make enough money.
Me: You can always start small, that’s what we did.
Friend: Like how?
Me: Well, you could get started by contributing 1%, you won’t even notice it. Then you can slowly increase it over time.
Friend: 1 percent! How much is that out of $1,000? Oh no, that’s like $100…I can’t do that.
Me: Uh, it’s only $10, $100 would be 10%.
Friend: That’s not that bad, I could probably do that.
Me: You gotta start somewhere. All you have to do is let your HR people know you would like to contribute 1% to your 401k and that’s enough to get you started.
Friend: Yeah, but I don’t know anything about all that investing and retirement stuff.
Me: I don’t either really, but you don’t have to know everything to get started.
Friend: Maybe I’ll just bring all the paperwork to you and you can figure it out.
Me: Okay, but I don’t know very much.
Friend: You know more than I do.
So could this be another reason why people aren’t saving for retirement? They just aren’t really sure what to do. It’s sad, but it really makes sense. Fear of the unknown.
I’m sure time is also a factor, because if you don’t know what to do, it can sometimes take a good deal of time to learn. So lack of information and time.
Of course there are other factors like not caring and not wanting to change, but that’s a whole other issue.
What held (or still holds) you back from improving your finances?