I’ve written before about some of my coworkers’ financial shenanigans. For the most part, they’re pretty careful and sensible, but one of the managers in my department is the notable exception.
He repeatedly asks for information about investing and finances which I’m happy to oblige him with because the level of his ignorance is slightly frightening and because it’s such general information that I’m not tipping my hand. For example, he doesn’t participate in our 401k because he didn’t understand the tax benefits. Instead, he pays an advisor to invest in post-tax accounts at over 1.5% fees. Facepalm. He also asked once, disparagingly, if I invested in index funds since, “those are just for folks who don’t know what they’re doing.” (As a side note, in one of our first discussions, he asked if I thought you could manage finances without an advisor. I responded enthusiastically that you could, only to be convinced by his subsequent statements that he really, REALLY needed to be talking to someone who knows what they’re doing. Advisors are good for some people. I just wonder what this advisor does for him if he’s STILL so clueless after years of working with this advisor.)
Anyway, apparently he has these discussions with many of my coworkers too, which is probably great since, as I mentioned they’re pretty sensible. After having enough of these conversations, he’s decided to downsize to a smaller house with a shorter commute time. Because it’s a smaller house, he got money back from the sale of his old house in addition to lowering his commuting costs and monthly housing expenses. So far so good.
So then he starts talking about what to do with the extra money from the sale of the house. Ok, I can see lots of reasons for not simply rolling that into a larger down payment on the new house. I assumed, however, that since he’s constantly talks about not having enough to retire on that he’d invest the difference, using it to kick-start his savings. Instead, I’ve now started hearing about some expensive kitchen options that he’s installing in the new house and some possible renovations (we’re talking moving walls and plumbing, not repainting or new carpets, so these are pricy renovations). So, he’s basically already spent the money he’s making from the sale of the old house. He also calculates that he’s only saving about $200 a month by moving. While that’s a nice monthly boost, I hardly think that will set him on a path to financial freedom, particularly since he just reset the 30-year timer on paying for his house.