Forget A Book Club: How Your Friends Can Help You Save Money

in Investing by

Meghan Martin is celebrated as a rock star in Personal Capital’s Denver office. She’s been responsible for hiring most of the advisory team, helping to grow the office to nearly 100 employees in a little over a year. The hum of excitement around the office – full of smart, enthusiastic people excited to be changing the world – is in no small part due to her.

Besides being the lynchpin of Personal Capital’s recruiting efforts, Meghan is also a personal finance guru (one among many at the company!). What makes her stand out? She scrapped her book club to launch what she calls a “Money Club”. Teaming up with her best friend, Leslie, she organizes a monthly get-together with about eight friends to talk personal finance. Topics range from budgeting for a wedding, to talking money matters with your significant other, to investing for the long-term. The group even holds monthly challenges to reach savings goals.

Social pressure for good. It’s a thrilling concept.

As a marathon runner, the concept of positive peer pressure resonates deeply with me. I’m more likely to get up for an early morning run if I’m meeting a friend than going solo. And if I’m tracking my run on Strava (a running app that shares my running apps with my friends), there’s no doubt I run with more pep in my step. In the realm of financial services, social pressure has enabled an important innovation in lending: micro-finance. As it turns out, micro-finance loans are typically repaid in group settings. Why? Because peer pressure increases repayment rates. 

In our day-to-day lives, social pressure seems more likely to lead to less optimal financial decision-making. At least, that’s been the case in mine. I’m more likely to feel irresponsible (to my checkbook) when I’m leaving a dinner with friends than when I’m eating solo.

But as Meghan and Leslie have proven, this doesn’t need to be the case. Their story is inspiring — so much so that we’re hard at work at Personal Capital to design a program to empower others to follow their lead. Given the power of our free software, we’re in an incredible position to do so (readers can sign up in advance to hear about the program’s upcoming launch).

In the meantime, I sat down to interview Meghan and Leslie to see the secrets behind the Money Club: how it got started, what actually goes down in a meeting and how it’s transformed their lives.

Q: What was your motivation for starting a meet-up to talk money?

A: [Meghan]: Developing good savings habits – sacrificing now for something I care about later – has been ingrained in me since childhood. I’ll never forget when I asked my dad for a small T.V. for my room and he replied, “How are you going to pay for that, hun?” I ended up saving dimes and quarters and sometimes dollars over the next year to get my T.V. It turns out, my dad put the equivalent amount of money in a savings account for me.

While I pride myself on good habits and a tendency to save, I know that the environment that I’m in can be challenging. And I see it’s challenging for my girlfriends too. When do we ever say “I’m not going to come to dinner tonight, because I’m on a budget?” Social pressure can be a big factor in over-spending. I wanted to see if I could make social pressure a factor in saving. I like that by verbalizing our financial goals, my friends and I hold each other accountable to those goals.

[Leslie] I had a similar upbringing to Meghan. My parents encouraged me to work to save money and were very open when it came to discussing how to save, the importance of investing, and why it’s important to be able to manage my own money. I found that when I brought these topics up with my friends, however, their responses and reactions really varied.

People really tie emotion to money and it makes it intimidating to discuss fears or ask questions — and I wanted to create a space where we could talk about financial issues and goals. A lot of my friends were looking for the same thing – a place to go to for advice and to discuss their financial goals and how to accomplish them. It’s a really important topic, and it’s not always easy to find all the answers on our own.

Q: How Do You Get Friends to Join?

A: [Leslie] It wasn’t that hard. We had a book club that we all attended every month or so, and realized that we’d always end up talking about our lives – what our goals are, what we’re struggling with in jobs, relationships, etc. When topics turned to money or investing – I was surprised at how many people jumped into the conversation. There’s a real appetite for this.

Q: What Does a Typical Session Look Like?

A: [Meghan] Our eight-woman group gets together at one of our houses:

  • We generally all bring some wine or a snack to the meeting to share. In fact, one of our “money saving” tips is to bring the extra food in your fridge or pantry that you know won’t get eaten before it goes bad. Why buy something when you don’t have to!
  • The topic of is generally determined in the previous meeting. We’ve covered topics such as budgeting, investments, future planning, etc.
  • Between meetings, we often share interesting articles, blogs or books we’ve read via our group Facebook Page. Suze Orman’s “The Money Book for the Young, Fabulous and Broke” was a book that we passed around.
  • During each meeting we’ll discuss short term goals and long term goals. We make a point each month to check in with each other on progress – including celebrations for any goals (big or small!) that we met as individuals that month.
  • One of the most recent challenges was what we call a “Money Fast” or “Spending Fast”. It was a great exercise in figuring out which parts of your daily life are a “want to have” (I WANT a store-bought latte) versus a “need to have” (I NEED coffee… but coffee from home is just as tasty – and cheaper!)

Q: With the plethora of DIY tools, personal finance blogs and financial advisors, why is this a great format?

A: [Leslie] As I see it, there are three important aspects at play here.

Number one: lots of personal finance decisions are things that we decide not to address until we have to — how many people pay their taxes on April 15? But with just a teeny bit of effort, your money can really work for you. Our monthly get together makes it a forced thing and helps all of us to “get ahead” while spending time with people we like.

Number two: it’s a no judgment zone. Like I said before – money can be an emotional and intimidating topic. It’s easy to feel silly about money matters and sometimes as individuals we don’t even know where to start looking for answers. How do I not know what asset allocation means? Why do people talk about risk-adjusted returns? This is a safe place to ask questions and learn. It’s part of our culture that no question is a stupid question (and more often than not, you hear a “I want to know about that too!”).

Number three: there’s social accountability… and support. Life is busy and there’s no indication that it will slow down anytime soon.  With monthly meetings, it’s hard to come to a session and admit that you didn’t even try to meet your goals. It’s like going to your piano lesson without an excuse that you didn’t practice. The group celebrates accomplishments and gives positive support when one of us is struggling — we’re in this together.

Related: The Paradox Of Saving For Retirement. UCLA Study Show’s Users Spend 15.7% Less When Using Our App

Q: What’s your advice for someone else who’s looking to get a their own Money Club up and running?

A: [Meghan] It’s fairly simple because money (spending and saving) is a huge part of everyone’s life. Keeping it casual and friendly yet setting goals and objectives tends to peak the interest of many people. Create an open invite for a few people that might be interested and encourage them to bring their friends.

At first I was somewhat timid to admit I was in a “finance club” but as it turns out it’s been very rewarding. I’m more conscious of what I’m spending and more confident in my financial future. I’ve also gained confidence in asking questions about investments and financial topics.

The following two tabs change content below.
Catha Mullen

Catha Mullen

Catha Mullen is passionate about helping people make healthier financial decisions, which is why she joined Personal Capital. Personal Capital helps people live better financial lives by providing technology-enabled advisory services, in addition to free financial software. She's got an MBA from Stanford and AB from Princeton.
Catha Mullen

Latest posts by Catha Mullen (see all)


3 comments

  1. Amy Hong

    I love the idea of having a safe and supportive place where you can address finances. We don’t do it enough and I think having a judgement free zone to discuss it with your friends is the perfect way to get started. Like anything else, starting a conversation is the first step!

    Reply
  2. Financial Samurai

    I love the initiative Meghan and Leslie! Must be fun to catch up with friends too.

    It’s smart to keep everybody motivated and accountable with their updates. I do a similar thing, but just with my personal finance site. When people are watching, one is much more motivated not to screw up!

    Reply
  3. BARBARA FRIEDBERG

    Wonderful inspiration and support for all the members. I’d expect it will lead to smarter money decisions. IMHO, quite a bit more financially rewarding than a book club 🙂

    Reply

Leave a Reply

Your email address will not be published.

Disclaimer. This communication and all data are for informational purposes only and do not constitute a recommendation to buy or sell securities. You should not rely on this information as the primary basis of your investment, financial, or tax planning decisions. You should consult your legal or tax professional regarding your specific situation. Third party data is obtained from sources believed to be reliable. However, PCAC cannot guarantee that data's currency, accuracy, timeliness, completeness or fitness for any particular purpose. Certain sections of this commentary may contain forward-looking statements that are based on our reasonable expectations, estimate, projections and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not a guarantee of future return, nor is it necessarily indicative of future performance. Keep in mind investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.