Besides the subtle pressures of the today’s varying commercials, friends contribute to a percentage of young adults monthly expenditures. According to a 2019 Credit Karma survey, friends can cost you month every month. In fact, 48% of millennial participants spent money to impress their friends. Not only did they spend money they did not have, but also they did it to keep up with their friends.
You may not believe it, but friendships cost money. And, how much does a friendship cost you?
A year prior to the Credit Karma survey, 1 out of 3 young adults were found to have gone into debt as a result. In fact, they borrowed more than $500 to finance their friendship so as not to miss out. This kind of debt is called a FOMO debt. A FOMO debt is an increasing debt created by young adults’ fear of missing out on experiences.
Besides these 32% young adults, 71% were also found to accumulate more than $100 in debt as a result. Since the 2018 & 2019 surveys, the FOMO debt seems to be increasing annually.
Listen, I am not pointing accusing fingers here. Hell, I used to be one of these adults in my early to mid twenties. Hence, why I am writing this article today to show you ways to circumvent this problem. So, you will not end up in debt as a result of keeping up with friends.
Does Money Affect Friendship?
Unless you are naive, money is important to friendship and relationship. In fact, money is a serious stressor in friendship and relationship. Having said that, how often do friends break up over money?
According to Yahoo Finance Data On Friends and Money, it takes as little as a $100 dispute to ruin a friendship. This is a data gotten from 1000 surveyed people.
To elaborate, 3 out of 4 said a friendship is definitely over when it involves a $500 dispute. While 40% said they would consider it, even if the dispute involves $100. Obviously, money and friendship do not mix well.
You see, my dear reader, a friendship which makes participants feel pressured to spend can quickly turn toxic. This is especially in cases, where borrowing and overspending are involved. You would think spending is the price of friendship, but it is not.
People tend to be conservative towards their finances, especially as they get older. As a result, friends who negatively impact your finances will grow to be a nuisance. Think about it for a second.
Whereas the part of cultivating friendship involves being there for your friend, it does not hold when it comes to friends who always want to do expensive things. Or, borrow from you constantly and paying back with difficulty. After a while, the routine becomes old, unfair and one-sided friendship. So yes, money can ruin friendships and if I dare to say- relationships too.
How Do You Control Spending Money With Friends?
Since having good friends affect your finances, it is important to budget for friendship. This is to ensure you enjoy the benefits of a good friendship without getting into a debt. In other words, grow a great friendship which do not peer-pressure you into lending or overspending to keep up.
With that said, here are what you need to do to avoid losing friends because of money.
1. Set Aside A Budget For Hangout
Friends are an important aspect of every adult’s life. The good ones keep you sane, well-rounded and happy. To cultivate a great friendship, it requires hanging out to connect sometimes. Under these circumstances, such activities do not have to cost you a fortune each time.
What you need is a budget. When you create your monthly budget, be sure to reserve a certain amount for hangouts. If you have read my article on how to create a personal budget, you will find an area on a budget sample where I emphasized setting money aside for fun. I called Miscellaneous Expenses.
Whenever you dine with your friends, be sure to spend within the limits you set for Miscellaneous Expenses. Meaning- even if the money set aside for such expense is $100 monthly, do not exceed it. If previous hangouts have exceeded your monthly budget for miscellaneous expenses, then you may have to take a rain check until your next budget renewal.
A number of budgeting apps can save you the headache of referring to your budgeting journal each time. Also, they can send you notifications when you exceed your budget. Check out my five best budgeting apps for controlling your monthly expenditures.
For this purpose, you will not be peer-pressured into spending money you do not have. Or, borrowing from your credit card to keep up with your friends. As a result, you will not accumulate a fear of missing out debt- FOMO.
2. Plan Ahead Prior To Dining With Your Friends
Overspending is a result of not planning ahead. What do I mean by this statement, good reader?
When you do not plan for an expensive diner service, you may end up paying for it when everyone decides to go to one. In addition, when you plan to hang out with a friend and four strangers tag alone, you may be pressured into paying for them too. This is especially in case of friends who tend to use other friends for personal reasons known to them.
Listen, these things happen. Ask around. As a young adult, you will meet these unexpected circumstances at least once in your lifetime. It has happened to me. And, I knew close people it had happened to too.
Surely, you need to consider your finances each time you step out with friends. Be sure you can afford what you are invited to, before you accept the invitation. By affording the invitation here, I refer to expenses within your miscellaneous expense budget. Or even better, necessary expenses which will not make you resent your friends after the hangout.
Every once in a while, you may be called a cheapskate by your friends. Do not let it bother you one bit. You are building a future for yourself. Only you know the dream you are trying to accomplish, hence the measure you take to get there with minimum debt to income ratio.
3. Say No To Borrowing From Friends Or Loaning To Them
Unless your friends loan you money- which I do not recommend by the way, it is not advisable to lend them money. I know this sounds like a bad advice, friendship has been ruined due to this very reason. This is because a good friend who has a hard time paying you back money, may start avoiding you.
Mostly, it may be due to the embarrassment of being reminded of the loan. But, such things happen. And, it can result in a huge misunderstand which creates resentment.
Resentment creates conflicts. Conflicts lead to further misunderstanding. This is where friendship starts to fall apart. So, implore you not to borrow money from your friends. As a result, you will not have a difficulty time saying no to loans.
Why am I telling you this, dear reader?
You would not believe it, but financial institutions like banks or credit unions are better creditors than you. While you may think you have patience it takes to allow your friends time to pay back, you do not. Trust me, most friendships start to turn soar when friends miss multiple payment deadlines. Or even, when they refuse to pay back.
Trust the statistics. It is better not to create a situation which can ruin your friendship. Bank and credit unions are better creditors than you. This is especially when large amounts are involved.
4. Avoid Overspending Due To Social Pressures
Who pays when you go out with friends?
Pay for your own food and drink. Unless your friends verbally said they will take care of the bill when they invite you out to a place, always pay for your expenses. Also, be courteous about overeating and binge drinking on their budget. Such actions can create serious resentment.
In a situation where it seems a potential expense may turn into overspending, I would recommend talking to your friends about it before showing up. Yes- tell them you are on a budget and you cannot to afford it. If they are good friends, they will understand and go for a cheap alternative. Otherwise, take a rain check on the invitation.
In a similar fashion, do not fall into the habit of paying for your friends’ foods and drinks. This is especially when you are doing it to keep up or impress your friends. If you have good friends, they will not appreciate it in the long run. Otherwise, bad friends will take full advantage of this to cripple you financially and unintentionally.
5. Talk To Friends Who Cost You Money
When you are becoming increasingly resentful to that friend who always makes you pay for dinner, it is time to talk to him or her. Listen dear reader, friendship is all about boundaries. Without a healthy boundary, good friends cannot affect your finances positively.
A healthy boundary requires a mutual understanding and respect. So, how do you tell your friends you cannot spend money sometimes?
Just tell them.
Friendship cannot foster under conditions which stifles the growth and development of the participants. If your friends cannot understand you have a budget, then it may be a good idea to reexamine your values. Meaning- your friends do not have to spend within budget like you, however it is not necessary to spend like them to be accepted and loved.
To conclude this point, I want to you to understand some of your friends may not understand at first. Some will leave you. Others will watch you for awhile to see whether you are serious. If you are serious about it, they will understand. Whichever one results from your talk, the good friends always stay and grow with you.
How Do You Know If A Friend Is Using You For Money?
It is simple.
Ask yourself how it makes you and your wallet feel. If you feel bad about it, then you need to talk about it with your friend. I sincerely believe every human relationship can reach its full potential, when honesty is a part of it. By honesty here, I refer to communication devoid of pretense and lies.
How does this pertain to the above question?
Well, talking about how you feel about a friend who uses you for money, is a sure way to prevent resentment. This is because you are addressing the issue. Now, whether the conversation leads to a change depends on the values the friendship is founded on.
Surely to avoid a friendship which takes advantage of you financially, I would advice you to refer to your values in life. The fact that you feel this way, indicates one of your values in life is being compromised. Therefore, a good way to address this issue is to discuss it with such a friend.
Do you agree?
Well, this is all I have got to write today. I surely hope you think about what we have discussed here. Money is a stressor in friendship and relationship. How important it is, is entirely up to you. Just be in control, when spending money with friends.
Finally, you can read my article- Is Eating Out Wasting Your Hard-earned Money. It elaborates more on how we unintentionally spend more than we budget eating out. And, what you can do about it.
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