My friend Tim is in a rough spot. He recently got divorced, moved across the country, and started a new job. He's making less than he used to, but his expenses haven't declined much. I don't think he's gone into debt, but he's walking a fine line.
One problem is that he doesn't have as much disposable income as most of his friends do. Because they have more money, they want to do more things, and the things they want do do are more expensive. This puts Tim in a bind. He wants to hang out with his friends, but he doesn't want to overspend.
I've been in similar situations in the past. It can be difficult to make smart financial choices when everyone around you is spending. You spend, too, in order to belong. Here are seven ways to cope with social spending situations:
- Explain your goals. Let your family and friends know that you're trying to get out of debt or are saving to buy your first house. By making your goals explicit, you should decrease the amount of pressure they give you. (And the amount of pressure you give yourself.) Conversations about money don't have to be uncomfortable. By honestly sharing your struggles and goals, you encourage those around you to examine their own spending as well. Ask your friends to help you be good, rather than pressure you to do something you'll regret later.
- Suggest low- or no-cost alternatives. Bike or run together. Go hiking. Kick a soccer ball around. Organize a picnic or a mother-daughter tea party. Play hearts or bridge or Settlers of Catan. A one-time investment in a board game or a deck of cards can be a cost-effective source of entertainment. If your friends want to go to a movie, suggest a matinee. If they want to dine out, name a restaurant you know you can afford. (Better yet, suggest a potluck.)
- Budget for social spending. If your circle of friends makes a regular habit of a specific activity, consider building the expense into your budget so it won't catch you by surprise. If your girlfriends go out for happy hour on the first Thursday of every month, for example, set aside $20 for the occasion. This may, of course, require sacrifices to other parts of your budget.
- Leave your wallet (or purse) at home. If you're worried that you'll give into peer pressure, create a self-imposed limit. Take $5 or $10 or $20 with you, but leave your credit cards behind. If you don't have the money with you, you can't spend it.
- Limit yourself. Do things with your friends, but spend less. Portland has a great bookstore, and several times a year I shop there with out-of-town visitors. They have a tendency to buy a basket full of books. I used to do this, too, before I learned to limit myself. Now I buy one or two items from my want list.
- Opt out. If your friends regularly participate in expensive activities together, politely bow out from time-to-time. By playing poker only once a month instead of once a week, for example, you may reduce your costs by 75%. If your friends like to go shopping, join them for the companionship. If the temptation to spend will be too much, don't go at all.
- Don't keep score. Don't obsess about what others have or don't have. Don't focus on the stuff — focus on the relationships. This can be difficult, I know, but it does no good to ask yourself why you don't live in a fancy 4,000-square foot home on five acres. Life is not a competition. Your goal is not to keep up with the Joneses. Your goal is to do what's best for you.
If, on the other hand, you're financially well-off, be aware that your friends may not be in a similar position. Don't suggest expensive activities. Don't brag about money. Don't flaunt it. Respect other people's limits.
For more on this subject, check out the following articles:
- The New York Times: Money changes everything
- New York Magazine: What's a little money between friends?
- The Simple Dollar: Are your friends always spending money? Ten frugal activities (and advice on how to suggest them)
Whatever your financial situation, remember that each of us comes from different circumstances. Don't judge other people or yourself based on what they do and do not buy. Make smart financial choices for yourself, and gently encourage your friends to do the same.
Author: J.D. Roth
In 2006, J.D. founded Get Rich Slowly to document his quest to get out of debt. Over time, he learned how to save and how to invest. Today, he's managed to reach early retirement! He wants to help you master your money — and your life. No scams. No gimmicks. Just smart money advice to help you reach your goals.