Beware of Financial Frenemies

Science has proven that the more time you spend with people, the more likely you are to emulate their traits. There’s even an entire PSA campaign that focuses on the peer pressure aspect of money.

This theory also applies to your finances in general. You are most likely to go on a spending spree when you are hanging out with friends than when you head out on your own for a specific item or errand. Good habits rub off too. If you are the trusted financial planner friend, it is easier to assist friends who struggled with cash management in the past to budget and track their spending.

There are also certain financial institutions that check applicants’ Facebook friend lists as another way to gauge their credit worthiness. While you probably won’t be denied a mortgage because one of your Facebook friends pays the cable bill late every month, it is true that you are the company you keep, even when it comes to your finances. Financial Finesse CEO, Liz Davidson, devotes an entire chapter to this concept in her forthcoming book, What Your Financial Advisor Isn’t Telling You: The 10 Essential Truths You Need to Know About Your Money called, “Your Life Partner May Be Your Worst Financial Enemy.”

Take a minute and think about your own financial situation. Are you still living paycheck to paycheck despite making three times more than your starting salary? If you are not satisfied with your relationship with money, it’s worth also examining whether your friends share similar struggles. If so, it doesn’t necessarily mean you have to find new friends, it may mean that your fastest track to financial security will involve getting your friends on board for some changes too.

Before you put together a budget and figure out where you’re going to find some extra funds to build your cash reserve, which is your ticket to escape the paycheck-to-paycheck lifestyle, it’s worth examining how your friends may be affecting your money mindset. Do you feel peer pressure to spend on events and entertainment even when you know you’re low on funds? Is there an unspoken competition regarding the latest gadgets or home décor? Before you can cut back on those things, you may need to have a frank discussion with your friends about why you’re holding each other to unhealthy financial habits.

Inspired by Kelley Long’s, Do You Have Financial Frenemies?

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