Are Your Friends a Bad Influence on Your Finances?

by Jessica Sommerfield · 6 comments

When lenders run your credit report, they look at a myriad of financial factors. But there’s another unlikely indicator that creditors are starting to pay attention to: your Facebook friends.

What do your Facebook friends have to do with your credit history? Well, the concept of peer pressure, far from being confined to your school days, has been proven to carry through into adulthood.

Taking a look at the spending habits and financial situations of your closest friends can often reveal quite a bit about your own.

While some newer financial institutions have started using social media to further reveal the credibility of their clients, it’s not the general practice — so you don’t have to rush to clean out your friends list just yet. However, being aware of how your friends might be influencing your spending will help you stay on track with your budget, and/or distance yourself from those who constantly hijack your efforts at frugality.

How to Determine Your Friends’ Influence on Your Finances

Do your friends pressure you to spend money in order to be with them?

Social activities with your friends often include spending money; for example, eating out, getting drinks, shopping, going to the movies, or attending concerts. While there’s nothing wrong with spending money on entertainment, it can quickly get out of hand.

If you have friends who are constantly pressuring you to spend money while hanging out, you may need to have a talk with them. They might not realize they’re putting financial pressure on you, especially if they don’t budget like you do. If they just don’t seem to understand your needs, it’s time to back off — even if just long enough to accomplish your current financial goals.

Do your friends’ spending habits tempt you to spend more than you should?

If you have friends who are always showing off their newest gadget or latest piece of clothing, it can indicate a spending problem. This can make you feel like you need to have what they do. (Also known as keeping up with the Joneses.)

Even if your friends aren’t intentionally pressuring you to spend, their habits can be contagious — especially if you already have a weakness for overspending. Be honest with your friends about how their spending habits are affecting you. It can be a tough call to make, but distancing yourself from these types of friends can be the difference between control of your finances and excessive debt.

Do your friends’ levels of financial responsibility reflect poorly on you?

Everyone has financial struggles, and poor choices in our past can leave us with consequences that last for decades. While you shouldn’t judge your friends based on past mistakes or circumstances beyond their control, you should be concerned if your friends’ financial habits are consistently irresponsible. Not only can this cast doubts on your own financial credibility, it can directly influence your finances.

What are your friends costing you?

If you’re frequently bailing your friends out of bad decisions and lending them money they never return, you may be losing more than your financial reputation. While it’s only natural to help a friend who’s down and out, lending them money or co-signing a loan for them won’t help them learn from their mistakes and establish better habits.

If your friends are costing you financial discipline, reputability, and money, you need to give them an ultimatum. If you’re good at handling money, sit down with them and teach them what you know. Offer resources for money management classes or counselors that can help them get back on track and break bad habits.

Whatever you do, don’t let finances cause your friendships to sour. Help those that can be helped, but don’t neglect to protect yourself.

Do your friends influence your financial decisions positively or negatively?

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{ 6 comments… read them below or add one }

Michelle September 19, 2013 at 5:12 am

My friends don’t really cost me money. Luckily we are all pretty similar in all regards, especially frugal entertainment.

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Property Marbella September 22, 2013 at 1:41 am

Unfortunately, peer pressure become too great for young people sometimes, so they buy for not being outside the Community.

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Jon @ MoneySmartGuides September 22, 2013 at 4:36 pm

Many times, our friends don’t overtly “pressure” us into spending money, but do get us to spend when we otherwise wouldn’t. I know with my friends, many times near the end of the night, someone will be hungry. Instead of just waiting until they get home to find a snack, we end up stopping at a diner to eat. Now others are tempted to order food too instead of just waiting to get home to snack.

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Marissa@Thirtysixmonths September 26, 2013 at 3:55 am

This is one of the biggest challenges in our finances. There’s really a choice you need to make when it comes to this either you step back at least for a while or get them on board. But if these things fail at least make them understand your situation, they are your friends after all, right?

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Heidi @ Thriftytricks September 28, 2013 at 6:40 am

I can totally relate, I’ve felt like my friends always have more money than me when I was younger. But I think it has a lot to do with matureness. I guess as you get older you realize that your habits have very little to do with what others think. There’s nothing wrong with ordering just one beer while others order 3 :) in the end, I get to keep those 5€ and my friends don’t :D

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David Smith September 30, 2013 at 6:23 pm

Stay away from these friends. That is one of the solutions to this problem. Instead, look for pals who can give good examples especially in terms of spending, creating a budget and saving money.

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