Do You Have Financial Frenemies?

December 16, 2015

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 focusing on the peer pressure aspect of money. (The Game is my favorite.)

Want to light up a room? Befriend the one who already does. Feel more like the one who blows out the candle? Take a look at who you’re hanging around with. Chances are, they have Negative Nelly streaks too.

The crazy part is that this theory also applies to your finances. I’ve definitely noticed this in my life. I’m much more likely to go on a spending spree when I’m shopping with friends than when I head out on my own for a specific item or errand. Good habits rub off too. My friends who struggled with cash management in the past are finding it easier to budget and track their spending weaknesses with the support of their trusted financial planner friend.

I’ve actually read that certain financial institutions are checking applicants’ Facebook friend lists as another way to gauge their credit worthiness. And while you probably won’t be denied a mortgage because one of your Facebook friends pays her cable bill late every month, it is true that you are the company you keep, even when it comes to your finances. Our 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’re less than happy 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. But 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 escaping 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, fashion 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.

If your friends are encouraging you to ignore your bank account, they could be financial frenemies
If your friends are encouraging you to ignore your bank account, they could be financial frenemies

Much like starting a new diet or fitness program has a higher chance for success if you do it with a friend, engaging your friends in financial habit changes could greatly increase the likelihood you’ll stick to it so be honest with your friends. Ask them if THEY are happy about their money and how you can work together to support each other in positive financial behavior. Consider forming a Financial Independence Day group, where you’ll have all the tools and resources available to you for success! And if you don’t feel like you can do that? Well… maybe you do need to find some new friends.