Beware of the Company You Keep

You may have seen the recent studies that indicate that people who are friends with overweight people tend to be overweight themselves. This is often because you do what your friends do. If your friends eat a lot of fast food and do nothing but sedentary activities, chances are that is what you will do, too. The same is true in personal finance. If you are friends with spendy people, you will be more likely to spend a lot of money just to fit in. If they go to movies, restaurants, and clubs all the time, chances are you will, too. If they hang out at the mall and buy expensive clothes, chances are that you and your money will follow.

It’s worse than that, though. While you might be able to get around the entertainment choices of your friends by suggesting more frugal alternatives, there’s no getting around their houses and cars. Unless you are extraordinarily strong-willed, you’re going to see the nice homes, cars, furnishings, and vacations that your spendy friends have and want them, too. You may find yourself gradually trying to keep up, even if you didn’t intend to. Because these friends are your social circle, what they have and do becomes what you (want to) have and do, too.

The upsizing of your life can happen gradually, without you even being fully conscious of it. Over the years the subtle pressure to have and do more can get to you. One day you wake up to realize that you are just like your friends, and that’s not necessarily a good thing. If they have debt, chances are you now have debt.

Your friends will not only affect how you spend money, but how your kids perceive money, as well. If your friends are spendy, flashy people and your kids play with their kids, chances are your kid is going to come home with a big case of the “gimmies.” They’re going to see all of the things these friends have and want them, too. When you, for valid reasons, don’t cough up the goodies, your kids are going to have a fit. If you do give in, well, that’s just money you shouldn’t have spent.

When kids see other kids getting expensive clothes and gadgets so easily, it makes it much harder for the frugal parent to say no. Kids don’t always understand (or care about) the intricacies of the family budget, all they want to know is why they can’t have what the other kid has. While you can’t prevent this entirely (they’ll meet plenty of spendy kids in school and in other activities), you can control at least a small part of their exposure by choosing your friends carefully.

Choosing to associate with people who share your values about money will make it easier to handle money issues with your kids, and you’ll be exposing them to others who set the positive example you want to teach. If your kids have friends who don’t get everything they want, it’s easier for you to explain why choices have to be made and for the kid to understand that the people who “have everything” are the minority, not the majority.

While it is possible for frugal people to be friends with spendy people and not jeopardize their own finances, it requires an extraordinary amount of discipline. The frugal person must be able to say no early and often, and the spendy people must be willing to make compromises. Too often one or the other isn’t the case and the frugal person ends up spending more than they want to, or the spendy people judge the frugalite to be no fun and begin to exclude them. If you want to be frugal and remain so, choose your friends carefully and pick people who share the same attitudes toward money that you do. It will be so much easier in the long run to maintain both healthy friendships and bank balances.

(Photo courtesy of Mr. T in DC)