There is a famous adage “You can’t choose your family, but you can choose your friends”. I believe your immediate friends have an equal impact (as much as your family) in shaping your financial discipline. They also play a major role in curating your outlook on personal finances. These friends invariably influence your outlooks in subtle ways over the long-form.
However, these influences might be slight nudges in your subconscious mind to make minute changes in your day-to-day choices. We should also be aware that some of the changes may also not be in the best interest. Over the years I have had numerous discussions with friends (friends of friends) on helping them navigate their personal finances. Every time I observe a good financial habit or a pitfall, I always tend to ask a few questions about it. This is solely to understand what drove the specific decision and the psychology behind it. Let me take you through a few examples;
1.Habits are contagious
A few years back a friend of mine was struggling with budgeting his salary and always ended up spending more. I suggested to start carrying envelopes for each of his spending categories. This forces him to categorise (food, entertainment, traveling, etc.) and be disciplined with his budget. When my friend ran out of cash on a certain envelope, he knew he had two options. One he could either stop spending on that category for the week. Two, he’d have to borrow it from another envelope which came at an opportunity cost.
I checked with him a couple of times to see if he was doing okay. He confirmed that he was within budget and everything was great. Little did I know that my friend was using me as an excuse to turndown meeting other friends. Conveniently I was thrown under the bus saying “I have run out of money on the envelops Arosha gave me”. This prompts the usual question “what envelops?” from the other end. Long story short this caught up with the rest of the friends. To my surprise, I got a call from another friend’s girlfriend a couple of weeks later accusing me of disrupting her weekend plans.
She said, “my boyfriend is not willing to meet me this weekend because he has run out of money on the envelopes, you gave him”. It took me a while to figure out. Later I explained to her what it was and he should be fine to make plans midweek. I also realized how good habits are sometimes contagious. It is why it’s important to have friends who nudge you in the correct direction.
2.Yolo and we travel.
We all have friends who make a decent living through their occupations and also travel quite frequently. They do so purely on their earnings and live within their budget. As much as we all would like to emulate such a lifestyle, we should always be conscious of other factors. These friends usually have a bigger financial safety net provided by their families. As such it gives them enough leeway to spend their entire paycheque.
I ran into a person who had racked up a significant amount of credit card debt by traveling. During my discussion it was apparent she took these trips with some of her best friends. However, her friends could afford to spend their total earnings as they had a bigger safety net. My friend on the other hand couldn’t as she had other obligations on top of her normal expenses.
It is always important to evaluate lifestyles your friends lead and make conscious decisions to ensure you do not fall into a financial pitfall by keeping up with them. This means fostering your friendship to a greater degree by being aware of your financial constraints. Be upfront and truthful, if they are good friends, they will always understand if you pass a few expensive trips. Another tip to ponder; If you can’t pay it in full end of the month, think twice before you swipe that credit card.
3.Did I hear wedding (debt alarm) bells?
What are weddings? The union two people who are deeply in love and are planning on celebrating their happily ever after. While having had the opportunity to be a groomsman over ten times (I’ve been told not to mention the exact number because it’s bad luck to run into double digits, but who knows) and now helping on planning weddings for some of my friends I believe I have seen it all.
Weddings are regarded as a once in a life time event (at least we all hope so), as such many service providers exploit this opportunity to charge exorbitant prices. I have seen instances where some people run into debt or eat into their parent’s pensions to pull off a wedding of their dreams. So next time you are planning on a destination wedding or over the top decorations ensure it is within your budget as you celebrate the start of this new journey debt free with your better half.
4.Side hustling
I am extremely grateful and fortunate for the friends I have. All of my close friends are from diverse professions/ streams and have constantly pushed me and all of us as a group to do better in life. The path to financial freedom cannot be achieved only through savings and careful budgeting but also by increasing one’s earning potential through either upskilling or by curating multiple income sources. Having a bunch of friends from different professions has helped me immensely in scaling some businesses as they complement my gaps of knowledge.
I have constantly felt pressured to look into other avenues of earnings (or side hustles) purely by association with my friends as all of them have their own side gigs which are now turning out to be profitable. Jim Rohn once said “You are the average of the five people you spend the most time with” and if your friends are constantly dragging you down it may be about time to revisit some of your friendships.
You may also be interested in ““Time is Money” or is it?” or “Are you in debt? (Good debt Vs Bad debt).“