Your Friends Influence Your Finances Way More Than You Think

Friends, shopping and walking together while happy, talking and laughing outdoor at city mall while excited about sale, deal and promotion for savings. Women in Milan for retail customer experiene

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The people you surround yourself with influence you in more ways than you might realize. Having friends who are overweight increases the chances that you become overweight, says the National Library of Medicine. Your friends’ smoking habits impact your smoking habits, says the New England Journal of Medicine. So it’s not a stretch to think that the way your friends’ approach to money would impact your finances.

You’re constantly absorbing ideas from the people around you – whether consciously or subconsciously. And money and friendship are closely tied. Every time you decide where to have dinner or vacation together, you’re making a financial choice together. Often, the person with the strongest opinions influences the group. So, it’s important to make sure the people in your life have financial goals that are in line with yours. Your friends could be one of your greatest assets – or obstacles – when it comes to reaching money milestones. Here are ways your friends can influence your finances.

YOLO Friends = YOOM (You’re Out Of Money)

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Yolo friends are infectious. They’re always telling you to book the flight, rent the yacht, get the concert tickets and pay for the $600 sushi dinner. Why wouldn’t you want someone in your corner telling you that it’s okay to indulge in every financial whim? The problem is, while you do only live once, you might live for a long time, and you’re going to have to pay for all of those years.

If your finances are tight, you might just have enough set aside every month for fun or investing in a retirement fund. And YOLO friends will always encourage you to choose that champagne and caviar brunch. You want to, because you want to hang with those friends. But they won’t be there when you’re 70 and can’t afford to retire.

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Fear-Based Mindsets Can Hold You Back

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A fear-based mindset – sometimes called a lack mindset – is characterized by making decisions based on the fear of going broke. This can look like never investing money, out of fear of losing it. It can look like not paying to learn a lucrative skill, out of fear that you’ll never make any money off of it. It can also look like not paying for advertising for your small business, out of fear it won’t bring in clients.

Some expenditures are a true investment in yourself. You really do need to spend money to make money sometimes. But if you’re surrounded by people who are allergic to that saying, you might find yourself making fear-based, limiting decisions about your finances.

At some point, you have to take the leap and hope the net appears. In other words, you need to believe in yourself to invest money in yourself – whether that’s in your small business or a brokerage account. Friends who dwell on all the ways investments go wrong can hold you back.

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Big Debt With Bigger Delusions

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America runs on credit card debt, and maybe your friends do, too. There will be times when you’re in a bind and you need to put emergencies on a credit card. It happens. But some folks are paying for a lifestyle they can’t afford on a credit card. They’re just making those minimum payments and letting the debt skyrocket. Their plan? That one day, they’ll get a windfall of cash when all their dreams come true. And they’ll “just pay it off then.”

If you have friends like this, while their self-confidence is admirable, their actions are dangerous. Going on vacations and buying designer clothes you don’t have the money for, with the hopes that you someday will, is not a smart game plan. Friends might try to mask their financial negligence as “believing in you”: “We believe you’ll sell that screenplay one day and be rich. So, you can afford those $1,000 shoes.”

Yeah…no.

Live within your means. Your current means – not some future, hopeful means. And surround yourself with friends who do the same. If you do get that windfall of cash one day, you’d probably rather spend it on a house than pay off credit card debt, anyways.

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How Your Friends Influence Your Finances (For Better Or Worse)