Your friends can have an adverse effect on your finances. Here’s how you can save yourself from their bad money habits.
Life without friends is plain boring! Besides, it is scientifically proven that people without friends are likely to die early. No Bueno! Anyway, we are pretty sure you have a lot of friends – of different sizes, shapes and types. But, did you know that your friends not only have an impact on your life, but on your finances as well?
Yes, you heard that right! You may be good at managing your finances, but if your friends indulge in poor money management habits, it could influence you in some way sooner or later. Whether they love swiping their Credit Cards without a care in the world, or always lean on you for financial support, their poor financial habits could land you in trouble out of no fault of your own.
Additional Reading: 8 Important Questions To Ask Before Lending To A Friend
It is certainly in your best interest to know how to handle bad money habits that your buddies flaunt before it starts rubbing off on you. We’ve listed down some of the common types of friends who are extremely bad with their finances. Also, we have added some quick fixes to save yourself from their bad money habits as well.
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The Freeloader
Your vampire friend! They have a lot in common with those fabled bloodsuckers of lore. The only difference is that it isn’t blood they’re after, it’s your money.
Freeloaders usually try and mooch a free lunch or dinner, or tend to tag along for a weekend trip or a party with no intention of contributing monetarily. Some of these moochers may even claim to have forgotten their wallets when you guys catch up over coffee or dinner.
What to do? Unfortunately, a blunt ‘No’ may not work with freeloaders. Instead it might just end up hurting your relationship. The only fix to their parasite-type attitude towards money is by subtly putting across the fact that even you’re short of cash and that you are trying to save for your future goals. The fact that you are concentrating on your future and saving for it will make them self-conscious. Due to this, they will probably be more hesitant to ask for money the next time.
Additional Reading: Are You Saving Enough For Retirement? Find out.
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The Underpaid
We all have that one friend who claims he gets paid peanuts, regardless of how experienced he is. There could be many reasons for him being underpaid. He probably hopped multiple jobs in a year, or he is in a field that doesn’t pay well or maybe he is a poor performer.
This underpaid friend may constantly ask you for money (like borrowing money sans the interest). Or the fact that he is struggling financially while you are at the peak of your career may put a strain on your relationship.
What to do? One of the only fixes to this problem is to talk to your friend about why he is in such a situation and maybe help him come up with a solution. Instead of constantly lending him money, you could guide him with regards to budgeting, saving and cutting down expenses.
Additional Reading: 10 Reasons You Are Poor Despite A Good Salary
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The Spendaholic
These are the ones who spend all their income on their lifestyle – whether it’s branded clothes, shoes, accessories, dining at fancy restaurants, visiting clubs and discos every weekend, or indulging in expensive hobbies.
Although you may be financially more stable than these spendaholics, you may always end up feeling poor when you hang out with them. Oh, and these guys usually love to spend money on their friends too. So, you may be treated to free dinners occasionally as well as expensive gifts on your birthday.
While this shouldn’t really affect you, people around the world tend to keep up with the spending habits of their friends just to feel accepted. That’s one financial trap you would do well to avoid.
What to do? Over-spenders tend to have a negative effect on their friends. They are totally fun to hang out with because you get to visit fancy places, try different cuisines, etc. However, you need to tread with caution. You may start to spend like them just to keep up with them. This could have a terrible effect on your finances. Think of a maxed out Credit Card and no money to pay your bills. Scary, isn’t it? So, think twice before indulging in an expensive lifestyle.
Also, before heading out to parties and fancy restaurants with high spenders, set a limit for yourself and make it clear that you will be able to shell out only what you can afford. Or better yet, you can suggest other less expensive activities like a nearby café or a house party.
Additional Reading: How To Bounce Back After An Unplanned Splurge
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The Miser
Hello, penny-pincher! While over-spenders can certainly harm your finances if you get carried away with them, the miserly lot can do some damage as well. Since they always look for the cheapest or the safest option, they tend to hoard their money without actually spending or investing in anything.
By letting this kind of behaviour influence you, there’s a good chance your money could stagnate instead of growing over time. Remember, investing is the way to go if you want to build your wealth.
What to do? Well, you could look at the positives. For one, you’ll definitely be able to learn a thing or two about handling money more efficiently (like taking advantage of discounts or shopping at a flea market). Also, you’ll stay away from lavish spending, which can only be a good thing.
If you can combine these positive aspects with healthy investments, you could have the perfect recipe for financial nirvana.
Additional Reading: Two-Minute Guide To Improving Your Financial Health
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The Boaster
These are the kind of friends you could certainly do without. They constantly brag about their high incomes and their financial accomplishments. At the same time, they constantly belittle your every accomplishment. Because of this, many people give in to their insecurities and try and spend more to keep up appearances around such people.
What to do? Although they may be blowhards, you could learn a lot from their accomplishments as well as their savings and investment strategies. Just don’t let their veiled barbs get to you.
Additional Reading: Why Debt Funds Are A Good Investment For Beginners
In closing, regardless of the company you keep, make sure your financial and investment goals are on the right track. In this day and age, it’s easy to get influenced by our friends and peers, so stay focused and disciplined with your money at all times.