We’ve all been there. You’re minding your business and your budget, when out of nowhere, one of your friends suggests a girls trip; or you get an invite to be a bridesmaid; or your friends want to go to dinner somewhere a little out of your budget. You buck up the courage to say no to a financial ask and then, BOOM — you get hit with money peer pressure. If this has happened to you, remember, you’re not the only one; millennials in particular struggle with this. According to a 2018 Credit Karma study, 40 percent of that generation have not only overspent to keep up with their friends, but have gone into debt to do so.
Money is extremely personal. How we earn it, how we spend it, and how we view its value varies vastly, which is why it’s nearly impossible to judge what someone can and can’t afford; or more importantly, what they want to afford. That’s why 2020 is the year that money peer pressure needs to go away for good.
Why it can be so damaging
Let’s start with the surface-level outcome. What is the best-case scenario of guilting someone into spending money they don’t want to spend? The best outcome you can hope for is that someone is lying about their budget. Then you coerce them into coming to a social event they don’t want to go to or buying something they don’t need. Yay? Worst case scenario, you help them make a really poor financial decision that can cause them financial stress and to spend money they should be saving.
From a financial level, the negative affects are crystal clear. They may go into credit card debt, derail their budget, or not be able to reach a financial goal. The emotional results may be less obvious, but can be even more damaging. The same Credit Karma study referenced above found that someone who has succumbed to financial peer pressure is likely to feel a lot of regret, the effects of which can carry over into other areas of their life. On top of all that, they may begin to resent the friend who pressured them in the first place.
How to recognize if you’re the guilty party
It’s super easy to recognize when you’re feeling pressured to spend money, but what about when you are the financial bully and you don’t even realize it? We’ve all done it, so don’t worry — you’re not a villain. As long as you aim to be more thoughtful moving forward, you’ll stay in everyone’s good graces.
Next time you find yourself in a situation where someone is making vague excuses not to do something, take a step back. Don’t push them and don’t try to convince them of anything. A 2018 Northwestern Mutual study found that more than a quarter of Americans feel depressed due to financial anxiety at least once a month. 45 percent of respondents said that a negative result of that anxiety is missed events with friends, family, or coworkers, which means their finances very well could be why they’re declining your invitation.
If you want to find out if money is the issue without directly asking them that, try to shift your plans to something more affordable. Chances are, someone in your group will be glad for the financial break. If your friend can suddenly attend an event or participate in a lower-budget Galentine’s Day gift swap, then you’ve correctly identified the problem — not to mention you’ve found a solution without prying into their financial life.
Look back on past social scenarios, chances are, you can remember a few moments where you tried to convince a friend that something was a good deal or an investment worth making. That is money peer pressure, even if you meant well. Do you always encourage friends to order that second drink or to join you on a well-deserved spa day? That’s financial peer pressure. Try to recognize these past scenarios so you can try to avoid them moving forward.
Look back on past social scenarios, chances are, you can remember a few moments where you tried to convince a friend that something was a good deal or an investment worth making. That is money peer pressure, even if you meant well.
What you can do to stop money peer pressure in its tracks
If you find yourself feeling pressured, remember your friends don’t want you to feel bad. Usually, money peer pressure stems from a place of inclusion. They sincerely want you to go to brunch or head to Las Vegas with them. You have to remember that they probably have a different perspective on spending than you do. Maybe they aren’t saving for a house right now or don’t have any student loans to worry about. Perhaps they simply don’t believe in saving for a rainy day. They could have gotten a big raise at work and aren’t thinking about how other people may not be in the same financial place as them. Point being, try not to be angry; instead, try to be honest.
Don’t start your honesty once you’re presented with an expense you don’t want to pay for, begin in advance by having open financial conversations with your loved ones. Share your financial goals and struggles. If you pretend you’re keeping up with the Joneses just fine, then chances are, your friends or family will feel a little blindsided when you want to skip a trip or social outing. If you try to include them on your financial hopes and dreams, they’ll most likely be your biggest support system.
When someone is really financially pushy
Dealing with a pushy friend can be a challenge, there is no denying that. In fact, nearly 30 percent of millennials feel discomfort at the idea of saying “no” when someone suggests an experience or activity that they really can’t afford. If someone really is pushing for you to spend money you can’t afford to spend, you don’t have to go into detail about your reasoning for declining. Simply say you’ll have to pass this time, but thank you for the invite. Then, offer up a more affordable alternative to show that money really is the only reason you’re turning them down. If they still try to convince you at that point, remove yourself from the conversation, because clearly your message isn’t getting through — and that is on them, not you. Protecting your financial health is important, and at the end of the day, you get the final say in how you spend your money.