How Peer Pressure Can Wreck Your Finances

When you think “peer pressure,” you probably think of kids: High school students pushing each other to make dumb decisions, or catty junior high cliques making fun of classmates who don’t have the “right” clothing, interests, looks, and so on. 

The good news is, most of us have matured a bit since high school.  As adults, we’re more secure in who we are and what we believe in, and, in general, we care less about what others think.  That said, we’re still influenced by our peers – and when it comes to money, we may be letting the people we know have too much influence. 

If you’ve ever felt pressured into spending money – whether it was on a new car you couldn’t actually afford or a pricy group outing that blew your budget – you’ve experienced financial peer pressure firsthand.  This kind of peer pressure can be especially difficult for folks trying to pay down credit card debt or save for the future.

So how do you put a stop to financial peer pressure?  Keep reading.

Stop Trying to Keep Up

Your neighbor buys a shiny new convertible – and all of a sudden your practical, ordinary, not-so-new sedan looks old and outdated.  Your brother-in-law has filled his Facebook timeline with photos of his newly remodeled kitchen – and you think of those photos every time you open your beige, 1980s-era refrigerator. 

Any of those scenarios sound familiar?  When people fall into the financial peer pressure trap, it’s often because they want to keep up with their friends (or neighbors, or coworkers).

This is not an especially new or rare phenomenon, but if you’re trying to pay down (or avoid) debt, stick to a budget, or build up your emergency fund, trying to keep up with your friends and neighbors is a dangerous, expensive game.  Sure, you might feel a twinge of envy every time you see your neighbors’ new car or your friend’s gourmet kitchen — but that’s not an excuse to start spending money you don’t have.

The next time you find yourself tempted to make a purchase just to keep up with someone else, remember this:  Things aren’t always what they seem.  The neighbor with the new car might be eyeballs-deep in debt.  Your brother-in-law might not have a dime set aside for retirement.  And who knows?  Maybe they felt pressured into those big purchases by their friends, neighbors, or relatives.

See what I’m getting at?  You can’t let others influence how you spend your money.  Focus on your goals, and stop trying to keep up with other people.

Honesty is the Best Policy

A good friend asks you to be in her wedding.  You’d love to do it, but you know that as a member of the bridal party, you’ll be expected to fork over a few hundred bucks for a dress, shoes, and an untold number of extras along the way to the big day.  You don’t want to hurt her feelings, though – and you’re a little embarrassed about your money situation – so you say yes.  You finance the whole thing with your credit card, and the thought of all that high-interest debt makes it difficult to enjoy the wedding-related festivities.

Have you ever said “yes” to a pricy invitation that you really couldn’t afford?  It’s hard to say “no” to friends – and this is why so many otherwise rational, responsible folks end up spending way too much money on social activities.   This is a type of financial peer pressure that I think of as “social spending.”  It’s what happens when you end up spending money you don’t really have on social events like vacations, gifts, or parties. 

When it comes to your friends, I think honestly really is the best policy.  Now, I’m not saying that every friend who invites you to a too-expensive restaurant needs to hear every detail about your struggle with credit card debt.  But you can bow out gracefully with a few simple words of explanation, like:

“Sorry, but I’m on a budget these days.”

“I’d love to, but I money’s a little tight right now.”

“Thanks, but we’re trying to save up for XX.”

“No thanks.  We’re really watching our spending – but we’d love to have you over for dinner sometime.”

In today’s economy, who isn’t trying to manage their money a little better?  A true friend will understand and appreciate your honesty.  Who knows?  You might even inspire someone to reevaluate their own spending habits.