Nearly 40% of millennials overspend to keep up with friends, according to a recent survey.
Digging deeper into the numbers, 73% of those who went into debt to keep up with their friends typically keep it a secret. And two-thirds of respondents feel buyer’s remorse after spending more than they had planned to on a social situation.
Those are important insights on millennial spending habits. Of course, this is not unique to any one generation.
According to Stephanie M. Tully and Eesha Sharma, researchers and co-authors of Context-Dependent Drivers of Discretionary Debt Decisions: Explaining Willingness to Borrow for Experiential Purchases, this is not a millennial-specific phenomenon. As they said, speaking of overspending to keep up with friends, “We actually don’t see any differences across age in our data. It seems to be just as pronounced among older generations as younger generations.”
Interestingly enough, and vitally important to point out, this is also not a socioeconomic phenomenon. You cannot outearn this temptation.
According to Robert Frank in his 2007 book, Richistan, “20 percent of households with between $1 million and $10 million in assets in 2004 spent all their income—or more—in a frantic race to keep up with their newfound friends: those with more money than them.”
Regardless of generation and/or net income, the temptation to overspend in an effort to keep up with our friends and their spending habits is common to all of us. No doubt, many of you have felt the same temptation in your own life.
How then, do we overcome this temptation?
Here are 8 Helpful Steps to Stop Overspending With Friends
1. Set your budget. Or better yet, create a spending plan. Be very specific on the amount of money you set aside for dining, experiences, and travel per month. Then be vigilant in keeping it.
2. Keep in mind the big dreams you have for your life. When creating your budget above, remember that your budget is not a restrictive device. Just the opposite, your budget is a roadmap to the life you desire: free from debt, financially focused on your values and most cherished pursuits.
3. Be honest to your friends. Surprisingly (or maybe not surprisingly), some of your friends feel the same way you do. According to the same survey, 36% of respondents doubt they can keep up with their friends for another year without going into debt, but nearly 30% don’t feel comfortable being the one to say “no” when one of their friends suggests an activity they can’t afford. Break the trend in your friendship group by being the one to initiate the conversation.
4. Look for cheaper alternatives while out with friends. Of course, entirely changing your friends (or hoping to change your friends’ interests) is not the only option. The next time you are out, look for less expensive alternatives: rather than ordering an expensive meal on the menu, order something more reasonably priced; skip the snacks and drinks at your next movie; or order a cheaper drink at the club.
5. Cut costs elsewhere. If spending time with friends and having the financial margin to do so is important to you, look for other spending areas in your budget that can be cut: buy less clothing, don’t upgrade your phone, pack your lunch for work. Minimalism is the intentional promotion of the things we most value by removing anything that distracts us from it. If applying minimalism in one area frees up more money to be spent with your friends, then that’s exactly the point of it.
6. Be clear on your reasoning. When speaking openly and honestly with your friends, also speak in clear, reasoned terms. Share with them why you want to spend less. Is staying out of debt important to you? Are you working hard to pay off a student loan or build up an emergency savings fund? Maybe generosity is something you want to leave space for in your life? Be clear that your reasoning isn’t just “I don’t have enough money,” there is usually a deeper reason and motivation behind it.
7. Suggest less expensive ideas. Friends spend time together—this is true. But that doesn’t mean everything they do together needs to cost a lot of money. Sometimes it just takes someone to offer up some less expensive ideas: Frisbee in the park, an afternoon on the beach, a hike, or a Redbox rather than a theater.
8. If you lose them, it’s okay. I understand the fear that if you don’t keep spending the money to be with your friends, they might stop being your friends. And that may be the case. But ask yourself, if that’s true, isn’t it eventually going to happen anyway? Can you keep overspending and going into debt indefinitely just to be with them? Of course not. At some point, something will need to change—either how much money they spend or how much money you spend. Besides, if you need to spend lots of money in order to impress your friends, you probably need new ones.
9. Remember, there will be other opportunities. One thing I know to be true of life, it goes on. Opportunities come and opportunities go. And sometimes bypassing an opportunity today means I can enjoy a different one tomorrow—when I’m in a better stage of life financially. Taking a step back from overspending to keep up with your friends doesn’t mean you’ll never be able to spend money with friends. Just the opposite. It’ll help put you in a more financially stable place, so you can do even more of it in the future.
Having friends doesn’t mean you have to go broke. You can have both friends and money. It just might take some intentional decisions to get there.
Todd D says
I wanted to happily report that minimalism has really helped me a ton! I have BP1 and anxiety. I personally find that having less is reducing my stress exponentially. I can actually breathe. Thank you for shedding light on a healthy lifestyle. It really has helped a lot.
Judy says
Funny— I had a friend who would get upset when I didn’t buy things. We both had Friday’s off and we would go out for lunch and visit shops. She bought trinkets. Always. I would browse and enjoy… but rarely made a purchase. She would ask, “Why?!?!” I would tell her that I already had too much stuff and the last thing I needed to do was buy more. It infuriated her ;)
Sadly, she passed away… and her husband sent her treasures off to Goodwill.
Per Thomsen says
Coming in to a new found freedom after a whole series of life changes this has become all to relevant to me. Spending time at the pub with friends has become common practice and with the need save money for the construction of a new place to live. Money saving is becoming more and more important.
Andrea says
I love #7. There are free events happening all the time. Libraries are a good place to find fun free activities and presentations. Art galleries too. Free concerts in the Park. Walks. Bike rides. Special interest groups such as book clubs or bird watching.
Andrea says
Offer to volunteer at a 5K walk/run. Meet new people while helping the cause. Encourage your friends to join you!
Nate says
Great tips Joshua! I wonder if there is a generational difference in spending trends on “stuff” (cars, houses, electronics, furniture, accessories) vs. “experiences” (vacations and other events such as concerts, sports, theater,etc.)? I tend to think I spend much more on experiences than stuff, and am one of the many representatives of the millennial generation.
joshua becker says
Definitely
Ola says
I recommend organizing a frugal activity and inviting friends to it. We do Sunday Funday in the park, with lawn games and waffles (there is power in the park, so we’ve plugged in a full griddle before). Now that the weather is nice we can start it up again!
We also don’t go out to dinner, but will eat beforehand and join people for a drink.
Angela says
I have to say not everyone feels the need to keep up with the rest of the people.
I’ve never desired to do so.
I’m sure I’m not alone.
I can afford most things but glad to say I’m just not interested.
Hope this doesn’t seem pious, I had to respond, perhaps others will too.
Andrea says
I agree with you, Angela. I’m the same way.
Angela says
I knew I wasn’t alone Andrea.
Cathy says
As a widow I am very careful with how I spend money but I still like to go out with friends. Recently I went out to dinner with a small group at a nice place and in order to save money I had an appetizer for dinner and did not have anything to drink. The others had expensive dinners and multiple drinks. When the bill came, the others decided to split the bill evenly! It’s sad because now I hesitate to go out with them again.
What is a good way to handle this situation?
Lisa says
The best way is to enjoy your evening as much as they did! We have done the same on several occasions and found ourselves footing the bill for others nicer evenings having had the frugal options. Now we eat, drink and be merry with the rest and don’t allow it to spoil our evening or stress us out. If we can’t afford it- we don’t go.
Maryrose says
I chose to speak up. Either upon arriving asking for a separate check or at the end – I enjoy myself just as much as everyone attending – don’t need to drink alcohol or eat a huge meal to have a good time and time with friends is important. I have not found any group complain about paying their own way!
mary says
I agree with this.
Mary
joshua becker says
Next time, just say, “Are you all okay if I just put in $xx to cover my appetizer and let you work out the rest?” (Just be sure to add in all tax and a generous tip and round up your offer). Almost certainly they will understand and be okay with your proposal.
Judy says
That’s a perfect way to handle it!!!
Good advice, Joshua.
ann says
You should have spoken up for yourself and said “I only had x and y, and would like to pay only for that plus my tip on that amount.” If these people are truly your friends, they just weren’t paying attention to what you ordered and will certainly not mind. Another option is to tell the waiter when you place your order that you would like a separate check.
Eileen Brunetto says
When I go out with friends, we OFTEN ask for separate checks, you have every right to do that. Your situation has been an occasional issue for me, as well.
Caroline says
This happened to me. I ended up paying for cocktails I could not legally drink (I was under 21 then). Ask the server for a separate check when ordering.
Dawn says
Hi Joshua,
I am a long time reader and enjoy all your posts. I agree with the above comment. I would like to add, that you can just as well substitute “time” for “money”; since in the end, time is the one thing that we do not acquire more of. Thanks for all that you do to keep us inspired!
Brenda says
Joshua, this post is so sad to me. Having grown up with frugal parents and having lifelong, wonderful friends who are not competitive, I cannot imagine this scenario. Yet, I know it is rampant. Thank God this was never a temptation!!!