When you find yourself with an uncomfortable amount of credit card debt and decide to prioritize your financial freedom, there’s oftentimes a group of people that we’re most afraid to share our new money goals with: our family and friends.
If the thought of talking about money makes you squirm, you’re not alone. As much as our society has become ok with discussing controversial topics, talking about money is still considered taboo in many circles, not just in the U.S., but around the globe.
A study conducted by University College London found people were more likely to talk to a stranger about sex, affairs, and even sexually transmitted diseases than discuss their salary.
Although most people don’t view general conversations about money as taboo, it’s the fear that we may be perceived as a failure that really prevents us from opening up and sharing our finances with our friends and family. In other words, we are sensitive about money because we believe our success is based on how much money we earn or have stashed away in the bank.
For example, when you’re in your early 20s, it’s ‘trendy’ to be financially unstable, which makes some younger higher-earners feel more comfortable sharing they are financially struggling when the reality is they are financially thriving.
It’s also why some residents in higher-earning cities like Beverly Hills and Calabasas end up with massive amounts of debt – they are trying to keep up with the Kardashians.
“Because money means something—it reflects who we are as a person, like it or not—it can be very difficult to talk about,” says Meghaan Lurtz, a financial psychology consultant and researcher studying personal finance. “It may be an aspect of your life that you’re not proud of.”
“If you don’t have money, you can look like you’re dumb, lazy, or irresponsible,” Lurtz says. “Whereas if you have lots of money, you can look greedy, rude, or snobby. In reality, none of those things are true among the masses.”
Having THE Budget Conversation with Friends, Family
One of the biggest reasons to be more transparent about your personal financial situation is so you don’t feel coerced into doing things that are financially out of reach—be it a shopping trip or a night out. The reality is at some point during your debt-free journey you will likely cuss-out your budget for “ruining” your social life.
If your friends and family are NOT aware of your financial goals and continue to invite you out for a happy hour, a destination beach bachelorette weekend, or they tease you about your car still making that rattling noise when you drive above 30 mph, you may reach an emotional breaking point sooner than later with your debt.
“A lot of times, if you don’t talk about it, you’ll end up doing stuff that you’ll regret later,” Lurtz says. “Perhaps you’re going out with your friends and you know you don’t have any money in your bank account. And of course, you want to go, and everyone is pressuring you to go, but you only have $20 in your account.”
Being honest about your finances doesn’t have to mean you share your exact salary information, Lurtz says, noting that oversharing your financial information can similarly make people uncomfortable. For example, someone who learns they earn more than their friends or is a diligent saver may feel obligated to foot the bill or pay more than others who admit they are struggling financially.
“You don’t have to disclose that much information, but there does need to be a way to tell friends and family to be accepting of the fact that not everyone is in the same financial situation,” Lurtz says.
So how can you stick to your debt-free budget and keep your social life?
Sticking to Your Budget & Keeping Your Social Life
Just because you may be on a budget does not mean that you have to stop all forms of fun.
Host Budget-Friendly Activities
If you really don’t want to disappoint a friend or spend beyond your means, consider hosting an activity that is in your budget. For example, if your friends are going out for drinks and dancing but it’s not in your budget, consider inviting your friends to your house before they head out for some cocktails and appetizers. This way you get to enjoy part of the night with your friends and not stress about overdraft fees or maxing out your credit cards.
This also applies to larger events like weddings and bachelor/bachelorette parties. If you can’t afford to go, talk to your friend about doing something special with them one-on-one before their special day.
“When [one of my friends] was getting married, I was just starting out in my career,” says Lurtz. “I couldn’t go to her bachelorette because I was already flying home for her wedding. I was like, ‘I’m sorry, I just can’t go. We can have a special night together before the wedding.’” Lurtz says it was an emotional moment for both of them (“I was crying, she was crying”) and that it was hard to see posts from the bachelorette party. “But you have to know your friends and stand your ground,” she says.
“Circle back to how you care about your friend and love your friend, but that you can’t make this work.” Think about how else you can participate without having to spend this money, whether it’s planning a night with your friend before the wedding or sending her something during the bachelorette.
Be Prepared to Stand Your Ground
According to a report from CNBC, nearly 80 percent of full-time workers claim to live paycheck to paycheck—including about 10 percent of those who make six-figure salaries. While it’s true that you can be living paycheck-to-paycheck while earning a six-figure salary, not everyone who claims to be struggling financially actually is struggling.
As it turns out, since being viewed as “poor” has lost some social stigma, more people are worried about being labeled “rich” — especially if we don’t feel we are financially wealthy.
In other words, when you share your new budget restrictions with your friends, they may complain about rent increases or bemoan about their own dwindling savings accounts, before encouraging you to live a little and charge another round on your credit card. But how much do you really know about your friends’ or family members’ financial realities or how they budget?
The truth is it’s hard to maintain good relationships when anxiety and emotional stress are wearing you down. When constant debt is a worry, it can prevent you from sleeping enough or eating right — leading to health problems later on that can in turn cost more.
Additionally, if your debt becomes severe enough that you start paying late, and missing payments, your credit history will be affected negatively. A negative credit report can affect the following areas of your life and finances:
- Insurance premiums
- Ability to get a job
- Ability to buy a home
- Ability to buy a car
- Security deposit on a rental
- Service provider (cell phone and TV) transactions
One possible solution?
Memorize a script you can repeat when you are encouraged to spend more than you are comfortable spending like this: “Hey, I’m not trying to make you feel bad, but I’m doing this because it works for me.”
Additional phrases you can use:
- Sorry, it’s not in my budget
- I’m spending my money on other things this month
- I can’t go out tonight. Can we set up a time for you guys to do dinner here?
- I’m not going to drink, but I’ll stop by!
- Or my new favorite: I do have money, I’m just choosing to use it more intentionally.
Model Good Financial Behavior
If you’re the one who is always suggesting get-togethers for your family and friends, you can demonstrate your debt-free priorities by the activities you propose and how you behave when it comes to money. In other words, be open with how you spend and save your money, as it just may inspire someone else to do something similar.
- You may suggest cutting back on holiday gifts and focus only on gifts for kids or participate in a gift exchange.
- Rent books, movies, and CDs from the local public library instead of purchasing outright.
- Invite your friend to a matinee vs a weekend evening theater show.
- Talk about your budget in general terms, such as saying, “We have $XX for entertainment this month. Would you rather go to a movie, or go out to eat?”
- Don’t Split the Bill. If I order water and an appetizer, while you order multiple cocktails, an entree, and dessert, I’m making these decisions to stay within the limits of my budget.
- Meet for Dessert. If paying for a full dinner out with friends is too much, consider meeting up with your friends for dessert, coffee, or tea.
- Find free events in your area or affordable fun on sites like Groupon or Living Social.
- Head outdoors for a walk, hike, or bike ride. If you’ve recently given up your gym membership to pay off your debt, one affordable way to get together with friends and family is to head outdoors for a workout.
- Host a Game Night. A few hours of drinks, appetizers, and board games are going to leave you with a lot of laughs and a lot more money in your account than if you had spent a few hours at a bar.
- Use cash instead of credit cards when you do go out. Normalize sticking to your spending limit.
Use Social Time to Improve Your Financial Literacy
If $20 fell on the ground every time your friend or sibling took out their wallet, what would you do? Tell them? Pretend not to notice?
Did you know that more than one-third of Americans reportedly don’t save money because they simply don’t know how? Given that the U.S. has spectacularly low financial literacy rates, discussing savings and debt-payoff strategies with friends can be a great way to increase your financial literacy.
Think about it, many people you know are missing out on potential returns—not because they’re foolish—but because they’re not informed, thanks to the cone of silence around money.
Jessica Ornsby, 29, says she frequently talks to her friends about money because she wants to share what she has learned. “One time we had a whole happy hour discussion about credit cards—which credit cards are best for building your credit, and how to increase your credit limit,” she says. “I have a lot of credit cards, and they’re all paid off because I talked to people about how they paid off their debt and followed that plan.”
Have you successfully introduced your new budget to your friends and family? Share your tips and advice with us in the comments below!