How Friends Can Ruin Your Finances

Have you ever had the kind of roommate that eats everything in the fridge even though he didn’t buy the groceries, or come up short on rent and ask you to cover for him?  Most guys are familiar with the slacker roommate or flakey friend who is always asking to “cover” for him.

 

We’ve all been there, money gets tight at the end of the month and there are so many reasons why friends ask to borrow money, but when they start ruining your finances can you tell them to stop mooching?

 

Here is a list of common activities among friends that are bad for your finances:

 

  • Its Monday night football at your local sports bar so you and the guys are getting together to cheer on your favorite team.  While you were prepared to by your own wings and beer you didn’t plan on some of your buddies asking to borrow money from you to pay for their meal.  What would have been about $15 for yourself is going to cost you over $40 for 2 of your other friends as well.
  • Rent is due and your roommate came up short on his half this month.  What would have been $250 is now $300 since he asked you to cover for him this month with promises of paying you back.
  • A new co-worker asked you out for drinks tonight after work, are you going to turn them down?  Now instead of a free night on the couch you’ll be footing the bar tab at close to $50.
  • Its summertime at the lake and your truck is the only one big enough to get everyone there together.  You think they’re going to pitch in for gas money?  Probably not, so you can count on putting at least $20 in the tank.

 

Assume everything listed above happened in 1 week; you just spent an extra $160 on your friends.  Meanwhile, you may have had to use your credit card to buy groceries or gas since you drained your bank account with 3 days to go until payday.  Higher balances on your credit cards mean more finance charges and potentially lower credit scores.

Think that extra $160 on your friends was worth jeopardizing your long-term financial stability?

 

If you put that extra $160 in a savings account, after only 1 year of letting your money sit there you would have made at least $4.  It may not seem like much but that’s free money to you my friend, after a 1 time only deposit.  Let’s see what other earning potential you’re missing out on; if you average at least $50 a month “covering” for your friends, you’re not just throwing away $600 a year but losing at least $656 because of what it could have earned sitting in a savings account.


 

Here is a list of alternate activities to do with your friends:

 

  • Host Monday night football at your place and make the guys BYOB.  Now you’re paying less than $10 for your own drinks and snacks.
  • Rent is due and your roommate is asking you to help pay for his half.  Have him call the landlord and work something out about making up the difference, with interest or not, when he comes up with the money.  It’s not your responsibility if you’re roommate is being frivolous, is it?  And you saved $50 by holding him accountable.
  • That new co-worker asked you out for drinks tonight but suggest an alternative plan.  Suggest lunch or happy hour, which is cheaper than dinner. New tab, less than $20.
  • If you’re headed to the lake and plan on being designated driver or just don’t mind everyone hoping in your truck instead of meeting up, ask everyone to pitch in a couple dollars to help pay for gas.  As long as they don’t have to drive they should be willing to accommodate your request.

 


Keep in mind that friends borrowing money may not just be draining your bank account; they are ruining your finances by potentially increasing credit card balances which means higher monthly finance charges and a lower credit score, and also by reducing the amount of money you could be saving each month and earning interest on for your future or emergency funds.

Call to action!

Leave a comment specifying how you would deal with a friend who is constantly trying to ruin your financial plan.

Comments

  1. Luckily I haven't had these situations happen to me but that's probably because people know that I won't do it so they don't bother asking me. A problem I do have is my friends trying to peer pressure me into going out a lot or going to an expensive restaurant but I just turn them down.

  2. Hmmm…guess this is probably why I don't have a whole lot of friends. I have very little patience for people who refuse to compromise or understand/respect our goals.

    I will say there are times I'm more willing to help friends than certain family members.

    • Dave, I think we all have family members who piss off who we replace on the heirarchy list with friends :-). I noticed you said "I don't have a whole lot of friends" Is this because how you categorize the people in your life? I have the following categories.

      Family
      friends
      associates

      I have tons of associates.. their opinion doesn't matter and I can just dismiss them easily.

  3. I knew a guy that would sometimes bring some snacks over to gatherings, but would make sure to grab the left overs before he took off again. ;)

  4. I got really good at saying "no" or "sorry I don't have it" when I was paying off my mammoth debts. The habit stuck with me and now I have no problems telling someone I can't help them when they ask for money. If it's the wings and beer crowd, "sorry I only brought $15", the taxi thinking friends "geez I really don't have the gas, can you help out". I haven't had a roommate since college over 20 years ago so can't really address that one :)

    • Everyone, needs to learn to say no and not feel bad about it. I must admit, that it took me a while to learn to say no until I went through the "pay stuff off" phase.

  5. I feel this way when I eat in a group the the restaurant. You know, when you are paying with a credit card and everyone just starts rhrowing cash, but not enough cash? I try to avoid bringing anything but cash to a restarurant thsese days.

    • Ohh.. Wayne I hate hate hate big group dinners/lunches. Well let me rephase that.. I hate big group dinners/lunches with unfair/broke people. Someone is always "short" and it pisses me off. I'm the type of person who wants to split the check right down the middle. You know what I hate worst than people who are short? People who want to itemize the bill. Granted, I don't order anything out of the usual but if we have 15 people are you seriously going to stand up and say "I ONLY HAD THE WATER and TWO BREADSTICKS" LOL…

      • Dude, I avoid giant group dinners like the plague. The last one I went to for a friend's birthday and I ordered an $8 appetizer and no drink…the bill comes and everyone goes, how about we just split it? And I'm looking around at people drinking and eating giant entrees…I PAID $35 FOR A FREAKING APPETIZER!!! And yes, I certainly couldn't jump in and protest, we're out celebrating! So that was a year ago this month, have managed to avoid big dinners since :) except for family and then there's no worry I know all the aunts/uncles will be fighting over who gets to pay! Haha

        • Oh, and it reminds me of that Curb Your Enthusiasm episode where Larry's paying for dinner and nobody in the group is paying attention…"80 dollars? That good? We got two chicken plates? (drops more cash) 100? 120? That's good right?"

        • We have another thing in common! From our love of crappy reality t.v. shows to how we loathe group dinners. Now, I'm a person who like to split the tab but I will tell you upfront about it. I won't surprise you at the end. I'm sure if you would have known the tab was being split you would have ordered more than an appetizer :-).

  6. My friends are always wanting to go to the bar after work for a few beers. Several of my co-workers do this every night and spend on average $60 a day at the bar. I am not anti-social and thus I do attend on occasion. But I will not lie, I do try and avoid the invites as much as possible.

    • 60 dollars per day! Oh my god, what the hell do you co-workers get paid annually? Someone, is really bringing home the bacon to blow 60 bucks a day on drinks alone. I'm kind of jealous :-)

  7. Some good advice! – Financial Protection: Pretending You're Broke: http://bit.ly/zCHItq via @add_vodka

    • haha good one. The problem is that with the invention of social media (twitter, facebook) it's hard to act broke sometimes. This is double tough for me as a financial blogger who is semi-open about my finances.

  8. I wrote about friends & money during Women's Money Week, and I highlighted some ways you can learn to say "No" to your friends because I find this is often the source of the issue; it's not always about the actual cost of things.

    • You're absolutely right. I know people who have a hard time saying "no". Even when saying no benefits them. It's as if they feel bad for not going along with their friends game plan.

  9. "If you lay with dogs, you'll rise with fleas!" So true! I don't think people realize the impact their friends have on their finances, careers, etc.

    • You have to to be weary of the company you keep. I have a few friends in the blow money fast camp. I had to learn how to say "no" and stick to my guns.

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  11. fwisp.com says:

    How Friends Can Ruin Your Finances…

    Have you ever had the kind of roommate that eats everything in the fridge even though he didn’t buy the groceries, or come up short on rent and ask you to cover for him? Most guys are familiar with the slacker roommate or flakey friend who is always as…

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