.5 Friend Types That Can Hurt Your Finances
5 Friend Types That Can Hurt Your Finances
By Aja McClanahan
Your inner circle of friends can have a direct impact on many areas of your life, including your financial behavior. According to a 2014 study from the Journal of Consumer Research, peers can influence you to make certain decisions.
You can even bond with someone over decisions to abstain or indulge in certain activities. The study found, for instance, that friends bond over small shared indulgences like eating chocolate, but were more inclined to abstain as the stakes were raised.
Because of this, you want to be especially aware of how your friends might be influencing your financial behaviors. You don't necessarily have to dump friends who negatively affect your spending, you just have to know how to handle your interactions so they don't cause you to make poor money decisions.
If you think it's time to take stock of your friend circle for the sake of your wallet, here are some personalities to watch out for.
1. The risk-taker friend
This person takes a lot of risks when it comes to their money. They aren't necessarily careless, they just tend to leap without looking. Sometimes they win and sometimes they lose. If you're not careful, these seasoned risk takers can take you along for a ride you're not ready for.
The excessive risk-taker tends to be impulsive, and seeing them win can influence you to make similar choices. This friend may encourage you to make major decisions without properly weighing all the risks involved.
How to handle them
Take their "bright ideas" with a grain of salt, but don't shun everything they conceive. They can be good business partners when tempered with caution. Sometimes, you won't be able to talk them out of anything, but you can definitely leverage their passion for risk taking if you find yourself being too conservative for your money goals.
2. The spendthrift friend
This friend spends every single penny that comes into their hands. They take expensive trips, show up at exclusive parties, and seem to be forever shopping and eating at fancy restaurants. In fact, whenever you two hang out it involves spending obscene amounts of money.
The spendthrift is not always broke. They may actually have the money to support this lifestyle; you, however, do not. One minute with the spendthrift and you could easily find yourself swept away by the sheer excitement of spending more money than you can afford.
How to handle them
In some ways, they could actually help you live a little. Just make sure to manage your interactions so that you don't end up in the red. If your friend suggests an outing that could cost more than you've budgeted for, suggest a more reasonable alternative. This way, you get quality time with your bff without the collateral damage to your wallet.
3. The doom and gloom friend
This friend is also known as the conspiracy theory or financially "woke" friend. They always predict that the financial world as we know it will come to a terrible end. Their portfolio consists mainly of assets in precious metals, canned goods, and their homemade bomb shelter. This friend won't save or invest for tomorrow because it might not come, or will be dystopian at best.
At times, they may tempt you to believe that the sky is falling and that you should do something about it. The problem is that many of their "solutions" involve ignoring sound, practical principles for the sake of events that are unlikely to happen.
How to handle them
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