Yahoo Finance 5 Ways To Deal With Making More (or Less) Money Than Your Friends
They say that true friendship can stand the test of time, providing a steady supply of support through thick and thin. But what happens when you’re richer (or poorer) than your friends?
When it comes to money, things can certainly get a bit tricky.
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“Certain social situations can be challenging if you make more money than your friends,” said Jake Hill, finance expert and CEO of DebtHammer. For example, you might struggle with picking a restaurant for a group lunch that fits into everyone’s budget if yours is much higher than everyone else’s.
“You might also find yourself being pressured to pay more than your fair share if everyone knows your income is higher than theirs,” he added.
Hill said the best way to ensure financial disparities don’t cause a rift in your friendships is to be transparent about your expectations. Here are some ways to deal with making more (or less) than your friends.
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Transparency and Sensitivity Is Key
When planning outings with friends on different incomes, it’s important to suggest options that are within everyone’s budget, said Mike Kojonen, financial advisor and owner of Principal Preservation Services.
“This approach was particularly relevant in a situation where a client, who had recently come into a large inheritance, was concerned about alienating long-time friends,” he said. “We discussed strategies for social gatherings that wouldn’t pressure anyone to spend beyond their means, such as hosting potlucks instead of dining at expensive restaurants, or choosing activities that were low or no cost.”
He explained that this not only preserved the friendships, but also deepened them through shared experiences that didn’t hinge on spending money.
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Foster an Environment of Trust
Another angle, according to Kojonen, involves addressing the emotional aspects of income disparities between friends. “People often tie their self-worth to their income, which can lead to resentment or discomfort in mixed-income groups.”
He continued, “I counseled a retiree client who felt disconnected from her circle due to her more comfortable financial position. We worked on openly communicating her desire to maintain these relationships irrespective of financial status, emphasizing the value of their friendship over monetary worth. Fostering an environment where friends can discuss financial disparities without judgment or envy is crucial.”
Set Up Clear Boundaries
Carter Seuthe, CEO of Credit Summit Debt Consolidation, agrees with the other experts that setting and respecting boundaries is key. For example, if you and your friends are making plans to go get dinner somewhere, he said to make sure to choose a place that everyone can afford.
“If a restaurant that’s being suggested is one beyond your budget, express that you aren’t in the position to comfortably afford that at the moment, and then suggest an alternative.”
On the flipside, Seuthe suggested that if someone expresses that they would feel more comfortable at a restaurant less expensive than the one you suggested, honor their boundaries and work together to choose a happy medium for all.
As for situations where financial assistance to a friend might be considered, experts say it’s essential to approach this delicately and with clear boundaries.
“I’ve advised clients on providing loans or gifts in such a way that respects both parties’ dignity and avoids creating dependency or expectations,” said Kojonen.
For example, setting it up as a formal loan with terms that acknowledge the reality of the situation or offering help in non-monetary ways can sometimes be more helpful and less damaging to the relationship.
Be Honest About Your Limitations
“Making less money than your core group of friends can create some seriously awkward moments,” said Ann Martin, director of operations at CreditDonkey. For example, if you can’t afford to do some of the activities your friends are interested in, she said you may feel like you are missing out or holding them back.
“This is especially true if your friends love to travel or dine at gourmet restaurants, since these activities are generally quite expensive,” said Martin. “To preserve your friendships, I think it’s important to be honest about your limitations.”
Whatever you do, she advised not overextending your budget just to keep up with your friends. “Not only will you put yourself at risk for financial hardship, but you’ll also become resentful of the very people you’re trying to bond with.”
Communicate Expectations
“I think the best way to handle this is sometimes just to establish expectations up front,” said David Kemmerer, CEO of CoinLedger.
For instance, he noted that if you make less than most people in your friend group, you need to be vocal and establish that you only plan to pay for your meal and drink at dinner, rather than splitting the bill evenly (and therefore footing the cost for others’ more expensive food and drink).
“This is also the case if you make more — you need to establish that you’re OK with covering drinks sometimes, but can’t afford to do it all the time, and mark those occasions at the beginning of the night,” Kemmerer said. He added that oftentimes, having clear boundaries and expectations can resolve these types of money issues quickly and quietly.
Overall, experts note that dealing with income disparities in friendships requires a delicate balance of empathy, transparency, and creativity in planning.
“It is possible to maintain and even strengthen these relationships by focusing on shared values and experiences, rather than on what each party can or cannot afford,” said Kojonen.
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