Research Articles

Friendships Are Expensive: How Your Friends Affect Your Personal Finance.

6 Mins read

You probably know the quote that says: show me your friends and I will tell you who you are. But do you know the American businessman, Dan Peña’s version? It says: ‘Show me your friends and I will show you your future.’ How true is this? Is it really possible to tell where I will be in the next ten years by just looking at my friends? What are the signs? Well, not only is it possible to show you where you will be in ten years just by looking at your friends, we can also tell you where your finances will be. Friendships are expensive and making the wrong choice of friends can affect your personal finance in a way you never saw coming. In this article, I will explain how friendships and finance connect. Let’s dive right into it. 

How your friendships affect your finances

While the saying, ‘Show me your friends and I will show you your future’ may have an alarmist tone to it, it can also have a positive undertone. This will depend on the kind of friends you surround yourself with. If you read that quote and you were worried or triggered, then maybe something is indeed wrong with your circle of friends such that the thought of them dictating what your future will look like scares you. 

Friends are not always a bad influence. Sometimes, a good circle of friends is all you need to get your money game right. Here are some ways your friendships affect your personal finance. 

1.  Your friends and your thought process

Do you have a scarcity mindset towards money or an abundance mindset? While you may not know it, your views of money are largely influenced by the people you surround yourself with. The conversations you have with your friends, the events you all attend together, and the people you follow and respect; all these determine your perception of money and finance. This in turn affects how you as an individual interact with money; how you make money and how you spend it. If your friends have the wrong perception of money, you will most likely hold the same and all of you may be headed in the same direction. We explained this further here.

2. Your friends and your spendings

According to this survey, 40% of millennials overspend to keep up with friends. If you’re a Gen Z or a millennial living in the Instagram age, then you will understand this. Here is a hard fact: you will have friends who will make more money than you, just as you have those who make less than you. The problem with this is how it affects the dynamics of your friendships. You may not notice this initially but with time, it becomes obvious. It may start from the time they bought you a huge birthday gift that you could not have dreamed of getting; or the time they suddenly complained that they were tired and in response to their tiredness, took a trip to Dubai or went on a vacation; or the time they suggested something outrageous to your circle of friends. 

If you’re not careful, you may end up in debt because you are surrounded by friends who are far richer than you and you are unable to say no to some of their demands. So you keep harming your personal finances to keep up. The fear of missing out and the shame of saying no are just a few reasons why people get into debt to meet up with friendship demands. 

What then is the best way to navigate situations where your friends are making you spend more than you can afford? How can you address this without ruining your relationship?

Talk about it. Sit your friends down and let them know that, in actual truth, you can’t afford the lifestyle they are pushing on you. The conversation can go this way: While I appreciate your inclusive spirit and desire to hang out with me, I will not be able to go on some hangouts because they exceed my budget right now. As you may know, you guys earn more than I do so you can afford some things I can’t and that’s totally cool. Just putting it out here so I won’t be the one killing the vibe anytime someone suggests an expensive restaurant or a trip I can’t afford. I hope you guys understand. 

Talking things out with your friends turns the table around such that, instead of overspending to keep up, you now have friends who understand you better and accommodate your needs and present financial status. This won’t always be easy but it has to be done. If not, your friendships will be more expensive than you think. 

3. Your friends and your financial growth

As explained earlier, your friends don’t just impact your finances negatively. In fact, if you pick your friends wisely, you may begin to do better financially. How does this work? And no, it’s not by receiving cash gifts or borrowing money from your friends. Your friends can give you the motivation you need to do better financially. They don’t even have to say anything. The mere fact that you are surrounded by people who are doing well can be a huge motivation. They serve as healthy ‘competition’ for you and encourage you to also take your money game seriously. This can be in various forms: encouraging you to save money, pushing you to invest, preventing you from careless spending, and giving you the right money orientation

There is an incredible value that comes from having the right kind of friends. If done right, your friendships will not harm your finances but serve as a catalyst for financial growth.

4. Your friends and your money habits

Have you ever seen a group of friends who do the same thing? Save on the app, invest the same way, and even make money the same way? Of course, it’s unrealistic to limit your friends to those who work in the same industry as you. But then, you don’t need to have your friends as coworkers before they can influence how you make money. 

A good example of how this plays out is with Ponzi schemes and internet fraud. Peer pressure is a major factor leading to both of these vices. There’s always that one friend who tries it out and then shares it with their other friends. And there is a tendency that you will also participate in a Ponzi scheme if your friends are involved. Having the wrong set of friends who are involved in this sort of thing and already looking for quick ways to ‘cash out’ will influence you to start exploring unhealthy money habits like this. This can have a huge negative impact on your personal finance and how you view money. 

Building wealth with friends

According to a report by PayPal, more than half of Gen Z and millennials have had their friendships impacted by money. This is often in a negative way. Here is the bitter truth: navigating money can be hard. Navigating it with friends can be even harder. This is why most people run away from mixing money with their friendships.

However, you should understand that even in money matters, your friends are for you, not against you. When you understand this, you can begin to reap the benefits of good friendships as it relates to personal finance. At Cowrywise, we understand the power of building wealth with friends or with people you’re in the same community with. We have the Money Duo feature for this very reason, so two close friends or lovers can save together. We also have circles for large groups of friends.

Instead of leaving things to chance with your friends, you can choose to save together or invest together. If you are not at that stage with your friends just yet, you can start with financial education. Reading educational articles together or watching YouTube videos that help your friends see money the right way. This is a good way to make sure you all are on the same page when it comes to your perception of money. It also helps you to introduce certain money habits that you think can help you and your friends as a group. 


Your choice of friends can harm your financial journey and in the long run, damage the good future you envision for yourself. You need to probe this. Ask yourself the hard questions. Are your friendships harming your finances or helping you grow wealth? There is no middle ground. If you’re not sure, it’s most likely because the answer is the former. 

The friends you choose are an investment in your future. Are your friendships too costly to maintain or are you on the right track? That is the big question.  

At Cowrywise, we are big on building wealth. Beyond having the right friends, saving and investing your way to financial success is the way to grow lasting wealth.

Start with us today.


How To Keep Track of Personal Finances

How to Lend Money to Friends and Family and Not Regret It

Charlie Munger: What you did not know about Warren Buffett’s Right-Hand Man

1 Comment

Leave a Reply

Your email address will not be published. Required fields are marked *