Lenders look at a myriad of financial factors when they run your credit report, but there’s another unlikely indicator that creditors are starting to pay attention to: your friends as presented by your social media accounts.
What do your Instagram friends have to do with your credit history? Well, the concept of peer pressure, far from being confined to your school days, has been proven to carry through into adulthood.
Taking a look at the spending habits and financial situations of your closest friends can often reveal quite a bit about your own.
While some newer financial institutions have started using social media to further reveal the credibility of their clients, it’s not a general practice so you don’t have to rush to clean out your friends list just yet. However, being aware of how your friends might be influencing your spending will help you stay on track with your budget, and/or distance yourself from those who constantly hijack your efforts at frugality.
Do your friends pressure you to spend money in order to be with them?
Social activities with your friends often include spending money; for example, eating out, getting drinks, shopping, going to the movies, or attending concerts. While there’s nothing wrong with spending money on entertainment, it can quickly get out of hand.
If you have friends who are constantly pressuring you to spend money while hanging out, you may need to have a talk with them. They might not realize they’re putting financial pressure on you, especially if they don’t budget like you do. If they just don’t seem to understand your needs, it’s time to back off, even if just long enough to accomplish your current financial goals.
Do your friends’ spending habits tempt you to spend more than you should?
Do your friends’ spending habits tempt you to spend more than you should?If you have friends who are always showing off their newest gadget or latest piece of clothing, it can lead to a spending problem. This can make you feel like you need to have what they do. (Also known as keeping up with the Joneses.)
Even if your friends aren’t intentionally pressuring you to spend, their habits can be contagious – especially if you already have a weakness for overspending. Be honest with your friends about how their spending habits are affecting you. It can be a tough call to make, but distancing yourself from these types of friends can be the difference between control of your finances and excessive debt.
Do your friends’ levels of financial responsibility reflect poorly on you?
Everyone has financial struggles, and poor choices in our past can leave us with consequences that last for decades. While you shouldn’t judge your friends based on past mistakes or circumstances beyond their control, you should be concerned if your friends’ financial habits are consistently irresponsible. Not only can this cast doubts on your own financial credibility, it can directly influence your finances.
What are your friends costing you?
If you’re frequently bailing your friends out of bad decisions and lending them money they never return, you may be losing more than your financial reputation. While it’s only natural to help a friend who’s down and out, lending them money or co-signing a loan for them won’t help them learn from their mistakes and establish better habits.
If your friends are costing you financial discipline, reputability, and money, you need to give them an ultimatum. If you’re good at handling money, sit down with them and teach them what you know. Offer resources for money management classes or counselors that can help them get back on track and break bad habits.
Whatever you do, don’t let finances cause your friendships to sour. Help those that can be helped, but don’t neglect to protect yourself.
Do your friends influence your financial decisions positively or negatively?