How to Talk About Money with Your Friends

Title: How to Talk About Money with Your Friends

Starting the Money Conversation

The hardest part about talking about money with friends is starting. But according to Lori, most of us talk about money with friends without realizing it. We can use money-related topics as a springboard for a deeper conversation about finances. These topics can be things like moving into a new apartment or wanting to buy something that exceeds your budget or waiting to have another child until the first one is in kindergarten.

Setting Financial Boundaries

When discussing plans with friends, it’s common for someone to calculate the financial burden that will come from those plans. When that happens or if it becomes a recurring theme, having financial boundaries can be helpful. For example, if a friend suggests a place to eat or an activity that exceeds your budget, you can suggest an alternative that fits your financial situation. It can also be helpful to clarify the context. For instance, you could share with your friend that you are working on rebuilding your emergency fund, so instead of going out to a pricey dinner, you’d prefer to meet up for drinks before or after dinner.

Leveraging Friends as Resources

Financial literacy levels have declined over the past decade, according to a study by the Financial Industry Regulatory Authority (FINRA). In 2019, only 34% of study participants could answer four out of five fundamental questions about financial literacy, down from 42% ten years ago.

This data highlights the importance of normalizing money conversations with friends. Removing the taboos around talking about money can help individuals learn from their friends instead of trying to figure it out on their own.

If you have financial questions or are struggling in a certain area, consider asking a financially experienced friend for advice or guidance. You can start by simply asking a financial question and inquiring about how they learned about money. They may say their parents taught them, and you can share that your parents didn’t talk about money and ask if they could help you. They might point you to a book or some resource. It’s a way to ask without showing your hand or admitting that you don’t know.

Setting Shared Financial Goals

Another way to integrate money conversations into your relationships is by setting shared financial goals. Not only can emotional support have a significant impact, but you may also be more likely to achieve your goals when you share them with a friend.

In 2015, Professor Jill Matthews, a psychology professor, studied the impact of different goal-setting strategies. Her research found that participants who set specific goals and committed to taking actions to achieve those goals – and sent weekly progress reports to a friend – were significantly more likely to achieve their goals than those who did not.

According to Brooks, the greatest benefit of talking about money with your friends and setting goals together is the ability to encourage each other to stay committed. Achieving financial goals is tough – it takes time, sacrifice, and focus. Having someone to help keep you on track and focused on your goals will undoubtedly increase your chances of achieving them.

Avoiding the Comparison Trap

There’s no doubt that money can be a sensitive topic, and it’s easy to compare your financial situation to that of others. It can be hard to avoid comparison when a friend has a significantly better financial situation, such as a higher income or no student debt.

When
You may feel comparison or doubt, Brooks suggests reminding yourself that it’s not always a fair comparison. There are many factors that shape our financial story, some of which are beyond our control.

It is also important to remember that what you see from the outside is not always the full picture. Just because someone earns more or can buy nicer things doesn’t necessarily mean they are better off in other areas. They may be spending more than they can afford, or their higher income may be offset by financial responsibilities that you may not be aware of.

And while it’s difficult to completely avoid comparison, it’s important to ensure that those thoughts don’t turn into something unhealthy.

Lori said, “Jealousy is natural, but it can destroy relationships, and it’s not fair to envy others for something they can afford.”

Keeping Money Conversations Judgment-Free

One reason why talking about money is difficult is the fear of judgment. Therefore, it’s important to keep these conversations judgment-free from all sides. First, you deserve to speak openly with your friends about financial matters without receiving judgment in return.

Brooks said, “You don’t know what you don’t know, and there is no shame in seeking knowledge that you know you’re missing.”

At the same time, it’s important to refrain from judgment when friends choose to share information with you. In instances where you and your friends are having genuine conversations about money, treat your friends with the same respect and non-judgment you would like to receive if the roles were reversed. Talking openly and honestly can be beneficial for both you and your friend – financially and emotionally.

Source: https://www.thebalancemoney.com/how-to-talk-about-money-with-your-friends-5209872