Over the past four months, I’ve been interviewing people about how they managed to get out of serious debt, and I’ve noticed a recurring theme in their stories: More often than not, paying down their debts required them to avoid expensive social situations. That withdrawal often put a serious strains on their friendship, and sometimes resulted in them losing some friends altogether.
When 31-year-old Page Trimble set out to pay down his $68,000 in student loan and credit card debt, he took up rock climbing as a free hobby. But his frugal lifestyle rankled some of his friends. “Some of our friends understood what we were trying to do, but others were like, ‘Why are you not coming out to eat with us? Why aren’t you coming to the show?’ Other people don’t care what your financial goals are. They just want to hang out and have you do what they’re doing.”
Kyle Pendergrass lost six friends when he ventured to pay off his student loans after college. “They came from more affluent backgrounds and just couldn’t understand that some people have to say ‘no’ to things so they can pay off their debts,” he explains.
As a child, Lorelei was mocked for being from a poor family. But once she started climbing the ranks of her industry in adulthood and earning and saving more money, she experienced the opposite problem: Her friends resented her for being too wealthy. “When my friends and I were all poor, it was fine to vent about money because we were on even footing. But things have gotten weird as I’ve changed socioeconomic classes. I’m scared of coming off as the rich asshole. … Strangely, talking about money is more socially dangerous now than when I was poor.”
These experience point to a tension between achieving personal financial goals and maintaining relationships with friends. “It’s almost a universal problem,” says Robert Weagley, associate professor and chair emeritus of the personal financial planning department at the University of Missouri.
The discord between friends and finances stems from the “relative income hypothesis,” Weagley says—the economic theory that says people’s consumption and saving habits are more influenced by social factors than by their actual incomes. That is, people will often spend more than they can afford as “an outward display” that they’re of a higher social class.
Once a person grows accustomed to a certain standard of living, they’re usually reluctant to “ratchet down” to a lower consumption class, Weagley adds. So if one friend suddenly decides to spend less, it can cause conflict for everyone.
“It takes a toll on your self-esteem to not be able to keep up with your friends’ spending,” says Kelsy, a 25-year-old woman living in Northern California. “No one want to stay home drinking PBR when you can go out drinking $10 craft beer with your friends.”
Kelsy eventually caved to the pressure, trading in her cheap social activities such as game and movie nights at home for lavish dinners and binge drinking sessions with friends. Spending more felt great and was a boost to her social life, but it undid all the progress she had made paying down her debt.
The most discouraging aspect to this phenomenon is that there’s not necessarily a win-win solution.
“If you want to revise your budget away from consuming particular goods and services, you have to make tough choices,” says Dennis Hoffman, an economics professor at Arizona State University. “If you lose friends as a result of this, then these are friends who have high incomes, who don’t worry about budget constraints and can’t realize your own constraints. I don’t have any advice there other than the logical one: Pick another set of friends.”
That’s harsh advice, even from an economist, but it’s exactly what happened to Pendergrass and Trimble. They both lost “friends,” but they soon realized those friendships were unsubstantial, predicated mostly on getting drunk together — fitting with Weagley’s slightly more upbeat take.
“If people are going to reject you because you’re trying to reach your financial goals,” Weagley says, “they probably weren’t that good of friends of yours to begin with.”