Why can’t we be friends? Maybe because only one of us can afford to go to this new restaurant.
More than a third (36%) of Gen Z and Millennials said they have a friend who often causes them to overspend, finds a new study Since Intuitive Credit Karma which surveyed over 1,000 young adults. For many of them, that means racking up debt and letting friends down in the process. At a time when both generations feel living paycheck to paycheckno wonder they do anything to avoid lifestyle drift.
The problem is worse for millennials, who likely have more spending money than Gen Z due to the fact that they are further along in their careers and are also in a more expensive season of life overall. Eighty-eight percent of millennials versus 80% of Gen Zers with a “spendy” friend — which Credit Karma defines as someone who pushes you to spend money you don’t have — say that spending time with this friend got them into debt. And 15% of millennials said debt was at least $500; only 2% of Gen Zers said the same.
It makes sense that millennials are more affected by their “spend-the-money” friends. They find themselves more often at big times of transition — like promotions, weddings or new babies — which is when financial tension between friends tends to peak, financial therapist Amanda Clayman said Voice. Even bad transitions, like layoffs or medical emergencies, “affect financial norms between groups of friends,” Clayman said.
Between two recessions, crush student debtand one inexorable increase in the cost of livingwealth creation has been miles out of reach for most millennials since joining the workforce – the debt they take on isn’t really something they can afford, even if they’re make up for lost financial ground. The pandemic only widened the wealth gap within the generation, which may intensify the pressure to keep up with the Joneses.
Many Credit Karma respondents said they fell victim to a friendly lifestyle change because they didn’t want to feel left out, wanted to follow their friend’s lifestyle, or they wanted to please their friend. And many have admitted that they just don’t know how to say “no”.
For some, it may seem easier to just cut off the friendship and stick with people who have similar spending abilities. But that’s more likely the case for Gen Z than Millennials: 47% and 36%, respectively, said they would consider ending a friendship because of their friends’ drinking habits. And a third of Gen Z respondents and 29% of Millennials believe it’s important that their friends earn about as much as they do.
“Spending money to stay with friends isn’t something new, but it could be a problem if people start losing friends due to misaligned spending habits,” said Courtney Alev, consumer finance advocate at Credit Karma, in the report. “Talking about your finances with your friends might help alleviate some of the stress around money, especially if you have different financial situations.”
But more than a quarter of millennials said they keep their income and debts secret to avoid judgment from friends. Credit Karma respondents in both age groups blamed dining out as the top expense they incur, followed by shopping for clothes, drinks and nights out, travel and vacations. For Gen Z, “self-care” expenses like massages and manicures were a big slice of the pie.
Social networks exacerbates the problem. Watching wealthy peers flaunt their fancy vacations and shopping sprees can both create anxiety and add pressure to buy into the pursuit, though, as a Bank Rate Survey discovered last summer, most people who make impulse purchases after browsing social media have come to regret them.
It’s not just the younger generations; many americans admitted to spending too much money on things like clothes, costume jewelry or cars to impress their peers, only to then struggle with debt. The problem is not limited to those who are short of money; high-income people reported more pressure than low-income people, likely because they have more money to gamble.
While severing friendships may seem drastic, it’s no surprise that money can wield such power. People tend to follow social conventions to fit in, often to their own detriment. A working document 2018 from the Federal Reserve Bank of Philadelphia found that neighbors of lottery winners were more likely to go bankrupt after watching their peers’ wealth increase.
Obviously, spending an inordinate amount of money to keep up appearances is a bad decision, especially considering that those spendthrift friends might leave. deeply in debt themselves.