NEW YORK (MainStreet) — Can't figure out why you're always going off budget? Are your credit cards maxed out and you don't know why? It might be that you have the wrong kind of friends. Just like in every other area of life, the people around us greatly influence our conditions. So if you're stuck in a financial planning rut and trying to figure out why, look for some of these behaviors related to your closest friends.
Keeping Up With the Joneses
"I have friends that don't budget," says Ellie Kay, a family financial expert. "They own 15 McDonald'ses, but they don’t budget. They don’t think anything of spending $300 for a throw pillow." She uses this as a way of explaining how it's not necessarily your friends 'fault that you're having problems; it’s yours.
"If you don't have the money and you tend to overspend when you’re around them, that’s not their problem -- it's yours," she said.
This doesn't just apply to buying creature comforts. It can be as simple as buying another round at happy hour when you just don't have the money.
"Happy hour is over a lot faster than you think," she says. Once that's done, you're going to start paying close to $10 for a drink. While your friends might have the money to do that, you might not. So it's important to stick to your budget, even when you're heading out for the night with people who have greater means than you.
Beware of Moochers
"These are people who might have gotten you through a lot of crises," says Kay. "These are people who might have helped you to bury a body."
This can lead you into one of the biggest problems friends can cause with your money -- asking for loans.
"Someone comes and asks for $100 to get through the weekend," says Randy Padawer, a consumer advocate with LexingtonLaw. "The problem is that, by definition, this is the last person you should be loaning money to. If they were responsible, they wouldn’t need the money."
"Your friend is going to be a lot more forgiving of you for not loaning them the money than you will be when they don’t pay you back," Padawer said.
Don’t Co-sign -- Ever
"Co-signing a loan for friends can be really dangerous," says Padawer. This is because you're on the hook for a car note or a credit card. It's not just the money involved, though that can be significant. It's that, when you co0sign for a car loan, mortgage, credit card or other loan product, you're adding that to your credit report as well.
"It's dangerous enough when it's family," says Padawer. "But at least with family members, they’re going to have a hard time avoiding you at the next few Thanksgiving dinners."
You might not even know that there's a problem until you pull your credit to find out that it's totally ruined. Bottom line: there's no upside for you to cosign on a loan for someone else -- and a huge down side.
Getting Bad Financial Advice
Lots of people get investment tips and other financial advice from their friends. Padawer cautions people against that.
"Just because someone is your best friend doesn't mean they have good financial advice to give," he says.
The person doesn’t mean to lead you astray, but the bad advice still stands as such. This also applies to people who start businesses and want your investment. Even when you believe in the idea, most businesses just don’t last.
Leave your financial advice to the professionals. But if you have to entertain an idea from a close friend, run it by a trusted advisor before acting.
--Written by Nicholas Pell for Main Street