How do your “people” influence your spending habits? We’re talking about your community, your circle, your friends, your family. Maybe you don’t think they influence you at all, but research says that’s unlikely. We are social beings, and we tend to match the habits of others in our circles, whether we like it (or realize it) or not.
Level up, together
Do you hang out with like-minded people because you wanted to be like them, or did you all become like-minded because you spend time together? At the end of the day, it doesn’t really matter. Regardless of how you got to where you are, there’s a good chance your community has an an impact on how you think,and how you spend. What will your future will look like? No matter how powerful the influence of your community, you always have an opportunity to examine your future.
We’re not suggesting you replace your close friendships with new ones to get a leg up financially. However, being aware of how your relationships impact your financial decisions is the first step toward making sure their impact is a good one.
When you feel peer pressure (yes, even as fully grown adults, we still experience peer pressure) to keep up with your besties, join your friends on an expensive trip, or upgrade to something you really don’t need, consider the following points:
- Recognize your circle’s habits. Not all habits are bad, but when you stay in your circle, sometimes you can forget that it’s ok to opt out of what you once considered the norm. What do your people spend money on? The lottery, cryptocurrency, trendy stocks, multi-level marketing campaigns? These get-rich quick schemes rarely give us what we’re looking for. Re-evaluate whether your current spending habits are helping you meet your financial goals.
- Make financial literacy and responsibility a part of your coffee talk. Alex Orozco, Lead Designer at the Beans, points out that these conversations aren’t commonly celebrated between friends, which means they don’t get reinforced. “When you’re not having these conversations, you’re not building these good habits.” She poses a challenge to the rest of us: “Strike up a conversation about savings and see how it works out. Maybe it’ll change the dynamic in your group a little bit and help everyone out.” Maybe the result is less pressure to go to Jamaica this year and more progress toward your long-term goals. Another point of clarity: sometimes, when Jamaica presents itself, you oughta go. Just maybe not every time and maybe try to turn it into a community challenge where you plan and save together upfront.
- Think about someone you know who you look up to as financially responsible. When you’re faced with an important (or sometimes even an impulsive) financial decision, do you think about what that person would do instead of what the person next to you is doing? Better yet, establishing a financial mentor can help you stay accountable to achieving your short and long-term financial goals. Choose someone who has made decisions that inspire you: “…If you’re talking about mentorship, you have to talk with people who are actually living and are doing what you want to do,” says Brooke, a finance coach.
- Know yourself. It seems that some people tend to spend more when they shop with friends, while others tend to spend less when they’re shopping together. Think about the last couple of times you made an impulsive spending decision and consider how your circle may have directly or indirectly affected that decision. How often you might be the influencer and how often are you the influenced? How many times in the last month was it your idea to go to happy hour? Hint: sunset walks are free and good for your health.
- Consider a cool-off period. This strategy takes many forms (see: The 1% rule), but the basic premise is this: if you’re going to make a purchase, sleep on it. If you’re excited, wait and see how excited you feel tomorrow. Don’t give in to the rush of impulsivity – no one likes that freshly shamed feeling in the morning.
- Add a certified financial planner to your community. Developing a relationship with a financial planner can be a powerful step toward achieving your goals. And, you don’t have to be “wealthy” to start the process of planning for your future. A wise financial planner won’t laugh when you come in with $200 and say you’re ready to start pursuing your goals – we promise.
We’ve discovered one organization that has capitalized on the impact our community has on our financial situation. They have formally partnered financially successful middle to upper-class individuals as “allies” with those who live below the poverty line to help them navigate their financial decisions and wade through the bureaucracy that can make financial literacy seem like such an uphill battle. They’re called Circles USA, and we think they’re very cool. Studies show that Circles participants have seen their incomes double, and even triple. Circle participants often achieve a 39% increase in income after six months and a 78% increase in income after 18 months. Participants continue to increase their income – even after the 18-month period.
Take Away
How can you be inspired today to be more aware of your community’s impact on your financial situation? And, even further, how can you set a “good influence” in your circle to make wise decisions? Who knows, it just may catch on.