Are Americans smart spenders? Look at their friends and you will know for sure. Even if you are unsure about your own spending habits, you simply have to observe how your friends spend their money. Your own habits will not be far from what you observe. It really proves the saying that “birds of the same feather flock together.” You naturally gravitate towards the people who have the same interests as you – including your own spending behavior.
In some cases, people even develop new habits because of the people they often hang out with. That is what we call financial peer pressure.
Study reveals the truth about the pressure of keeping up with friends
This observation is proven by a recent study done by the American Institute of CPAs. They conducted a study with the Ad Council to determine how much influence our friends have on our personal financial habits. The results published on the AICPA.org revealed the following:
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78% of young adults look at the financial habits of their friends to determine their own habits.
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66% admitted that they strive to keep up with their peers in terms of living conditions.
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64% admitted to having the same clothing preferences as their peers.
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⅔ of consumers feel some level of financial peer pressure when it comes to the food and gadgets that they will spend on.
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Half of young adults had to resort to using credit cards in order to meet expenses for basic necessities.
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More than ¼ of young adults had to miss a payment because of financial difficulties.
If you thought that peer pressure is only rampant in school, you will find it across all ages. Make sure that you will learn how to identify what is a good influence from bad financial peer pressure.
5 tips to help you overcome spending peer pressure
Of course, if your friends are savers and they practice good financial habits, it is okay to succumb to their influence. But if you think that your friends are a bad influence on your spending habits, you don’t have to end your friendship with them. There are ways for you to continue being their friend but you have to set some rules that will keep yourself from falling into financial habits that can ruin your budget.
Here are 5 specific tips that you can do to avoid succumbing the financial peer pressure.
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Be honest about what makes you overspend. Ask yourself, are you following in the footsteps of your overspending friends because you really love buying stuff? Or are you just trying to keep up with their lifestyle? If it is the former, then you know that it may not be your friend’s problem. You also have to change your own mindset about money. But if it is because of the pressure to keep up with your friends, you still have to make some adjustments about your mindset. Convince yourself that keeping up with them should not be a necessary act to gain their approval. If it is, then you should know that they are not worth keeping as friends.
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Make a plan. regardless of the pressures you feel with your friends, you will need to make some sort of financial plan to help you make the right choices about your money. If you know for a fact that you cannot afford something because of what your plan shows you, then no amount of pressure can make you spend on something. At least, the compulsion to blindly spend will not be there.
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Budget for entertainment expenses. A study done by Mintel.com revealed that Millennial parents love to spend on entertainment expenses. 21% of these young fathers spend more than $300 on their family’s entertainment expenses. 79% spend less than that. There is nothing wrong with this because it is a great way to bond with the children – as they love to do things that are fun after all. But if you are in this position, you have to make sure that you budget for it. Whether you are single or not, it is a must that you plan for your entertainment expenses. That way, you know your limit.
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Reward yourself every now and then. If you are sticking to your budget, you need to reward yourself once in a while. If you usually do not hang out with your friends to cut back on costs, you may want to give yourself a break at least once a month – or once every two months. It all depends on you. Also, make sure that even your rewards are within your budget.
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Open up with your friends about your financial troubles. Lastly, you may want to let your friends know about the reason why you have to suddenly change your financial habits. If you are in debt, do not be embarrassed to let them know. If they are your real friends, they can become a great source of support for you. If they do not support you and end up judging you, then you know that it is time for you to part ways. You also have to know that sometimes, staying committed to your financial resolution means telling someone about it. At the very least, the embarrassment of failing will motivate you to complete your financial goals.
If you follow these tips, you should be able to head off any potential financial troubles just because you could not say no to the financial peer pressure that your friends are putting on you. Remember that if they do care about your welfare, then they will support you regardless of your financial beliefs.
Even social media can influence your financial habits
In line with the problem that is caused by this form of peer pressure, you should also be aware that social media can also affect your financial decisions. In fact, we published an article about it in the past. It discussed how online shopping through social networks is actually quite popular today and that consumers should make sure that they go through secure transaction only.
But beyond that, social media also influences how Millennials spend their money. In a study done by Pymnts.com, Millennials are heavily influenced by what goes on in their social network accounts. These sites has become an influential platform where people share and read content. And beyond that, they are also able to interact with each other.
Their study revealed the following statistics:
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68% of Millennials admit that they are “somewhat influenced” their the posts that they find in their pages about consumer spending – especially if it is done by their close peers.
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9% of those between 18 to 34 years of age admit that the chances of them making a purchase is very likely to happen. 19% said that it is “fairly likely” to do the same.
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The purchase of the product is more compelling if a member of their social network contact will share their comments and observations about the purchased product.
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This online version of the financial peer pressure is in the form of posted photos, posts, videos and even a simple message from the actual brand.
Obviously, the influences we have in our financial decisions are all around us. You have to understand that you need to learn how to filter all of these before you make your own decision. Something might seem like a good buy for a close friend but that does not necessarily mean it will be the same for you. Do not let financial peer pressure lead you to make the wrong choices about your money – especially when you have limited resources.