Experts Agree: These 5 Steps Make Budgeting Easy
- Budget for important things
- Use the envelope budget
- Designate a shopping day
Kristin Hanes, 36, was enjoying a fun San Francisco lifestyle with lots of travel and dinners out until a year ago, when she was downsized at her job as an anchor at a local radio station.
Since then, she’s survived on income from freelance writing and her blog The Wayward Home, which is only a fraction of what her old job used to pay. Not wanting to go into debt or make too big of a dent in her savings, Hanes moved into a houseboat and cut back her expenses significantly.
But she still feels pressure to shell out from friends who always want to spend money and who often make reservations at fancy restaurants without realizing that costly meals out are no longer in her budget.
“The last time that happened,” Hanes says, “I texted my friend saying I wasn’t going to be able to spend much money, and she wrote back that it was okay, we could split stuff.”
The bill still came to $40 each, and Hanes remembers feeling sick about the expense. She vowed that she wouldn’t go to another nice restaurant until she was able to make more money. Still, she struggles with feeling like she’s missing out when her friends always want to spend money.
“FOMO is a real thing,” she says, referring to the popular acronym meaning “fear of missing out.” “When your lifestyle changes, you start to worry you’re missing out on fine dining, fun drinks and going out.”
Figuring out how to handle having less money than your friends can be tricky. But if you stick to your budget, talk to your friends and find ways to have fun without breaking the bank, you should be able to save your cash without having to sit at home solo.
Debbi King, 47, a personal finance expert and author, knows a thing or two about how FOMO can wreak havoc on your financial life, especially when you’re always wondering how to keep up with friends with money.
“FOMO is what got me into $200,000 worth of debt,” she says. “I wanted to do and have what everyone else had, but my income wouldn’t support it.”
She amassed that massive debt 19 years ago in auto loans, personal loans and credit cards from going out too much and overspending. To get out of debt, she slashed her budget by moving to a studio apartment and cutting out cable and extras like going to restaurants and out for drinks.
“I often had to say no to my friends and family,” she says. “But as I began to see my debt lessening, it was easier and easier to say no.”
If your friends always want to spend money, King suggests using a budget to guide your spending. Still, she understands how difficult it can be to stick to your budget, especially when there’s peer pressure involved. That’s why King emphasizes the need to build balance into your budget. After you’ve paid all of your bills and put money toward your retirement, emergency fund and other savings goals, she thinks you should use what’s left over for fun.
“Make sure that you do have something in your budget for entertainment,” she says. “It may not be what your friends have so you may need to say no occasionally, but at least you can participate without being completely left out.”
It’s also important to track your budget closely—something that’s easy to do with budgeting apps like Mint and YNAB (You Need a Budget). Following your spending can also help you resist the temptation to overspend because your friends always want to spend money.
“Your friend isn’t going to pay your way later in life,” King says. “You need to do what you know you need to do, which is save for your future. If you don’t, you are going to look up in 20 to 30 years with a lot of regret.”
Your best friend heard about a great new restaurant with killer lamb chops and an amazing wine list, and the whole gang is excited to check it out. The only catch: It’s way out of your price range. Hanes understands the frustration and how difficult it can be to ask for a change of plans, especially if your friends always want to spend money.
“I hate having to convince friends to go somewhere cheap or only go to a happy hour,” she says. “I feel like I’m taking their fun away.”
But she suggests that rather than spend all of your energy trying to figure out how to keep up with friends with money, have an honest conversation with them about your budget.
“I think it’s good to make sure your friends are aware of your financial situation,” Hanes says. “If they are true friends, they will understand and be accommodating.”
In fact, one of Hanes’s friends recently treated her to dinner and drinks because she knew that she couldn’t afford to go out otherwise. Still, other friends have asked her to split the dinner bill equally when she only ordered an appetizer—a common quandary for those struggling with how to keep up with friends with money. Hanes believes it’s critical to say something rather than pay more than your share.
“It’s your money and your life and you have to stand up for yourself. Your future and financial freedom depend on it,” she says. “If I overspent regularly, I’d burn right through my savings. To me, it’s not worth it.”
Just because your friends always want to spend money doesn’t mean you can’t hang out anymore. There are plenty of ways to have fun together that won’t keep you awake at night worrying about your credit card bill and account balances.
When it comes to how to handle having less money than your friends, Hanes suggests being proactive about making inexpensive plans. She’s become an expert at sniffing out deals.
“It is always a great feeling when you can stay on budget and see your goals being achieved. It’s much better than the anxiety that comes with overspending.”
“I find happy hours where I can get a beer for $4 and an appetizer for $5,” she says. She also recommends going to ethnic food restaurants where prices tend to be lower and keeping a list of fun things to do that don’t cost anything.
“You can suggest to friends to go on a walk or a hike. Visit a beach and take a blanket and a picnic lunch,” Hanes says. “Go to a park and bring a board game and a bottle of wine and some cheese. Make it a game to find the cheapest happy hour in town or find a neighborhood to explore and go thrift shopping.”
If you’re wondering how to handle having less money than your friends, King suggests staying in and inviting them over.
“Movie night is always fun,” she says. “Also, cooking a meal, book club and spa nights are a blast. For the guys, getting together to watch a game or BBQ is always a good time.”
If your friends really want those expensive lamb chops, then don’t let your worries about how to keep up with friends with money ruin your fun. Just meet up with them afterwards or make plans for another night when you can go along.
Feeling pangs of regret when you look at the Instagram photos from the big concert you skipped is normal, but it’s important to remember that you can have fun anywhere and be frugal without cramping your style. Having a friend over and lip-syncing to the same songs in your living room can also make for a great night. Plus, at the end of the evening, you won’t be worrying about how to keep up with friends with money. Instead, you’ll sleep soundly with your budget still intact.
“It is always a great feeling when you can stay on budget and see your goals being achieved,” King says. “It’s much better than the anxiety that comes with overspending.”
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