Friends? In this economy?
Love keeping up with business news? Download the Audacy app and follow WBBM Newsradio to get WBBM’s Weekend Wallet newsletter!
As prices for everything from electricity to chocolate have gone up, receiving a wedding invitation or even a text to meet up for coffee with friends has been throwing people into a state of dread. While they don’t want to experience the terrors of FOMO (fear of missing out), they aren’t sure if their bank accounts can take the hit.
This week, Ed Gjertsen, a certified financial planner and founder of Engage Wealth Group in Chicago, joined WBBM Newsradio’s Rob Hart on the “Noon Business Hour” to show people towards a future that includes both a savings account and stable friendships.
“Without question of a doubt Rob, there’s so many alternatives of things to do with friends rather than buying specialty house drinks for $25 a pop,” he said.
In June, Ally Financial released the results of “The Friendship Tab” survey. It found that nearly a quarter of millennials and Gen Z fear they are missing out on social connections due to financial constraints. Even more (42%) said they overspend on activities with friends a few months out of the year and 18% said they overspend regularly – every other month. One out of four respondents said social spending makes building savings difficult and on average, they spent $250 per month on activities with friends.
“It’s not only [people in their] 20s and 30s, but a lot of people tend to fall into this habit where you know… in order to keep up with their friends… they may be paying a lot more than they should be given what they have in terms of their income and things like that,” said Gjertsen.
He noted that this can cause both financial strain and strain on relationships. According to Ally’s survey, 20% of respondents said financial or lifestyle differences contributed to the loss of a friendship.
Hart brought up one of the biggest financial costs that can come with having close friends: wedding bills. These aren’t only something that betrothed couples and their families have to shoulder. Last September, financial company SoFi revealed that the average cost to be a bridesmaid was $1,650 and the average cost to be a groomsman was just a skosh lower at $1,600.
Multiply that by a few friends walking down the aisle every year and the costs pile up. When it comes to expenses from weddings, friends often have at least a few months to prepare. Yet, only 18% of the Ally survey respondents said they have a strict budget for activities with friends.
Once you get that wedding invitation, “maybe you start cutting back a little bit on the soft expenses between now and then to be able to have those funds,” Gjertsen recommended. He said planning ahead can help open up more opportunities to spend without feeling stressed about it, like nearly a quarter of the Ally survey respondents.
“Focus on saving… investing in your future self,” Gjertsen said, adding, “then you work on hard expenses such as like rent or mortgage and then you have the soft expenses that is like: ‘Here is my spending plan for fun.’ And do the best you can to stay within that plan.”