You and your friends may have shared a similar economic situation when you were kids or while you were in college, but now that you are adults, your incomes might diverge widely. Perhaps you've chosen to join the volunteer corps or pursue a Ph.D. while your friends are already working high-paying jobs. Differences in spending habits can destroy a friendship when they result in wildly different lifestyles or feelings of resentment, but if you approach the money situation with care and you have good friends, you can avoid blowing your paychecks on luxury cruises and sushi dinners that you can't afford.

1. Don't Assume You Can Afford It Too
Just because all your friends recently purchased new luxury cars doesn't mean you should follow suit. If you've always been on similar spending levels in the past, your inclination might be to think that nothing has changed. However, your friend might be earning a bigger paycheck, or be willing to make sacrifices in areas that you aren't, like living in an inexpensive apartment or giving up vacations, in order to afford his or her new wheels. Of course, for all you know, your friend can't afford it, either. Most people don't volunteer information about how much they make. Stick to purchasing decisions you know you can comfortably afford, regardless of what the other people in your life are doing. (For related reading, see How Do Your Finances Stack Up?)

2. Be Honest
People who are your true friends won't drop you because you can't afford to dine at four-star restaurants. You may have to miss out on some pricier outings, but good friends will be flexible and incorporate inexpensive activities into their social lives that you can join in on.

3. Suggest Alternatives
If your friends invite you to a restaurant you can't afford, suggest meeting up at your favorite coffee shop instead or offer to host a potluck. If they want you to join their gym, suggest going hiking or taking a stroll around the block. If they want to visit San Francisco and stay in a pricey hotel, suggest camping on the outskirts of the city or getting enough friends to come along so that you can share the room bill and make it affordable. When you give your friends options instead of turning them down outright, they'll know that you care about spending time with them and maintaining the relationship, even if you can't always afford the things they want to do.

4. Plan the Activity
Instead of taking the defensive position of trying to steer your friends' plans in different directions, go on the offensive and start coming up with the plans yourself. You could suggest a volunteer activity, a movie night at your place, playing Frisbee, or a museum visit. Good friends will understand that spending quality time together doesn't have to cost money.

5. Spend on What You Want
This is an important life lesson. Whether you're making a small purchase or a large one, you should be the one to decide how your money is spent. If you want to pay off your credit card more than you want to go clubbing, don't go clubbing just because your friends are doing it. Let your friends in on why you are turning down their invitations so they'll know that you're rejecting the expense and not their company. As mentioned previously, always follow up a refused invitation with a new invitation.

6. Save So You Can Spend
If your friends really want to fly to Spain for a trip and you really want to go, don't automatically turn down the invitation just because you can't afford it as easily as they can. Make it a priority to save for the trip ahead of time. Sometimes stretching your budget doesn't seem so bad when it's for an experience you'll value for years to come. (To learn more about saving your disposable income, see Sneaky Strategies That Fuel Overspending and Squeeze A Greenback Out Of Your Latte.)

7. Minimize the Cost
If you do take your friends up on an expensive outing or trip, leave the plastic at home and take with you only what you can afford to spend Then, think about ways you can minimize the cost of the outing. Eat before you go to the restaurant and order an appetizer as your meal. If you aren't driving, have a drink or two before you go to the bar, then order a soda while you're there. If you must drink while you're out, drink beer or wine instead of pricier cocktails.

Having friendships isn't supposed to be costly, and it doesn't have to be. If you make a conscious effort, you should be able to stick to your budget without losing your friends.

To get started on the road to improving your financial scenario, see Six Months To A Better Budget.

Related Articles
  1. Home & Auto

    4 Areas to Consider Roofing Material Types

    Roofing your home is very important, that’s why you should choose a roof specifically designed to handle your area’s climate.
  2. Savings

    6 Ways to Save Money on College Supplies

    Tuition and room and board are big expenses, yes, but the cost of textbooks and supplies can add up, too, unless you strategize.
  3. Home & Auto

    When Getting a Rent-to-Own Car Makes Sense

    If your credit is bad, rent-to-own may be a better way to purchase a car than taking out a subprime loan – or it may not be. Get out your calculator.
  4. Options & Futures

    An Introduction To Value at Risk (VAR)

    Volatility is not the only way to measure risk. Learn about the "new science of risk management".
  5. Investing

    Looking To Begin Trading In The Stock Market?

    If you are a new trader, we explain the differences between penny stocks and options so you can make the best decision for your personal trade plan.
  6. Options & Futures

    How to Trade Options on Government Bonds

    A look at trading options on debt instruments, like U.S. Treasury bonds and other government securities.
  7. Investing Basics

    How Does a Collar Work?

    Collar refers to a protective options strategy that investors use after a stock has experienced substantial gains.
  8. Budgeting

    The 5 Most Expensive States for Child Care

    To get a better sense of how child care costs can fluctuate, here's a look at the costs of child care across the country.
  9. Options & Futures

    Long on Oil? Hedge Falling Oil Prices with Options

    With no end to the oil slump in sight, here are some risk management strategies using options to protect your oil positions.
  10. Home & Auto

    Looking To Invest In Home Improvements?

    Some home improvement projects could cost you more to complete than they’ll pay out in equity. So, here we show you the worst projects to avoid.
  1. Security

    A financial instrument that represents an ownership position ...
  2. Series 6

    A securities license entitling the holder to register as a limited ...
  3. Internal Rate Of Return - IRR

    A metric used in capital budgeting measuring the profitability ...
  4. Board Of Directors - B Of D

    A group of individuals that are elected as, or elected to act ...
  5. Good Student Discount

    An auto insurance policy discount available to young drivers ...
  6. Strike Width

    The difference between the strike price of an option and the ...
  1. How does a forward contract differ from a call option?

    Forward contracts and call options are different financial instruments that allow two parties to purchase or sell assets ... Read Full Answer >>
  2. How does a bank determine what my discretionary income is when making a loan decision?

    Discretionary income is the money left over from your gross income each month after taking out taxes and paying for necessities. ... Read Full Answer >>
  3. What is the range of deductibles offered with various health insurance plans?

    A wide range of possible deductibles are available with health insurance plans, starting as low as a few hundred dollars ... Read Full Answer >>
  4. How do I know how much of my income should be discretionary?

    While there is no hard rule for how much of a person's income should be discretionary, Inc. magazine points out that it would ... Read Full Answer >>
  5. What are the main risks associated with trading derivatives?

    The primary risks associated with trading derivatives are market, counterparty, liquidity and interconnection risks. Derivatives ... Read Full Answer >>
  6. How can an investor profit from a fall in the utilities sector?

    The utilities sector exhibits a high degree of stability compared to the broader market. This makes it best-suited for buy-and-hold ... Read Full Answer >>

You May Also Like

Trading Center

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!