A guide to non-awkwardly dealing with money differences between friends

Having money talks with your friends is never easy. This article can help you better approach financial discussions with friends who you may have financial differences or disagreements with.

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No matter how much of it you have, money is an inherently awkward subject between friends. Maybe you're the one who always tries to steer the group away from the fancy cocktail bar and toward someplace with a more forgiving happy hour; maybe you're the one who's frustrated that hanging out always has to mean staying in; maybe you've been on the receiving end of a seemingly innocuous, but still uncomfortable, comment about your spending habits.

In a 2017 report from the Bank of America, 44% of respondents cited money as a cause of stress in a friendship.1 The report also noted that based on the responses received, it seemed as though friends would rather talk about nearly anything else—family drama, even their weight—before talking about money. And the subject can be an especially sore one when 2 people who were once on equal footing newly find themselves in differing financial situations. One 2015 study, for example, found that when friends' class positions diverge, relationships tend to strain as new social positions impact one's hobbies, tastes, and personality.2

Study author Lena Pellandini-Simányi said that based on her research, people tend to handle finances with friends in 1 of 2 ways: they either avoid talking about the wealth discrepancy altogether, or they go for full transparency and talk openly about it. However, neither approach is perfect. On the one hand, ignoring the fact that one of you is flush with cash may seem like the polite way to go, but it can easily backfire; these issues aren't going to disappear if you ignore them. On the other hand, addressing it head-on has the potential to go sideways too, with "poorer friends perceiving richer ones as bragging and richer friends perceiving poorer ones as moaning," she says.

Still, it is possible to avoid money-based strife if friends stick to some sensible guidelines. Try these strategies next time one of you wants to go out for rosé and other can only afford Miller High Life.

A good way to navigate the disparity is to find a middle ground when figuring out how much to share about your monetary limitations. In the moment, being forthright is usually better than making up an excuse to get out of an activity you can't afford. Erin Lowry, author of Broke Millennial: Stop Scraping By and Get Your Financial Life Together, recommends saying something like: "I want to spend time with you, but [insert costly activity] is out of my budget right now, so instead could we just grab bagels and go for a walk in the park?"

Nicolle Osequeda, a therapist who specializes in financial issues, agrees transparency is the way to go. "If I am on a limited budget and my friend continually asks me to do Soul Cycle and an expensive brunch every Sunday, I may say no to avoid a conversation about not being able to afford it," she said, but "my friend may take this as a sign that I don't want to spend time with them. A better way to approach this is offering honesty."

Don't overdo it, though—being up front is one thing, but it's not the best idea to constantly vent about your money problems to the same person. If you're the one who's better off, you run the risk of annoying your poorer friend. If you're not as well off and rattle off your money woes, your spendier friend might assume you're angling for a loan.

Finances are a highly personal issue, so when a friend pipes up and says, I can't afford this, instead of challenging the assertion (and side-eyeing her new laptop), it's better to reserve your judgment. "You should never begrudge your friends for opting out of an expensive outing, nor be angry if your friend decides to still go and indulge in the activity you can't afford," Lowry said. Trust that your friend is operating in good faith by bowing out—and remember that even if it seems like their spending habits aren't matching up with their words, you don't know the full picture.

Employ a little creativity until you're on a more level playing field. Institute a policy like, "Whoever picks the bar is the one who pays." That way, the more budget-conscious friend can choose somewhere they're comfortable paying for and the more well-off friend can indulge in something they'd enjoy without creating anxiety around splitting the bill. And avoid falling into a habit of the richer friend paying for the more budget-conscious one. Lowry suggests doing it sparingly, "lest you start to resent your friend and your friend starts to feel awkward about you always paying."

Be mindful of what kinds of things you talk about when you're together. You may not be directly addressing your financial situation, but there are still ways to bring it up that can be off-putting to the other person. "If your only topic is what you ate in your recent restaurant visit, how much of a bonus you got—or, at the other end, how expensive housing became—the friendship is unlikely to last," Pellandini-Simányi says; at the very least, it will drive a wedge.

The best way to avoid that is to keep your friendship grounded in things you can both enjoy. Keep the traditions you enjoyed back when you were on more equal footing: for example, did you first bond in college over pretending to study while watching seniors play Frisbee™ on the quad? Instead of suggesting pricey brunch or a manicure during your hang, meet up at the local café to sip iced coffee and people-watch while catching up, just like the old days.

The same principle applies even if you've never been in the same place financially: "The key is to find regular activities that are affordable and fun for both friends," Pellandini-Simányi says. "The point is not to get the other person join your daily activities, but to find new, shared activities."

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1. Bank of America Friends Again Report 2017

2. Sage Journals, How Do Friends Manage Income Differences? The Role of Lay Concepts of Justice in the Erosion of Income-Bridging Friendships and Social Segregation, August 17, 2015
Article copyright 2018 by The Cut. Reprinted from the April 13, 2018 issue with permission from The Cut.
The statements and opinions expressed in this article are those of the author. Fidelity Investments cannot guarantee the accuracy or completeness of any statements or data.
This reprint is supplied by Fidelity Brokerage Services LLC, Member NYSE, SIPC.
The third-party provider of the reprint permission and Fidelity Investments are independent entities and are not legally affiliated.

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