How to Talk to Your Friends About Money

When it comes to contentious topics, money is right up there. We have all been in situations where someone doesn’t fancy paying their share of the bar tab, or maybe you are the one who finds their friends splashing out carelessly, and you feel left behind? Whatever the issue, dealing with it is rarely fun. But it is not just awkward: not talking about money with friends could be costing you anywhere from a few extra hundred bucks a month—or thousands—all because we don’t want to seem impolite. To help avert friendship bust-ups over money, we have enlisted the experts to explain what to do when confronted with some tricky scenarios...

When it comes to contentious topics, money is right up there. We have all been in situations where someone doesn’t fancy paying their share of the bar tab, or maybe you are the one who finds their friends splashing out carelessly, and you feel left behind? Whatever the issue, dealing with it is rarely fun. But it is not just awkward: not talking about money with friends could be costing you anywhere from a few extra hundred bucks a month—or thousands—all because we don’t want to seem impolite. To help avert friendship bust-ups over money, we have enlisted the experts to explain what to do when confronted with some tricky scenarios...

The dilemma
‘I lent my friend Rs 20,000 and they have not paid me back.’

The Solution: No matter how frustrating this feels, take heart from the fact it is a very common scenario. According to a Lloyds Bank study, 30% of adults say they have argued with friends about money, with lending being the main cause. “Ask yourself: do you want the money in that moment or would you just like it if they acknowledged the situation?” says Alex Holder, author of Open Up: Why Talking About Money Will Change Your Life. Sometimes, just knowing they haven’t forgotten can help you feel better; ask them if it is okay for you to remind them in a month and follow up then. But if it really is about the money and your resentment is starting to damage the friendship, speak up. “If you don’t ask them, it will just play on your mind and affect your relationship,” Alex adds. If they can’t afford to pay you back, work with them to come up with a repayment plan. Start by asking: ‘Would `2,000 a month be easier, rather than the full amount in one go? I will send you my bank details again, just in case you don’t have them.’ If you don’t want to talk to them directly, ask for the money in a text message with your bank details attached. Another option is to sign up to Paytm, a banking system that allows you to pay friends using just a mobile phone number. Both parties need to register to send and receive payments, but it is easy, quick, and free to use—and once it is done, you will never have to faff about with account numbers and IFSC codes again. “Try to make it as easy as possible for them to pay you back,” adds Alex.

The dilemma
‘If we go on holiday, how can I make sure we all pay fairly?’

The Solution: No one wants to tarnish a good holiday with arguments over who paid for what. Keep things equal by downloading the Splitwise app before you go. One person creates a ‘group’. Then, each time someone makes a payment, such as paying for a meal, they enter the cost, and who paid, into the app, and tick the names of the people who owe money. At the end of the holiday, the app will work out a split for the group. All you have to do is settle up. You can also set a budget to start with so costs don’t spiral out of control. Once you have a system that works, use it for all of your socialising, or even with flatmates, to keep costs fair.

The dilemma
‘When we go out, I often choose a smaller meal and don’t drink, but my friends split the bill so we all pay the same. How can I say I just want to pay for what I have had?’

The Solution: Ever seen the episode of Friends where a restaurant bill is split equally and Phoebe, Joey, and Rachel reveal they had a smaller meal because they couldn’t afford the same as Monica, Ross, and Chandler? It clues us into a tricky truth: sometimes friends just don’t realise that not everyone has the same budget. The key lesson here is not to wait until the bill comes to tell your friends you only want to pay for what you ate. “Be honest from the start. Unless you say something, you can’t expect them to guess,” says Alex. “If you have one of those annoying friends who orders 10 starters for the table and an extra round of mojitos for everyone, overcome that by going out with cash only. When you order, say you only have a certain amount on you and, therefore, will only be ordering a small meal. Don’t be embarrassed about putting the cash down at the end. Say, ‘This is all the cash I have, but it covers my food and drink.’”

The dilemma
‘My friends talk about salaries, but I earn less and worry they’ll judge me.’

The Solution: According to UK’s government department, Money & Pensions Service, embarrassment is the most common reason why adults avoid talking about money to friends and family (18%), with the feeling that they should be more successful at 13%. “Earning more doesn’t mean someone is more high-achieving or intelligent than you,” reminds Alex. “Some industries simply pay more. You could easily be at a similar level and have a five-figure discrepancy between your salaries. If you love your job more, have more flexibility, or good benefits, does it matter if you earn less?” But if you really feel uncomfortable about revealing your salary, you shouldn’t feel pressured to talk about it. “Instead, discuss your work benefits (such as healthcare or discounts), spending habits, or personal experiences about money and work,” says Emilie Bellet, Founder of The Wallet podcast and Vestpod.com. “In time, you may feel happier discussing what you actually earn.”

The dilemma
‘I don’t want to miss out on fun with friends—but don’t want to get into debt either.’

The Solution: When it comes to fun with friends, the FOMO is real—but, says Emilie, giving into the temptation of doing something you can’t afford is not worth getting into debt for. “Take a step back and make a spending plan first by creating a budget,” she advises. “When you get paid, allocate your income to bills, essential spending, savings and, finally, fun. Every time you do things with friends, only spend from your ‘fun pot’.” To overcome peer pressure, she suggests sharing your financial goals with your friends, and telling them that you are trying to save a certain amount within a specific period—say, for a rent deposit. “If something is out of your budget, suggest cheaper solutions—you may even find your friends feel the same, but were too afraid to say.”

The dilemma
‘My friend is really bad with money. What should I say?’

The Solution: First things first, don’t go in with your views and advice immediately. Approach the subject with caution and sensitivity—and only if you feel they are really suffering as a result. “Instead of implying they are doing things wrong, ask them if they want to ‘talk’ about money. You could open the conversation by suggesting you need help and asking if they want to be your ‘accountability buddy’ or ‘savings supporter’, for example. You could even ask them to share a savings goal with you,” says Emilie. This will help them learn from you and discover better ways to manage their money. It also gives you a good excuse to open up a conversation about finances when you feel the need. If you are feeling a bit uncomfortable, practise what you will say first. But don’t judge your friend and go in with a supportive attitude. “It can take time to change someone’s money mindset because money is a personal thing and we were all brought up with different attitudes to it,” adds Emilie.     

“Make a spending plan first by creating a budget every month.”