How Peer Pressure Affects Our Personal Finance

Recently updated on: October 21, 2023

Have you ever experienced being with your friends or colleagues when they suggested dining out or going somewhere out of your price range?

However, even if you knew you didn't have the money for the activity, you still decided to go because you felt you would miss out or be left out.

If you answer yes, you are a victim of financial peer pressure, influencing you to act according to your group and spend the money you may not have.

So, why is it important to be careful with peer pressure that will affect your personal finance?

What is Peer Pressure?

Peer pressure is the influence of our peers or people we see at the same as our 'level.' This can include our friends, classmates, colleagues, and family members of the same age group.

In effect, we may change our behavior, habits, and interests to conform to what our peers do, which can positively or negatively impact our lives.

This may also be connected to why Jim Rohn said that we are the average of the five people we spend the most time with.

But how can peer pressure affect us financially?

How Can Peer Pressure Impact Your Spending Habits

Peer pressure can influence you and me in many ways, but some things can affect us financially and even push us to the edge if we're not careful.

1. You will try to buy new shiny things to be 'in.'

In your desire to conform to your peers, you may sometimes want to have what they have so that you are still part of the group.

Unfortunately, this can cause you to spend on things you may not need or, worse, something you can't afford.

Think of people who buy gadgets, clothes, cars, or houses just because their peers and social group already have them. You may also be more likely to spend with your friends.

2. You will try to experience things out of peer pressure.

Aside from buying things, your peers may influence you to try new experiences that may harm your finances, like vices and gambling.

Though peer pressure regarding vices happens more commonly in adolescence, it may also occur in adulthood. However, vices are just a waste of money and detrimental to your health.

Then we have gambling, including the casinos and online sabong, which placed thousands, if not millions, of Filipinos in financial distress.

Other common experiences caused by peer pressure are eating out, partying, and going on vacation to different places, even though it may cost you more money and put you in debt.

3. You may get into debt because of peer pressure.

Another big impact on anyone's finances caused by peer pressure is getting into debt. 

This usually happens when you can't keep up with the expenses of your chosen lifestyle, which in turn, causes you to get trapped in the debt cycle.

Remember that a debt-free lifestyle is a good life. So, if you have the means to avoid financial peer pressures around you, do it.

How to Avoid Falling to the Financial Peer Pressure?

Now that I discussed three negative impacts of peer pressure on our finances, there are ways to not fall into the trap and save yourself from the troubles.

1. Just tell them no, or maybe next time.

We are all adults by now, and it shouldn't be hard to understand the meaning of no. Unfortunately, many of us can't get past the phase when we can't take no for an answer.

Stand your ground and tell them you can't go with them, or politely tell them you will go next time (unless this relates to vices and gambling).

2. You can suggest a more budget-friendly alternative.

If you don't have enough money to spend on whatever activity your peers decide to go to, you can suggest a more budget-friendly alternative. 

This way, you can still join them and have a good time. Plus, you can save a few pesos in the process.

3. Create a guilt-free spending fund.

You don't have to always say no to every invitation because you will miss the chance to spend time with your friends and colleagues.

What you can do instead is to save money and place it in a guilt-free spending fund, which you will use to finance your expenses outside your normal responsibilities.

Every time you fill this up, you will have the budget to join your peers or buy stuff. However, you must also build the discipline to stay within your budget.

You may also try using a piggy bank for your short-term goals.

4. Be honest and tell them about your financial situation.

Sometimes, your friends or colleagues will keep badgering you to join them without knowing what you're going through financially.

So, it will be better to be honest with your friends and tell them that you can't join for now because of financial reasons.

Don't be afraid to lose face because you can't spend for now because it is absolutely better than trying to keep up with the Joneses.

5. Be with people who share your values.

Lastly, make sure that you are with people who share your goals and values because they are the people who will be quick to listen and understand.

Final Thought

Personal finance is more than just money because it is connected to many aspects of our lives, including social groups and peers.

So, while being part of a group and having peers is great, it may not always be best to join them on things that don't add value to your life, are potentially harmful, or too expensive.

Just do your thing and trust the process because, eventually, you will be among better peers.