Today, we bring you a post from Credit Karma about how your friends can lead you into credit trouble. Hanging out with friends shouldn’t require a plan for getting out of debt!
Friends always mean well, right?
When it comes to tricky money issues, even our best friends may think retail therapy, investment advice, and spa trips are for your own good. But the road to hell–or more appropriately, bad credit–can be paved with good intentions.
Our friends can influence us when it comes to our financial attitudes. Even if it’s not explicit pressure, being with friends temporarily adjusts our approach to money because you (and your budget) aren’t the only one calling the shots when it comes to what activities to do and where to go.
Even one girls’ night out can land you in debt that lingers long after you and your buds split. Avoid these sticky situations to maintain your credit health and preserve your friendships.
Happy Hour = Sad Budget.
The situation: You and your friends meet up often for drinks, and every time you go out, you feel pressured to buy a few rounds. A bar tab for your entire party puts a hefty dent in your budget, or worse, piles up as interest-charging debt on your credit card.
The credit consequence: Blown-up budget.
The fix: If you can’t bring yourself to skip happy hour, stash cash so you won’t crack and use your credit card. While it’s kosher to pay for a round or two if everyone is buying, also remember that you owe yourself a sound budget more than you owe your friend her Cosmo. Let the table know that since you brought limited cash, you’ll have to go easy on drinks that night.
RELATED: A Checklist for Getting Out of Debt
Retail Therapy = Not Your Credit Remedy.
The situation: Due to a break-up, job stress, or just another bad day, you and your friend are in desperate need to shop. Out in Retail Land, splurging on beautiful new boots or a designer bag together doesn’t seem so bad. You are both supportive of each other’s wants because, “Girl, you deserve it.”
The credit consequence: Expensive, unplanned credit card debt.
The fix: The problem isn’t just how much retail therapy will cost you, but how long it will take to pay off. If you place your impulse buy on credit, you’ll have additional debt to pay off over the next few months plus a jump in your credit utilization rate–both credit score drags. Plus, you’ll be paying more than you think: Add the extra monthly interest charge of your new debt, and the price tag of your shopping spree jumps even higher.
Financial Advice = Financial No-No.
The situation: Upon hearing your financial issues, your friend offers some unsolicited advice–close that credit card, invest in this stock, join her Ponzi scheme. She might think she is coming to your financial rescue, but it could be your financial ruin.
The credit consequence: Unexpected and unknown consequences to your credit.
The fix: Whether it’s your best friend, mother, or coworker, be very wary of financial advice from anyone other than a professional. Unless they are truly fluent in finance-speak, they could be sending you down a path of credit destruction if they don’t know your whole story. Whatever worked for them may not work for you; your credit health and financial situation differs from theirs in many ways, and taking their advice can blindside you with unexpected consequences.
Moral Of The Story.
Be cautious and vigilant of your credit when you mix money and friends. Keep your frenemies close and your financial well-being closer.