Friendship Habits Drain Wallets, Fuel Debt
Many young adults overspend to maintain social ties, impacting financial goals.
A significant portion of millennials and Gen Z report that their financial aspirations have been negatively affected by social spending. This trend highlights a disconnect between the desire for social connection and prudent financial management.
The Cost of Socializing
Emmy, a 31-year-old Los Angeles resident, found herself trapped in a cycle of credit card debt. For over a decade, she accumulated balances, paid them off, and then repeated the pattern. At 18, she began spending freely, often covering costs for friends without seeking repayment.
When Emmy started documenting her financial journey on TikTok in March, her total debt had surpassed $28,000. She acknowledged her role in accumulating the debt, stating, “I know this is my fault.”
Her experience is not unique. A recent survey by Ally Bank reveals that nearly 60% of millennials and Gen Zers believe their financial objectives have been hindered by their social expenditures.
According to Jack Howard, head of money wellness at Ally, prioritizing time with friends can yield significant well-being returns. However, the survey also found that 42% of these age groups admit to overspending on their social budgets multiple times a year, leading to financial difficulties.
Budgeting for Social Life
Americans value in-person social interaction, with 69% of survey respondents connecting with friends weekly. The average monthly expenditure on social activities is $250.
Despite this, financial planning for social events appears lacking. Only 18% of Gen Z and millennials adhere to a strict budget for activities with friends, the Ally survey indicated.
“You gotta just put it in your budget. I think a lot of people just don’t realize that cocktails with my girlfriends this day and brunch this day, and then I DoorDash with my partner another day, all of those expenses add up.”
—Jack Howard, Head of Money Wellness, Ally
Howard advises viewing money as a “tool to enhance your values and your experiences.” Reflecting on personal values and aligning spending accordingly is crucial. If costly activities like dining out or traveling with friends are priorities, adjustments may be needed elsewhere.
For example, in 2023, the average American spent $1,343 on leisure activities, including dining and entertainment, according to the Bureau of Labor Statistics. This figure underscores the significant financial commitment social outings can represent.
Prioritizing Experiences Over Expenses
Beyond adjusting budgets, Howard suggests seeking out low-cost or free social activities. This approach is currently a priority for only 23% of millennials and Gen Zers.
“What you really want is the experience. What you really want is the time with your friend. [We need to] really get back to the basics of understanding that we need these friendships to increase our well-being … but we don’t want to overspend to where we’re getting into financial trouble.”
—Jack Howard, Head of Money Wellness, Ally
Emmy is working to shift her social interactions toward more economical options as she tackles her credit card debt. However, changing ingrained spending habits and communicating these changes to friends, who are unaware of the extent of her financial struggles, presents a challenge.
She expressed anxiety about how her friends might perceive her financial situation, despite believing they wouldn’t judge her. This fear of judgment is a common obstacle that can perpetuate overspending, Howard noted.
Identifying the root cause of this impulse to overspend, often linked to upbringing or past experiences, is key. Understanding this connection can help break the cycle of repeated financial missteps in both personal and social spending.
Individuals finding it difficult to manage their finances effectively may benefit from consulting a certified financial planner or a financial therapist for personalized guidance.
