What To Do When Your Friends Make Way More Money Than You Do (Or Vice Versa)

We like to think our friendships are strong enough to handle something as silly as financial differences. But the truth is, money can make things awkward, especially when one of you earns significantly less (or more) than the other. Here’s how to handle the most common issues that can arise.

Find Common Ground With Activities

Your friend wants to go to concerts and movies all the time, and you can’t afford it. This is probably the most common issue when there’s a wealth gap in your friendship: the cost of doing stuff. In fact, there’s a even a Friends episode dedicated to this problem! On the show, Monica gets fired and everyone forgets about the issue. Hopefully you fare better.

Communication is a better solution. Your friend might not realise just how pricey those activities are, so if they don’t know you’re on a budget, they’re probably going to keep suggesting them.

There’s really nothing wrong with flat out saying, “I can’t afford it, sorry.” Although, some people avoid this because it sounds like an excuse, especially if you’re not open about money with your friend.

If you’re looking for another way to address the issue, here are a few scripts to get you started:

• Try “We’re saving our pennies for [current savings goal],” as suggested by a You Need a Budget user.
• Suggest a frugal alternative: “Le Cigare Volant is really pricey, and I’m on a budget. Do you mind if we meet for happy hour at The Counter instead?”
• If it’s a big activity, like a vacation, money psychologist Brad Klontz recommends starting the conversation on a positive note, by letting your friend know how much he or she means to you. Then, try something like: “My major financial goal right now is to save up to buy a house. That means I need to cut back on my spending. This vacation isn’t in my budget.”

Assuming you’ve tried the above and this is still an issue, here are a few additional tips:

• Pay yourself first: Sometimes it’s not as easy as saying no. When your friend wants to go to an expensive concert, you’re probably tempted to go, too! You can eliminate temptations like this buy using a zero-sum budget, which basically means you save your money before doing anything else with it. This way, even if you do go to the concert, you’ve already saved for your financial goals, so you’re good. Or, you can tell your friend you can’t afford to go, because it’s literally not in your budget. Either way, you’ve put your finances first.
• Discuss your goals: It might help to let your friend in on your financial goals. If you have a solid friendship, chances are they’re happy to support your efforts, and they might also think twice about expensive activities.
• Do stuff, but spend less: If your friend can’t part with his or her expensive habits, consider creative workarounds. For example, money writer Shannon McNay told Forbes that when her friends would make plans to go out to eat, she’d make dinner at home, and then just order dessert at the restaurant.

If these outings catch you by surprise, you might consider working them into your budget. Obviously, you shouldn’t spend money you don’t have, but setting aside a certain amount helps you prepare for occasional outings so you can budget accordingly.

For example, my significant other and I have friends that really enjoy going out to eat. We love doing that with them, but for a long time, hanging out with them meant destroying our budget. To fix this, we split our “dining out” budget into two different categories: regular restaurant spending and “social spending.” Basically, we cut back on our own restaurant habit so we could have more money to go out with our friends. In fact, now, we pretty much only go out to eat when our friends are involved.

Ideally, though, you should be able to communicate with friends about your budget, so these other options aren’t necessarily a replacement for that. They’re just additional fixes for finding a happy medium.

If You’re the Higher Earner

If you want to spend time with a friend on a budget, you have to be considerate of their finances. You can suggest frugal alternatives, like:

• Happy hour instead of dinner at your favourite restaurant
• A potluck birthday party instead of a party at an upscale venue
• A local, weekend getaway instead of a pricey, weeklong vacation

If you really want to try a new restaurant, and you’re intent on going with your friend, you may offer to treat them. Here’s what Richie Frieman of Quick and Dirty Tips suggests:

Simply say, “We enjoy hanging out and I want to treat you XYZ today.” You should by no means expect them to reciprocate, since you are doing this out of the kindness of your heart.

If they push back, offer a way for them to pitch in:

“I told you this was my treat, but hey, pay for parking and buy me a beer, and we’ll call it even.”

This way, they’re still pitching in a little, but hopefully not in a way that will wreck their budget. Of course, doing this too often can be problematic, too. Your friend might feel like it’s charity. Or, they may even start assuming you’ll pay for everything, and that’s a whole new conversation, in which you’ll have to politely tell them you can’t budget for their spending.

Overall, it’s just about being understanding toward a friend’s situation. It’s ok to offer to treat every now and then, but suggesting cheaper alternatives shows a little more empathy.

If You’re Going to Borrow Money, Set Some Ground Rules

Few things make a friendship more awkward than borrowing money. In general, it’s probably best to follow this rule of thumb: don’t do it.

But if you’re going to borrow money anyway, at least heed this advice:

• Make a concrete deadline: This is generally up to the lender to do, but as the borrower, you want to watch out for yourself, too. You might tell your friend you’ll pay the money back when you can, and they brush it off as no big deal, but perhaps they expected to be paid back much sooner than you’re able to make that happen. Setting a concrete deadline eliminates a lot of confusion down the line.
• Draw up a contract: It sounds like it’d make things even more awkward, but having a contract can actually take a lot of the pressure off of the situation. Both parties know what to expect when there are set rules for payback established.
• Pay interest: Again, this sounds pretty cold, but if you’re going to ask to borrow money, Business Insider suggests it’s polite to at least offer to pay interest, even if it’s a small amount.

If You’re the Higher Earner

It might be tempting to give in when a friend asks or hints to borrow money from you. If you do, follow the other golden rule when it comes to lending money to a friend or close family member: don’t expect to get it back.

Make sure you’re comfortable with that before saying yes. Or, maybe there’s something they can offer in exchange. Maybe they have got awesome photography skills and you need a few photos for your website. Tell them you’re happy to give them some cash if they can help you out with that. Of course, working together can cause a whole mess of problems, too. So you might want to prepare for that and not expect too much out of the situation.

And if you say no, you shouldn’t have to explain yourself; politely declining should be enough. But if you feel obligated to give them a reason, here’s what clinical psychologist Dr. Daniela Schreier tells MoneyUnder30:

If you feel you should, explain that you have rent, or a mortgage, or a family. It’s certainly understandable in this economy that people can’t throw money around.

You can offer to support them in other ways, too. If they need a job, perhaps you could look over their resume. If they’re having trouble paying back a student loan, maybe you could help them research info about their options.

Nip Unsolicited Advice In the Bud

Money can be a touchy topic in friendships, especially when there’s a wage gap between friends. For example, if one friend feels like the other isn’t managing money correctly, that friend might feel inclined to give advice. And that can be annoying.

If your friend is giving you unsolicited money advice, Real Simple’s Catherine Newman suggests being direct by politely saying:

Thank you for trying to help me, but I might have given the wrong impression. I’m not actually looking for advice.

She adds that you might also consider how you’re conversing with them. Maybe they’re just trying to connect, because you vent about your financial situation with them quite a bit. People often respond to venting by offering a solution, and they might not realise that you just need to let off some steam.

If You’re the Higher Earner

Maybe your friend’s money situation is so out of control, you feel it’s your duty to help them out. Money writer Janine Eccleston suggests you try not to completely call them out. Instead, discuss a situation related to the one they’re in, but don’t directly point out that they’re wrong or making mistakes, because that can make people defensive.

Can’t Afford an Expensive Wedding? Be Upfront ASAP

A lot of couples go all out for their wedding, which often means the wedding party has to spend a lot, too. Even if you’re not in the wedding party, you might have to fork over some major cash — what if the wedding is in Hawaii and you just can’t swing it?

The best answer is really the most obvious one: just be honest. If you need some sample dialogue, here’s what writer Antonia Massa suggests:

“I know you’re working hard to plan this wedding, and I wish I could be there with you. But this year has been tough for me financially, and I don’t think I can swing this. I hope you’ll understand.”

That said, there are a few things to keep in mind:

• Let them know as soon as possible: It’s tough planning a wedding. If you’re asked to be in the party and you know you can’t pull it off, you should tell the bride or groom as soon as you can, so they can plan accordingly.
• Don’t blame their choices: As Massa points out, you don’t want to say something like, “If you weren’t having the wedding in Aruba, I could go. But unfortunately…”
• Offer something else: If you can’t make it, let them know what you can offer as a friend. Maybe it’s help with planning. Maybe it’s dinner after the honeymoon. Whatever the scenario, this lets them know you still want to celebrate. When I couldn’t make it to a friend’s wedding recently, I offered to help edit her wedding video, for example.

If your friend has specifically asked you to be in the wedding party or attend a bachelor/bachelorette party and you can’t afford it, make sure to let them know how much it means to you that they asked, and again, offer to help celebrate in ways that are more financially realistic for you.

If You’re the Higher Earner

It’s your wedding day, but you want your friends to be a part of it, too. And if a friend earns significantly less than you do, you may want to take that into consideration when budgeting for the day. Beyond that option, event site Gathering Guide suggests offering to buy some stuff yourself.

For example, if it’s your dream to have a bachelorette party in Cabo, and your bridesmaid can’t afford it, consider paying for her flight yourself if you’re not willing to go with a cheaper alternative. The site adds that it’s also courteous to tell people in your wedding party how much they can expect to spend, total, on supplies and activities. And A Practical Wedding suggests offering guests two or three options for hotels (budget, mid-range, or luxury), with prices varying by at least $50.

Money can cause problems in even the tightest of friendships. The good news is: basic communication, openness, and empathy can make all the difference. And in solid friendships, those are skills you learn to develop anyway.