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Show Me Your Friends

Over the weekend I spent some time at an event with folks much better off then myself or my family. That got me thinking. I hear a lot from personal finance gurus and others that you should be friends with those who are financially better off and learn their behaviors in order to improve your own. I thought a lot about this bit of advice as I conducted small talk at this particular charitable event.

My Friends

On the ride home I thought further about my experience over the years with folks I think of as “Rich”. I’ve been to events where they parallel parked private jets, talked at lengths with celebrities and hundred millionaires, and regularly deal with executives at work that make more in a year then I have made in my career to date. Alternately we have friends that make minimum wage, live off government assistance, and barely make by. So I started to think of these friends in the context of the guru advice.

Friends Making Bad Financial Decisions

The first thing I noted was I’ve seen my share of both rich and poor make bad financial decisions. People I knew as rich that two decades later were in the poor house. Kids with a trust fund who are now rolling in debt. Self made millionaires starting over after a series of poor financial choices. So do as they say may not be the best advice.  Some of the mistakes they’ve made would be a lot harder to recover from at my current stage in life. For example I certainly could not see restarting my financial position from 0 at my age.

I’ve seen similar mistakes from the opposite end of the scale. Living beyond your means. Justifying buying another car, or having another kid when you can’t afford it because it will work out. I’ve heard these words and seen the outcomes. So, I wouldn’t look for advice from them either.

Friends Making Good Financial Decisions

Mind you I’ve also seen the opposite, the poor person and rich person making good decisions that have changed their lives. However, many times these decisions were unique to their situations and not always applicable to my life. Occasionally, I see good decisions and want to follow them, but usually the most advice I find from their good decisions is the guidance that perseverance is the key to success.

Failures As Lessons

This doesn’t mean I can’t learn from either party. What it does mean is that I generally don’t learn from their successes. I tend to learn from their failures as I do from my own. The reality is the real lessons sink in from when they go wrong rather then when they go right. Thinking about loss aversion, that a loss has a bigger impact then a gain on one’s feeling of well being. Even the aspect of time has an impact, but I can never guarantee things will go pooorly later when I see the success now. Simply put, its easier to learn from the failures.

I’ve watched family and friends live on credit cards, so I use credit cards only as cash. I’ve seen others pull out of stocks during a stock market crash, hence I buy and hold. I watched as a friend declared bankruptcy after buying too much house, so we never bought a house we couldn’t pay the mortgage for on one income.

That all being said, going back to those gurus, I don’t choose my friends or associates based on their financial positions or their decisions. I also don’t like to see friends make bad choices. Wherever I can if they ask for it, I try to give them advice, and when they don’t want advice I at least lend an ear. Ultimately your friends are your friends because of your relationship with them. Their financial lives should have nothing to do with it.

Do you have examples of how you have learned from others?  Do you choose friends based on their economic status?


  1. The Green Swan
    The Green Swan February 15, 2017

    No, I have never chosen friends based on their economic status. That has never made sense to me, it is much more with how you connect with people and you can’t force that. I have friends and acquaintances up and down the spectrum and I tend to favor the average Joe’s, down to earth people. Even those who have made it in life can still be down to earth and that’s what I appreciate.

    • February 15, 2017

      I don’t get it either. My mom said to me as a kid, “Show me Your Friends, and I’ll show you the type of person you are”. As I think back she meant it to keep me out of a bad crowd in high school, not in the context of Finance. Still I see others preaching similar lines in the Finance world.

  2. Michael
    Michael February 15, 2017

    There is no “economic status” involved in a true friendship. From a financial perspective, I have friends who are way better off than me and I have friends who are not where I am.

    Economic status has had nothing to do with my friendships.

    Yes, we learn more from our failures than from our successes. You make an excellent point that we should learn not only from our mistakes but from other people’s mistakes as well so we don’t need to learn everything first hand.

  3. Leo T. Ly @
    Leo T. Ly @ February 15, 2017

    Financial position rarely determines if I will befriend a person or not. I am friends with people because I have something in common with them and we share mutual interest and respect. Also, I only talk about finance and give advice if people ask me.

    • February 15, 2017

      Now an interesting counter point, I do sometimes find myself holding back a part of my life from my less well to do friends. At the extremes sometimes I don’t want them to start thinking I’m the “Jones” or am rubbing their faces in my own success.

      • Leo T. Ly @
        Leo T. Ly @ February 16, 2017

        FTF, I think that regardless of the financial situation that your friends are in, they should feel happy for you when you are doing well. Because they are your true friends and they won’t be jealous or resent you because you have earned your way there. My view is that friends should look after one another and we should not judge when there’s no reason to do it. If I have a friend that is interested to learn how I do certain things to be better off, I am more than happy to show him/her the ropes.

 February 16, 2017

          In theory yes, and perhaps my friends don’t come to those conclusions. But I just feel wrong talking about my latest trip to wherever when my friend is wondering how she’ll make the rent and feed her kids for the month. It’s a balancing act for sure.

  4. Mustard Seed Money
    Mustard Seed Money February 15, 2017

    I really like this thought provoking question.

    I don’t choose friends based on their net worth or what their paycheck is. However, if I’m being truthful with myself, most of my friends are neighbors that I live near, people at work or friends from church. I am in a little bit of a bubble as most of the people I spend time with are highly educated and doing relatively well for themselves.

    So while I may not choose them based on their status I don’t exactly go out of my way to befriend people outside my little bubble. Maybe I need to start expanding myself.

    Great post!!!

    • February 16, 2017

      It’s very easy to get caught in that bubble. I work at a tech company and went to an engineering school. So did my wife. As such our newer friends tend to be engineers. As such you do get a lot of bubble think. We have older friends from outside the tech world and are making a concentrated effort to connect with others. Recently we’ve started to employ an option you referenced, a local church community.

  5. Go Finance Yourself!
    Go Finance Yourself! February 15, 2017

    They say you are the average of your five closest friends. I’ve never set out to choose my friends with a conscious set of criteria. But over the years I have limited my time around those who are really negative. Most of my friends are pretty successful in one way or another. I’ve noticed that my closest friends all have traits that I really admire. Be it they’re super confident, great conversationalists, incredibly hard working, etc.

    I would say it’s helpful to seek out very successful people and learn from them. They don’t necessarily have to be your best friends, but the more time you spend with them the more their habits will rub off on you. Everyone has a different definition of success. For me, I could care less about possessions. Unless you paid for everything with cash that you generated, it really doesn’t impress me. People that have advanced quickly in their careers, or built something great from the ground up are examples of who I consider successful and try to learn from.

    • February 16, 2017

      I definitely see value in finding people as mentors to help along your career. As you said some ideas may rub off. But as ou said they might also not be your best friends.

  6. Rich @
    Rich @ February 16, 2017

    This is fascinating and something we were thinking about on our blog as well (especially since we are income inequal ourselves). I have friends ranging from poverty line to multi-millionaire hedge fund types. I think naturally you gravitate toward people of similar incomes because you’re likely to work with many of them (probably the biggest factor) and have shared interests (like the same level of dining / entertainment options). You don’t choose them as much as you share the same environment.

    I would never advocate restricting your life to a bubble, but I do think there are times when it’s wise to avoid negative, destructive groups. I don’t have a close friend who is a chain smoker or compulsive gambler, and that’s a good thing.

    On a related note, this is one reason I want my kids to go to a good college. They will form relationships (possibly lifelong) that will shape how they see themselves fitting into the world and how they view opportunities in life. It’s hard to dream big if you don’t see examples of success around you.

    Great post! –R

    • February 16, 2017

      We’ve actually gone the opposite way. Our oldest goes to a less well to do preschool as we want him to see both ends of he spectrum. We realize our work counterparts and most of our friends that are newer skew to simialar pay scales and backgrounds. Older friends from school age tend to be of the lower end. I suspect as he gets older we will send him to a better school once the level of education becomes more important, but we want him to have friends from other socioeconomic backgrounds.

  7. Rich @
    Rich @ February 17, 2017

    I think we agree for preschool — diversity is best (economic, social, cultural, etc). But during higher ed., I think young adults influence one another when it comes to focus, career goals, and so on. Great discussion though and food for thought.

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