My fiancé and I have one set of “couple” friends who are a lot like us in many ways. We’re all around the same age, and we’re all products of similar schools and universities. We live just a few blocks away from each other in San Francisco, and we’re all interested in travel, food, music, and nightlife.
There’s one major way, though, in which we differ. Our friends are rich, and we’re not. We rent an apartment in a shabby turn-of-the-twentieth-century building, while they own a spacious new condo. They think nothing of dropping $250 on a weekend dinner, while we stick mainly to tacos and Chinese food. We may live in the same city as our friends, but we occupy completely different worlds.
The Money Melting Pot
There’s nothing that can come between friends as easily as money can, and in the past few decades, growing income disparities and greater social mobility have begun to make money an increasingly contentious issue in more and more friendships.
A generation or two ago, people were friends with those they’d grown up or attended school with, or people from their workplace or neighborhood, and every group was composed of people at roughly the same socioeconomic level. Wealthy patrician families sent their children to Ivy League universities to become lawyers and doctors, while the children of blue-collar families learned a trade and remained in the lower middle class. Nowadays, a plumber’s son can go to Yale just as easily as the son of a congressman can, leading to peer groups that blur class and socioeconomic lines.
The economic realities of career decisions can also have a serious effect on friendship; friends who started off together at the same economic level suddenly develop tension once one is a lawyer and the other is a teacher. My fiancé and I work in creative industries, while our wealthy friends became white-collar professionals. These divergent paths become more complicated by the fact that incomes themselves have diverged, too. According to data compiled by the New York Times, the starting salary for a university professor in 1985 was about $24,500, while a first-year associate at a large law firm earned about $53,000. Even though that disparity may seem large, it’s nothing when compared with the gap between today’s salaries: now, that university instructor would start out earning $35,300, and the lawyer would earn $170,000, plus a bonus. Growth in white-collar professions like banking, consulting, management, and law have led to a generation in which some people earn supersized salaries while their peers who are teachers, nurses, graphic designers, editors, and academics still have low wages.
Some economic research has shown that being surrounded by wealth can have detrimental effects on a person’s health and happiness. A 2005 study at Penn State University found that people were unhappiest when they were living in proximity to wealth. People of modest means who lived in modest communities were happy, but people with the same income who lived in areas where they were surrounded by richer people were markedly less so. When people develop their sense of self-worth relative to their friends or neighbors, that tendency can hurt their self-image and lead them to spend more to try to fit in and assuage their insecurity.
It’s difficult not to feel jealous about what other people have, and it becomes very tempting to live beyond your means to replicate the lifestyle your neighbors are living. When more well-off friends suggest a pricey dinner or a day of shopping, it’s hard not to indulge, in an attempt to fit in and grasp a little bit of the luxurious life for yourself. But most of these purchases end up on credit cards, and years of extravagant spending can spell financial ruin.
Letting Go of the Joneses
If you feel surrounded by friends who earn more money than you do, there are easy ways to mitigate their influence over your own finances and rein in your spending:
