peer pressure

6 Infuriating Ways You're Ruining Someone Else's Credit

Mikey Rox — Tue, 21 Mar 2017 10:00:17 +0000

Your credit score is one of the biggest deciding factors in your financial health. It influences whether you qualify for the best interest rates on mortgages or auto loans, it can impact your insurance rates, and it can even determine whether you land that dream job or not.

Establishing good credit requires managing your credit accounts responsibly. But your own credit score isn't the only one that can suffer the consequences of poor credit management. In the same way money can ruin a friendship, your financial carelessness could ruin someone else's credit. Here's how.

1. Charging up someone else's credit card

Becoming an authorized user on someone else's credit card helps build your own credit history. You'll receive a credit card in your name, and you're allowed to make charges on the account. But even though your name is on the card and the account shows up on your credit report, only the primary account holder receives the statements. This person is ultimately responsible for any purchases you make with the card.

If you're an authorized user, the mature thing to do is pay whatever you charge each month. If you don't or can't pay, this sets in motion a chain of events that could ruin the other person's credit.

Any purchases you charge to the account can raise the primary account holder's balance and increase their credit utilization ratio beyond a healthy range (utilization ratio is the credit card balance compared to the credit limit). Ideally, credit utilization should never exceed 30 percent of a credit limit — the lower, the better. A high utilization ratio can lower credit scores.

In addition, ringing up charges on someone's credit card and not paying what you owe could trigger payment problems. This can happen if the primary user doesn't have enough money for higher minimum payments. If they can't pay the credit card bill within 30 days, the credit card company could report the late payment to the credit bureaus. While a 30-day delinquency won't tank a credit score, if it's longer than that, the damage is more serious — at which point, you'd better run.

2. Defaulting on a co-signed loan

Maybe you're getting a car loan and need a co-signer. If you have no credit or bad credit, a co-signer can help you qualify for financing. But if you don't uphold your end of the bargain by making on-time payments (or if you stop paying altogether), your actions affect both of your scores.

Co-signers become responsible for loan payments when a primary signer can no longer make payments to the lender (which is why I would never, ever cosign for anyone). If you default on a loan and your co-signer can't take over the loan payments, the delinquency appears on both of your credit reports and remains there for up to seven years. (See also: Is It Ever Okay to Cosign a Loan?)

3. Bailing on shared expenses

Skipping out on a shared or joint expense, like a lease or a mortgage, is another way to ruin someone else's credit. If you move out abruptly after getting into a fight with your roommate or partner, and you refuse to cough up your half for joint expenses, the other person must come up with the cash or else risk an eviction, breach of contract lawsuit, or foreclosure. All three scenarios can destroy both of your credit scores.

A similar issue can occur if you bail on a joint utility bill. If the account goes unpaid, the utility company will send the information to a collections agency. Collection accounts remain on credit reports for up to seven years — but your friend's urge to punch you square in the nose will last a lifetime.

4. Pressuring friends to spend money

Financial peer pressure gets many people into trouble. Whether you realize it or not, you could be guilty of driving your friends to spend money they don't have. Of course, everyone is responsible for their own finances. But if you push a "You only live once" attitude on others, or if you constantly entice your friends to spend outside their budgets, they could succumb to the pressure and use credit to finance keeping up with you.

5. Ignoring a parking ticket in a borrowed car

Don't hide or ignore a parking ticket you get in someone else's car. Even if there's no way to identify the actual driver at the time of the violation, the parking ticket is tied to the owner's license plate and they will owe any fines you incur. If the parking ticket goes unpaid, a negative mark can appear on the car owner's credit report.

6. Blowing off library fines

On the off chance you go to the library and check out a book using someone else's library card, return the book on time and pay any late fines you owe. Some cities report these unpaid fines to collection agencies, which can cause a negative mark on the library cardholder's credit report. In all likelihood, it's just a few bucks we're talking about here, which makes the situation particularly annoying.

This article is from Mikey Rox of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

One Simple Thing You Can Do Today to Start Living Frugally

Max Wong — Thu, 19 May 2016 10:30:04 +0000

When my friend John lost his home and all of his belongings in a fire, he lived out of the back of his van to save money while he rebuilt his house. While he pined for his lost possessions, John immediately discovered that the one thing he needed to survive this catastrophe, of all things, was a membership to a 24-hour gym near his work.

At night, John would sleep in the back of his van that he parked, for free, at the gym. His gym membership also provided him with a clean bathroom where he could shower, and a locker where he could store his work clothes. Not only was John able to hide his homelessness for an entire year from his co-workers, he also developed impressive six-pack abs from all the extra time he spent working out.

When I first learned that John was living out of his van, I was initially appalled by his housing situation. I thought he was crazy. I never want my friends to be homeless. But, by the end of the year, I realized that John wasn't homeless — he had just chosen camping over renting. I had an unburned house, but in one year John managed to put more money into his retirement account than I had in a decade! Because his minimalist living situation only gave him the space to store things he really needed for survival, he'd managed to save 90% of his salary!

While I wouldn't wish John's literal trial by fire on my worst enemy, his extraordinary response to financial catastrophe provides a great lesson: Everyone would save a lot more money if we only bought what we needed, instead of buying what we want.

Why Are Definitions Like "Want" and "Need" Important?

Unless you are super-wealthy, separating wants from needs is the key to staying on budget. If you can't tell the difference between the two, then it becomes impossible to prioritize spending.

Pretty much every article ever written about frugal living harps on cutting extraneous expenses like fancy coffee. It's pretty much a known fact to anyone who is looking to cut expenses that fancy coffee, like cable television, is the work of the bad budget devil, while food and lodging are obvious necessities.

The reason why fancy coffee is a staple concept of personal finance articles is because it's so clearly a luxury item, even to someone like me who requires caffeine to open her eyes in the morning. The peril of buying fancy coffee is easy to explain and to understand. But, there are so many things that aren't so cut and dried.

For example, I need to have access to email for my Wise Bread job. I work remotely. I have met exactly one other Wise Bread co-worker, in person, exactly once in the five years that I have been an employee. However, I communicate almost daily with my editors via email. If I own a laptop, is a smart phone a need or a want?

What Is a Need?

A need is something that is critical to survival. You know, the basics.

Food

Everyone needs to eat, but even food can be considered a want. Because he was using his car as his living space, John's big expense for the year was food. He stored breakfast and lunch ingredients in his office refrigerator, but went out to eat almost every night. Had he wanted to save even more money, he could have lived off simple and cheap meals that met his basic nutritional needs. Restaurant food for him wasn't a need, but the one luxury he gave himself that year. After all, even his least judgmental friends did not want to go back to his van for drinks.

Clean Water

John had free tap water both at the gym and the office for drinking and cooking. He was able to shower at the gym any time he wanted, and didn't have the issue that most homeless people have — no easy toilet access.

Shelter

In John's case, shelter was a not a house, but rather his car. Shelter is, at its simplest, a safe space to sleep and store your things.

Appropriate Clothing

If I lived in Maine I would need warm boots to protect my feet against the winter cold. (Warm is the operative word here. Appropriate doesn't necessarily mean cute.)

Health Care and Hygiene

If you don't have access to medical care, your life can be uncomfortable and short. If you don't have basic hygiene tools like clean water, you are pretty much guaranteed to be sick. If you don't wear necessary safety gear at work, you are an accident victim ready to happen.

A Job

Without a livelihood, it is impossible to secure the other necessities of life.

What Is a Must-Have?

Elizabeth Warren (yes, that Elizabeth Warren) defines expenses that you don't need but cannot eliminate from your budget as "Must-Haves." For example, John's "Must-Have" was his gym membership. Without the gym membership, he would not have been able to sleep in the safety of the parking lot or use the locker room showers.

While a car isn't a need, many people who live in areas without public transportation "Must-Have" a car to get to work. They also "Must-Have" gasoline and insurance to run the car.

Most jobs require a preparatory education. Since none of us come out of the womb with job skills, we "Must-Have" schooling.

While I "Must-Have" one nice suit to wear to business meetings, unless I am interviewing for the job as Fashion Editor at Vogue Magazine, a black Chanel jacket is not a "Must-Have," even though I am 100% sure that owning one would make me a better person.

What Is a Want?

A want is any other thing you can think of buying. Literally. Any. Other. Thing.

If you really want to start living frugally, why stop at buying fancy coffee and cable television when you can stop buying almost everything you don't need and save loads of cash?

The Things We Can't Live Without: Peer Pressure

This Pew Research Center survey is 10 years old, but over time its results have only become more topical. In brief, in 2006 researchers asked people what items were considered a luxury and what items were a necessity, and then compared these responses to a similar 1996 survey. While most people now consider cell phones to be an absolute necessity, no one considered polling people on their thoughts about cell phones in 1996 because they were such a rarity. Only 49% of people surveyed in 2006 thought that a cell phone was a necessity.

This growing belief that the cell phone is a necessity is not due to superior technology, but because cell phone ownership is now the norm. Today, 64% of American adults not only own a cell phone, they own a smartphone. In 1996, no one thought of a cell phone as anything but an expensive item for the Gordon Geckos of the world.

What these surveys show is what people consider a necessity depends on what is normal to their peer group. It's not what you own; it's what you own in comparison to others. This tyranny of sameness tracks with many financial studies about the relationship between happiness and income. According to a survey by the Harvard Public School of Health, more than 50% of respondents said that they would rather make twice as much as their colleagues, even if it cut their actual income and purchasing power in half!

How to Budget Based on Needs Instead of Wants

Before you can jump-start your new frugal-er life, you need to figure out where you are financially right now. If you are one of the 40% of Americans who don't have a budget, please make one. It's easy.

With budget in hand, categorize each of your expenses as a Need, Must-Have, or Want.

Your Wants Are Your Wish List

Rename your Want category: My Wish List. (You already know that anything on this list is not vital to your survival, so you might as well be honest with yourself). Put your wish list aside for later inspection. No item you want should be a financial priority.

Next Are Needs

Next, look at your Need category. Here's where you need to start getting brain-stormy. (If you are like me, and love to cheat on your budget, then you might want to enlist an honest friend to help you look at each item with a critical, clear eye). Look at each item in your Need category one by one. For example, you need shelter, but do you really need such a big house? Could you save money by moving into a smaller space? Alternately, if you can't move, can you save money by splitting costs with a roommate or renting out part of your house as an Airbnb?

Do you even need a house? No, you don't have to live out of your car like John, but if you work remotely and love to travel, have you considered house sitting or sofa surfing for a fixed amount of time to save on lodging? I should note that John didn't live out of his car forever — just until his house was rebuilt. (He also spent many nights sleeping over at his girlfriend's house and house sitting for friends). Ask yourself if you actually have a surplus of needed things that you can convert into savings or even earnings. For example, can you harvest rainwater to irrigate your yard instead of turning on the hose? Do you really need to eat meat every day, or could you save on food by becoming a part time vegetarian?

Finally, Define Your Must-Haves

Now that you have analyzed your Needs for possible wasted opportunities to save, turn your gimlet eye on your Must-Haves list. If you change some of your Needs, then that will impact your Must-Haves. For example, if you move closer to work, you might be able to bike to work instead of using a car. You no longer Must-Have a car. If you cannot move closer to work and are stuck with a long commute, can you find someone to rideshare with you and help you pay for gas? Most importantly, are some of your Must-Haves really Wants in disguise? Is your truck necessary to your job, or can you downsize to a more gas-efficient car?

Once you have combed through your Needs and Must-Haves lists, calculate your savings. Ta-da! Check out those financial opportunities you could take! You are a budget-crunching genius.

Only when you have managed to wring savings out of your Needs and Must-Haves lists and have some extra money to spend on luxuries, should you look at your Wish List. Prioritize this list according to desire, as you will not be able to afford everything. The things that give you the most sustained happiness should get priority. For example, I love to travel so much that I am willing to forgo just about anything else on my Wish List in order to free up the money for the next trip. I always ask myself: "How much longer will it take for me to afford my next trip if I buy this other thing now?"

Keep Your Want Money Separate From Your Need Money

Just like it's a big accounting no-no to mix your business and personal spending in the same account, it is much easier to screw up your new frugal budget if you keep all your money in the same place. Many banks offer a free savings account when you open a checking account with them. This savings account is an excellent place to park your Wants money. (An even better place would be an investment account that gives a better return, but that's another article).

Since I use the envelope system to manage my money, it's easy to keep my salary out of my wallet, and only purchase what I really need. If you don't have experience with zero-based budgeting, this nifty trick might help you wrap your mind around the concept.

A Neat Side Effect to Defining Wants and Needs: Less Clutter

John's year at the gym taught him an important lesson: "I learned that I actually need very little to have a happy life. In fact, when I finally had the chance to replace the things I'd lost in the fire, I discovered I didn't want most of them."

I am currently trying to downsize my personal belongings to 1000 things. The question I ask myself to make this task easy is: "If my house burned down, would I spend money to replace this item?" If the answer is no, then I know that I don't need that item!

How do you define wants and needs? Has need-based budgeting improved your life or do you hate it with every fiber of your luxury-loving being? Explain yourself in the comments section.

This article is from Max Wong of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

How to Keep Peer Pressure From Destroying Your Finances

Mikey Rox — Thu, 28 Jan 2016 16:01:04 +0000

No matter your confidence level, you probably don't want to be known as the poor one in your group of friends. When they're going out to dinner and planning vacations together, it can be hard to turn down invitations or resist pressure to join in on the fun.

Financial peer pressure is a real problem that can affect people of all ages. According to a study conducted by the American Institute of CPAs, about "78% of young adults look at the financial habits of their friends to determine their own habits." Another 66% admitted that they strived to keep up with their peers in terms of living conditions, and two-thirds of consumers feel some level of financial peer pressure.

If you don't think friends influence your spending habits, consider this: Have you ever charged something you couldn't afford to a credit card to keep up appearances? Have you ever spent outside your budget so you wouldn't feel left out? Most of us have been in these types of situations. Luckily, we also grow and learn how to make better choices with our money, and one of the best decisions you can make is learning how not to give in to financial peer pressure.

1. Shop Alone

To resist financial peer pressure, you have to know what you can handle. You can't control what your friends do or buy, but you can control who you shop with. If hitting the mall with friends results in you burning through more cash than you have, you need to shop alone.

Your friends may not have ill intentions, but if they see you drooling over an item, they could unknowingly put pressure on you to purchase something you can't afford. You have to remember one important fact: You're the one who has to deal with the repercussions of a purchase. Your friends aren't getting the credit card statement in the mail; you are. Likewise, they're not the ones who'll worry about making ends meet if you spend outside your budget. Learn how to become your own shopping buddy.

Personally, I only shop alone, and I love it. I'm not tryin' to wait for you to try on six different outfits just to pick the first one you had on. No, thank you. I'll meet you back in the food court in an hour.

2. Don't Be Ashamed of Your Limitations

The fact that you have some financial limitations doesn't make you a loser or mean you're inferior to anyone. Maybe you have more expenses or responsibilities than your friends. Some of your friends might be single with no kids, have roommates, or live with their folks, whereas you're the breadwinner of your household. Everyone has unique circumstances. So if you have to pass on a costly night out or a fancy excursion, it's okay.

3. Don't Be Fooled by Social Media

Even if your friends seem to have it together financially, it could very well all be an act. With that said, stop coveting the lifestyles you see on Facebook or Tumblr. Remember, most people don't use social media to broadcast their problems. What they will do, however, is showcase the good in their lives, such as vacations, new cars, new homes, and other achievements. There isn't anything wrong with people sharing good or exciting news — just realize that what you see online isn't always the truth, and it definitely shouldn't be the standard you live by. Some of the people you envy are up to their eyeballs in debt — all because they're trying to portray a certain lifestyle. (See also: 10 Things to Stop Doing on Social Media by 30)

4. Don't Forget Your Goals

Adopting a frugal mindset is one of the best ways to reach your goals, such as saving up to buy a house or finally taking a European vacation. This involves pinching your pennies and making sacrifices for the betterment of your personal money. But you won't reach these goals if you're giving into financial peer pressure. The next time a friend ups the pressure or tries to make you feel bad for not spending money, think about your goals and decide whether saving face is worth derailing your plans.

5. Don't Let Braggarts Get in Your Head

Some people will brag about anything, and you might feel tempted to outshine them — but you shouldn't do this at the expense of your finances. The braggart is the one with the problem, not you. This person wants to stir competition and outdo his friends, family, coworkers, neighbors, etc. You have a choice. You can either ignore this person (at which point he'll take his annoying self elsewhere), or you can fall for the bait and get trapped in a game of one-up. Just know that in this game, there are no winners. You might come out on top, but it'll cost you.

Have you let financial peer pressure get the best of you? How have you dealt with it? Let's discuss in the comments below.

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This article is from Mikey Rox of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

10 Social Blunders to Stop Making by 30

Mikey Rox — Wed, 30 Sep 2015 17:00:43 +0000

There are things we get away with in our 20s — like dancing on bar tops and bingeing on 4:00 a.m. pizza (or maybe that was just me) — that just aren't acceptable in our 30s. What are they? Take a look at these 10 social mistakes to stop making by age 30. Leave some of your own suggestions in the comments below!

1. Engaging in Petty Arguments With Friends and Family

Bottom line — you're grown, and under no circumstance should you engage in petty arguments with your friends or family. You're better than that. Stay above that fray, and don't let negativity drag you down. If need be, eliminate people who aren't bringing out the best in you.

2. Dating (and Sleeping With) Tons of People

While exploring relationships, dating, and hooking up frequently in your 20s is acceptable (and necessary, in my opinion, as long as it's done safely), it's not a good look in your 30s. That's not to say that you have to be settled down — that's your prerogative — but you should at least be slowed down, lest you want to earn a reputation that's hard to live down and quite unbecoming of a person your age.

Slowly back away from the Tinder and nobody will get hurt.

3. Making Bad Impulse Decisions

Remember those baller weekends when you'd go out with your buddies, drop a few Benjies on booze and other nighttime fun, and wake up 12 hours later just in time to rinse and repeat? Yeeeah. Those days are over, pal. But not just because at age 30 you should be more mature and less apt to engage in such activities. Rather, because when you're in your 30s, you've established a professional and hopefully successful life. You've got much more to lose by making stupid decisions.

4. Publishing Detrimental Posts to Social Media

I know you've heard this one before — how under no circumstances you should be posting drunk pics or publishing offensive posts to social media — yet so many people still do it, much to their future selves' dismay. This kind of social media activity isn't just immature — it can make you look unstable, and subsequently unhireable, if you're not careful.

Jobvite recently conducted a study and found that 93% percent of recruiters check the social media profiles of prospective hires. It goes without saying that employees should be careful what they post to their social networks — especially when it comes to photos and comments that could serve as a red flag to potential employers.

5. Letting Your Parents Pay for Dinner

Mom and Dad picked up the tab for 18 years, bought your groceries and took you to dinner frequently during college, and likely gave a helping hand here and there a few years post-college too. Now it's time to give thanks — with your wallet.

6. Being Systematically Rude and Ill-Mannered

It's not hard being nice or polite, yet a decent portion of the population can't seem to master those skills. Stay ahead of the class by saying please and thank you, holding the door open for strangers, showing up to parties with a gift for the host, sending a note of thanks for a gift you've received, and otherwise greeting people with a smile to acknowledge that they exist. Because it's, like, literally the least we can do.

7. Living at Home With Mom and Dad

Okay, so you needed a little more time out of college to get on your feet. That's acceptable. What's not acceptable is living in your parents' house in your 30s. That's not a result of circumstance, like when you couldn't find a job because you didn't have enough experience. It's a result of laziness at this age, and if you were my kid you'd be homeless.

8. Asking Someone You Just Met to Keep Repeating Their Name

Admittedly this is something I need to teach myself. Even when I've asked the person their name twice, it's still hard for me to remember. Consider me a work in progress.

One tactic I try to use is saying the person's name out loud several times to drill it into my brain. Works most of the time. When I don't have a glass of wine in my hand.

9. Forgetting to Follow-Up

An extension of adopting a generally polite and mannered demeanor, extending your appreciation post-event is important. More than anything else, it shows that you care and that you're considerate, and in many circumstances that will make you a standout.

10. Submitting to Peer Pressure and Pack Mentality

Given our carefree and often reckless attitudes in our 20s, it's easy to give into peer pressure — especially if you're trying to fit into a certain group — and subscribe to a pack mentality, which for many of us was established in high school and college as a result of athletics and other extracurriculars. But in your 30s, you really ought to be your own person, free thinking and independent. It doesn't mean you have to abandon your friends altogether, but you certainly shouldn't be reliant on them so much socially that you can't do anything without them.

"Starting in early childhood and continuing throughout the lifespan, we, as humans, are almost programmed to look to others for an identity or at least some ideas on how to interact with and function in the world," says child and adolescent therapist Támara Hill. "Sadly, many 20-somethings struggle with identity and often look to other youths for 'inspiration' on how to be."

Studies show, however, that by the time we adults reach age 30, we should have developed some idea of who we are, how we want to present ourselves to the world, and what goals we would like to achieve.

"Research suggests that the adult brain reaches full development by the age of 25," Hill continues. "It is more likely that by age 25, young adults are more capable of approaching the world from a more adult perspective. Our prefrontal cortex — the area of the brain that controls impulses, decision making, personality, planning, and a host of other significant skills and characteristics — is more fully developed by age 25. By 30, adults should be more capable of separating from the 'pack' and creating their own identity and life goals."

What other social mistakes do we need to stop making by age 30?

This article is from Mikey Rox of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Lifestyle Inflation: The Ultimate Financial Trap

Tara Struyk — Thu, 20 Jun 2013 10:36:30 +0000

Do you remember the first real paycheck you ever got? Not a pouring coffee part-time kind of paycheck, but one from a real, full-time-with-benefits, honest-to-goodness job? I know I remember mine. And while that salary would not have impressed most people, it sure impressed me. Suddenly, I was making more in two weeks than I'd scraped by on over the course of two months while in university. In other words, I was rich! (See also: Is Peer Pressure Keeping You Poor?)

So, I did what any highly educated, smarty-pants college grad would do — I spent every cent on new clothes. And shoes. And probably some other stuff I can't remember now. After all, in two weeks, my job would just give me more!

It wasn't long before I'd accumulated a lot of nice clothes and other things I hadn't even really thought of buying before. But here's the thing. Although I was making a lot more money, I still rarely had two quarters to rub together at the end of the month, just like in college. Only this time it wasn't so much my lack of income that was the problem, it was me.

Lifestyle Inflation

It's called lifestyle inflation, and it's what happens when you get a raise or some other financial boost that should put you ahead, but instead often leaves you in exactly the same financial position.

Once I could afford something better, all the trappings of my former lifestyle suddenly looked like a dingy, old version of me. Soon, I was shedding versions like a snake and its skin, trying to slither away from the discards as quickly as possible.

Caught on the Hedonic Treadmill

What I didn't realize is that while you may be able to buy a better lifestyle, it never really feels like a better life. Some people call the act of pursuing that lifestyle the "hedonic treadmill;" you can run as fast and as hard as you like, but you won't actually get anywhere. And if you really push it, chances are you'll fly right off and land face first in your own little slice of financial hell.

Fortunately, my job gave me the opportunity to learn about personal finance — and the skills to assess what I was doing with my money. I have, of course, enjoyed some lifestyle inflation since my college days; I have a car, I eat much less canned food, and my apartment is far from crummy (look mom, no ants!). But it hasn't inflated so much that I'm not benefiting from my bigger income. As a result, I'm able to save money for retirement every month, make extra payments on my mortgage, and stay out of debt.

Want to avoid falling prey to lifestyle inflation? Well, you're in luck, because it's actually as easy as shifting your perspective.

Remember What Makes You Happy

Sometimes a boost in income is almost like a switch in the brain. Suddenly, the car you drove so proudly looks like an old tin rattle bucket, and the $1 burritos you shared with friends are thrown aside for fancier fare. The thing is, when you think back to the days in your life when you were happiest or had the most fun, those memories are probably completely unrelated to what you were wearing, driving, or how much money you were spending. Chances are, they probably had more to do with where you were in life and who you were with.

Tight Budgets and High Adventure Go Hand in Hand

I once stayed in a filthy motel that was only sort of close to the beach. It was supposed to look like a cute Mexican inn, but the doors were only sheets of plywood with peeling red paint (seriously), and hospitality was definitely less than quaint — the inn keeper banged on the door at 9 a.m. to ensure we'd be out by checkout time. Oh, and did I mention that the front desk also served as a bar, and that both were manned by a one-armed, tie-dye clad man with a glass eye? You can't make that kind of stuff up. If my friends and I had been able to afford a hotel on the beach, one with real doorknobs and soft, soap-scented sheets, well, I wouldn't have this story to tell.

Financial constraints have their advantages. Not only do they force you to be more resourceful, but when you run out of options, you're likely to find yourself in some pretty crazy adventures. I can't say I'd go back to that motel, but I have to admit that most of the nice hotels I've stayed in haven't been nearly as memorable.

Take It Away Before You Can Spend It

It always amazes me when people can live happily enough on their salaries and then still find themselves unable to save more money when they get a raise. If they didn't have that money to spend before, why do they seem to need it so badly as soon as it hits their bottom line? The answer is, they don't, just like I didn't really need all that money from my first job — at least not for spending.

Fortunately, I got into the habit of taking some of it out of my checking account on payday and moving it to my savings account, or my retirement plan or, later, my mortgage. You can do the same. You just have to decide to do it. And if you want to indulge in a little of your newfound wealth money, go ahead and do it. Just be sure to split the difference to save for some bigger, more important financial goals.

Build Some Balance Into Your Budget

Avoiding lifestyle creep doesn't mean living your life as a crusty, closed-fisted money hoarder. After all, you probably work pretty hard for every pay raise you get, and you deserve to enjoy that extra money. So please, spend some of it on something awesome. Just not all of it. After all, if making more money just means continuing to live paycheck to paycheck, running up debt, and accumulating more stuff, you're really just working harder and harder without actually living better — or getting ahead financially. And that's just sad.

Feel Richer, Be Richer

Lifestyle inflation is so sneaky that it can creep up on you almost without you noticing. Suddenly, you're driving a nicer car, or even just moving up to brand-name cereal. There's nothing wrong with wanting to enjoy money, but I think the key is to actually enjoy it. Otherwise you can make all kinds of money without feeling the least bit richer for it.

Have you ever succumbed to lifestyle inflation? How did you walk yourself back to more sensible income and spending habits?

This article is from Tara Struyk of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

The Five Stages of Not Shopping

Max Wong — Tue, 02 Apr 2013 10:00:30 +0000

On January 6, 2007 I joined The Compact, an environmental group whose members agree to “buy nothing new for one calendar year.” (See also: The Compact: Mindfulness and Frugality Through Buying Used)

The goal of The Compact is to take as few virgin resources out of the planet as possible. I joined The Compact out of green guilt — in 2006 I had traveled to Italy three times and Spain once. Although I had enjoyed a spectacular year of travel, my jet-setting lifestyle came at a huge environmental cost. Back home, I decided I had to go beyond recycling and step away from consumer culture to shrink my carbon footprint. (Also, I like to test myself, but that’s another story).

Although The Compact has a lot of exemptions — the purchase of food, safety items, services, downloadable content — it is still a challenge to buy mainly used goods. (Where do you find used shoe polish)? It demands patience and creativity, which is why I am still a member of the compact six years later. The Compact makes every day into an adventure. It’s super fun, and I have learned so much about myself because of it.

When I started The Compact in 2007, I anticipated that I would be frustrated, annoyed, and occasionally inconvenienced by limiting myself to only buying used goods. So I was surprised to note that the biggest obstacle to compacting was not my own impatience, but other people’s emotions.

Because of The Compact, I now have real sympathy for vegetarians. Even people who stop eating meat for health or budget reasons get hostile pushback from certain meat eaters who are sure that all vegetarians are smug, leather-shoe-wearing hypocrites. I don’t know why certain people internalize how I personally choose to conserve resources, but they do.

The second I decided to stop buying new, my shopping habits suddenly became a Kübler-Ross model experiment (think "Five Stages of Grief") with my friends as research subjects.

And so, without further introduction, here are the Five Stages of Not Shopping, and how I dealt with each one.

Denial

Initially, some of my friends refused to acknowledge my commitment to not buying new and gave me Target gift cards for my birthday and holiday gifts. They preferred to believe that I was just poor, because who would voluntarily decide to buy less stuff?

How to deal: I thanked them sincerely and listed all the groceries (a Compact exemption) I’d bought at Target with their gifts. While buying food with the gift cards just solidified their notion that I was simplifying out of poverty, I saw no upshot in complaining about getting presents. Sometimes it’s the thought that counts, even if it’s the wrong thought.

Anger

If I had a nickel for the number of times someone has snorted in annoyance at my reusable grocery bags, even though it takes no longer to bag my groceries in cloth than it does in plastic, I would have tens of dollars.

How to deal: Sometimes, when I am feeling mean, I offer the snorter a tissue for their “allergies,” but generally I just ignore hostility from strangers. What’s the point in getting into an argument with someone too dumb to realize that most big grocery store chains in Southern California offer a five cent credit for every reusable bag? In the twenty years I’ve lived in Los Angeles, I have saved over $2,000 by bringing my own bags.

Bargaining

This conversation usually begins with other people telling me that I am depriving myself because I won’t buy a Starbucks coffee or I am somehow living a less full life because I won’t spend money on overpriced snacks from the vending machine at the office.

How to deal: I explain to people that every dollar I save in Los Angeles is a dollar I get to spend in Italy. I don’t remember every $1 Coca-Cola I drank in 2010, but I remember every cappuccino I drank in Italy during the three months I lived there. Most people will stop hounding you into buying stuff you don’t need if they know you have a goal you are trying to meet.

Depression

That pouty expression my friends make when I ask the waiter to box up my leftovers at the end of a meal gets so tired.

How to deal: Up the ante. Why put my leftovers into a takeout container that will be garbage the second I bring it into my house? Instead of adding more trash to the planet, I bring my own collapsible Tupperware take-out containers with me when I eat out. I can’t control my friends’ irrational dislike of eating delicious restaurant food as a midnight snack, but I can control how much waste my eating habits generate.

Acceptance

My friend Andy recently busted his girlfriend at a dinner party at their home. Apparently she only uses cloth napkins when I come over to eat because she fears that I will spend the entire meal silently judging her use of disposable goods.

Sometimes peer pressure is a good thing. The longer the post-recession almost-recession drags on, the more friends ask me for thrifty, environmental advice that would have gone ignored in better financial times.

How to deal: (Laugh hysterically). Be gracious and enjoy every teachable moment. Being a member of The Compact has been liberating. Because I now question every purchase, I have more money in the bank and fewer things to dust. Why wouldn’t I want to share the magic of Not Shopping with everyone I care about?

Have you faced criticism for saving resources? How did you deal?

This article is from Max Wong of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Is Peer Pressure Keeping You Poor?

Max Wong — Wed, 13 Feb 2013 11:36:33 +0000

Like every other Wise Bread writer, I hate debt. Although my debt doesn’t keep me awake at night, it is one of the things I think about while brushing my teeth every morning. “What will I do today (brush-brush) that will help me pay down (brush) my home mortgage ahead of (brush) schedule?”

The idea that “many people would rather struggle to pay off a large credit card bill than utter the phrase 'I can’t afford it,'” tests the limits of my financial imagination like a velociraptor tests an electric fence. It’s so painful, yet I can’t stop thinking about it. Spending money that you don’t have is a type of self-harm that often goes undetected and can have lifelong consequences. (See also: The Enemies of Frugality)

The Positive Power of "I Can't Afford That"

I am grateful that I figured out early on that people who judged me for saying “I can’t afford that” were the same people who were secretly living with crushing amounts of credit debt and didn’t own anything. I think most emotionally mature people realize that friends and family who make you feel bad about how much money you have are not nice people, but even armed with that knowledge, there is still so much peer pressure to spend.

One of the hardest things about not having financial parity with the people around you is turning down invitations to events that are out of your budget range. Being in debt can be isolating. In addition to missing out on weddings, nights on the town, or even schooling, friends who get turned down repeatedly might take your reluctance to spend money you don’t have as a personal rejection.

So, how do you talk about debt without losing all your friends? There must be at least a dozen ways that people manage their public spending vs. private debt, but I have four strategies that have worked for me personally.

Be Your Own Financial Cruise Director

Your debt is not your friends' problem to solve.

While your truly good friends will always listen to you complain about your financial woes, it’s not really up to them to make your life without money work. If you want to spend time with people you care about, suggest alternate, inexpensive ways of spending time with them:

If you can’t afford to go to a $10 gym class, suggest a morning hike or a run through the park to your sporty friends.
If you can’t afford dinner, ask to meet with your friends after dinner for a drink instead.

When I was really poor, I became the master social planner for everyone in my life because I would comb the weekly alternative newspaper for free concerts, book readings, art openings, and other events that I could invite my friends to.

Even if you live in a tiny town with no nightlife, there are plenty of free ways to spend time with your friends. For example, offer to go with them when they have to run all their boring errands. Or, hang out with them at school events for their kids. Do yourselves both a favor and schedule a cleaning day where you switch off helping each other clean your houses. Chores go faster when you have a friend to talk to.

Be Honest

First, be honest with yourself. Use a debt calculator to figure out how long it will take you to pay off your debt with what you are currently paying.

Once you’ve established your baseline, experiment with the calculator to see how fast you can pay down your debt if you just pay just 5% more than you are currently spending.

Once you know how little money it takes to cut YEARS off your debt, try to figure out what amount of money you can cut out of your budget and throw at your debt.

Do you have good public transportation in your town? Would it be worth it to stop driving your car for a year if it meant you could pay down a credit card debt in the same amount of time?
Would people at your office still be your friends if you stopped going on Starbucks runs with them every day and instead baked a homemade cake once a week to share with them in the lunch room? Would they still be your friends if you just escorted them to Starbucks and didn’t order anything yourself?

Second, be honest with your friends. Put on your adult pants and just be out about your budget parameters.

The economy is crappy, so most people are actually in the same boat. In addition to saving yourself from friendship-ending misunderstandings, being honest about your finances can actually lead to finding extra work. Most people do live lives of quiet desperation, and those people are not the ones who get recommended for jobs. I am very loud about my life of desperation, and consequently I’ve always had odd jobs come my way. No reasonable person can fault you for wanting to sock away more cash during a recession, and you might as well reap the rewards of talking about yourself.

Decide What You Really Want

Nothing is more depressing than not being able to afford something you really want because all your money is going to pay down credit debt. That said, if you earned an extra $100 per month this year that didn’t have to go for bills, what would you spend it on?

When I was still in college, I decided that I wanted to buy a house by the time I turned 30. Every time someone pressured me to spend money I didn’t have I would say, “I’m sorry, I can’t afford that because I’m saving up to buy a house.” That really shut people up because people can understand the desire and expense of homeownership. Also, by having that goal, it was so much easier to not feel deprived because I would just ask myself, “Do I want this cocktail, pair of shoes, theater ticket, whatever more than I want a house?”

So what do you really want? The kids in private school? A vacation? The ability to eat sushi three times a week? People are a helper species. If you commit to a personal goal, even random strangers will root for you to achieve it.

Find People Who Will Reinforce Good Spending Habits

Ultimately, how you spend money is your responsibility. Are the people who are pressuring you to spend money going to apply the same amount of attention to helping you get out of debt? If the answer is no, find some people who share your financial needs and desire to get out of debt.

A recent Harvard Business School field study tested the effects of self-help peer groups on micro-entrepreneurs in Chile. The paper’s authors discovered that participating in self-help style groups helped the micro-entrepreneurs almost double their savings.

The Harvard researchers also discovered that similar effects can be achieved by holding people accountable through feedback like text messaging. Luckily, you don’t have to be a Chilean micro-entrepreneur to get online feedback. ING’s CompareMe tool allows people to plug in their age, income, and hobbies and see how their retirement savings and their debt stack up.

Do you work better with a buddy? Most people do. If you can’t find a friend or family member who wants to commit to a savings challenge with you, recruit someone who lives near you. Likely candidates include anyone who attends a Dave Ramsey seminar or any adult education class on personal finances or Simple Living. Alternately, you could always start your own savings group online, where you can get advice and support from people who are actively looking to spend less and save more.

Do you feel peer pressure to spend money you don’t have? What do you think about it? What do you do about it?

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This article is from Max Wong of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

5 Ways to Dodge Peer Pressure to Spend

Lana Goodrich — Mon, 31 Dec 2007 15:31:26 +0000

Your friends have a direct influence on your money. What do you do when you feel pressure from your friends to spend money you don't have? (See also: Should You Talk to Friends About Money?)

1. Play host.

Have a potluck or dinner party at your house. Invite your friends over for a cheesy movie marathon and spend the night mocking them. Host a BYOB beer or wine-tasting party. Everyone gets to eat, drink, and be merry for cheap, and unlike a bar, you'll actually be able to hear the conversation. You look like the gracious host, and no one needs to know you're trying to save money.

2. Spend more time around your creative friends.

When you hang out with friends who have the newest high-tech gadgets or expensive new cars, you're bound to feel inferior. Spend more time with your friends who think for themselves. Maybe you've got a friend whose passion is old silent movies or a friend who collects something obscure. You'll get to know your friend better and being around someone who doesn't follow the crowd will force you to think about what's important to you. And you'll probably be inspired to follow your own passions.

3. Blame it on your values.

It's hard to suck up your pride and say to your friends, "I can't go out because I don't have the money." So fib a little. Tell them you've committed to spending more special time with your partner. Tell them you're cutting back on the bar to train for a race. Tell them you've joined a book group and have reading to do. Sometimes replacing one excuse (broke) with another (working on physical fitness) is easier because you're not as emotionally tied to it. And as long as you're telling all your friends about your newfound virtue, you might as well join that book club for real.

4. Change the subject.

Say you're hanging out with a friend who wants to spend the day shopping for clothes. You're still paying the bills from the last time you went shopping. What do you do? Trick her into something else.

"The mall's going to be packed on a day like today. You know you never showed me those pictures from your vacation in Greece?"

Or, "You know, I have a problem and I'm so distraught. Do you think you could give me some advice?"

It happens all the time — you and your friend have plans to do one thing, but throughout the day you get sidetracked and end up doing something else completely. But this time, do it deliberately.

5. Find new friends.

Don't get rid of your old friends. Just add new ones to the mix — preferably ones who share your financial goals and values. If that's a stretch, at least find friends who can help you focus on something other than spending. When you're getting to know a new friend, it's the conversation that counts — not what you do together.

How do you manage peer pressure to spend when you're around friends who don't share your views on money?

This article is from Lana Goodrich of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread: