Bad Credit, Bad Choices—Assumptions to Avoid

We’ve talked about the many reasons to stay mum on personal finance. Talking specifics with family and friends can be awkward, especially if one is seemingly better off than others. While this polite silence is usually a good thing, it also leaves a vacuum of questions, doubts and assumptions about the successful ways of friends and acquaintances. The absence of answers can make us feel insecure and even weak, leading to jealousy and poor financial decisions. Learn from the assumptions and rationales listed below. They will help you overcome the green-eyed monster and see things clearly.

“There’s no way she can afford such a grand lifestyle! She must have a lot of credit card debt.” Your coworker couldn’t possibly afford a big house and a new car without some serious help, right? Perhaps, but don’t be too hasty in your judgments. It’s also possible that she:

  • Saved. Plain and simple. A long-funded bank account can go a long way in the purchase of a home or car, reducing the monthly payments to an affordable amount.
  • Received a gift. It’s common for parents to gift their children with down-payment funds for a first home or car. Eliminating the up-front cost is sure to make things easier for your coworker.
  • Shares responsibility. Sharing ownership with a spouse or significant other lessens the burden by at least half, a sum your coworker can easily afford.

“They don’t have kids; of course things are easier for them.” While it’s true that kid costs are expensive, don’t write off your friends’ successes too quickly. In addition to no kids, they may also have:

  • Limited debt. Living without the burden of credit card balances, student loans and other commitments are just a few of the ways your friends may be cashing in on their entire income.
  • An iron-clad budget. You know the phrase, “work hard, play hard,” and the same applies to finances. Sticking to a strict budget is the best way to spend responsibly, save aggressively and yes, celebrate good fortune. Your friends could be reaping the rewards of well-laid plans.
  • “They’re wealthy and probably never shop at discount stores.” Au contraire, my friend. While it’s true that gobs of money and common sense are usually inversely proportional, don’t assume your rich friends aren’t interested in a bargain. Mixing expensive items with affordable ones is an effective way to decorate a home, buy clothing and furnish a working lifestyle. It’s also a good way to cut corners, allowing you to build a large savings account. Don’t be fooled by the opulent look of success—look closely and you’ll see a few discount items.

Whether it’s luck, planning or maxed out credit cards, the best way to compare yourself to a friend is this: don’t. You’ll never find satisfaction in keeping up with others. The bottom line: Leave conjecture where it belongs, far away from your budget. Focus on yourself to find a deeper level of peace.