How To Deal With Money Between Friends

When You’re Splitting The Bill

Few situations give us social anxiety as much as splitting a restaurant bill with friends. If you hang out with a group of like-minded people who are happy to split the bill in a way that works easily for all of you, then hold on tight and never let go, because there’s nothing worse than when that iPhone calculator rears its ugly head for the fifth time in one sitting. But that’s not the only scenario that fills us with dread – it’s also the friend who says “I’ll get this one!”, leading to the fear that the next place you visit is going to be twice as expensive and – gulp – on you. The latter is actually a pretty common fear – a 2018 study has revealed that ‘reciprocity anxiety’ is something plenty of us experience, and is characterised as “feeling anxious in a situation that requires them to reciprocate or when they anticipate such a situation.” In fact, splitting the bill at dinner is the number one thing that makes Brits uncomfortable when it comes to finances.

Jamie Smith-Thompson, Managing Director of Portafina, advises that you should be upfront and honest with your friends before you even step into the restaurant. “[This] means you can set expectations well before the event,” he says. “It might be an agreement to go Dutch. Or even itemize the bill. Whatever you agree, do it before you arrive at the venue. That way, everyone knows where they stand and you can spend the time enjoying friends’ company without the pressure of sorting out the bill hanging over you.”

Tashema Jackson, money expert at uSwitch, agrees with this sentiment: "To avoid what can be an awkward conversation after dinner, decide on the approach before going for the meal: will everyone pay for themselves, or will you split the bill evenly? Have it figured out before stepping in the restaurant."

Maike Currie, Investment Director at Fidelity International, suggests that splitting the bill evenly is the best way to go – and to give an expense splitting app like SplitWise a go, ensuring the experience isn’t as painful and drawn out as you were anticipating: “It’s always best to ‘go Dutch’, even if your friend had an extra glass of wine – it’s not worth splitting hairs over.”
 

When You’re The Poor Friend

As you and your friends grow up, you will no doubt achieve varying levels of success at different points in your life. But there’s nothing worse than being the one on a low salary when all your pals are high-fliers. It’s inevitable that you’re not going to be able to afford to go the restaurants they can afford to eat at or buy the bottles of wine from the bottom of the wine list. It can get exhausting telling your friends that you can’t afford to do the kinds of things they like doing. According to pensions advice specialist Portafina, nearly a fifth (19%) of 18-24-year-olds have lost a friendship due to issues over money.

It can be awkward for two people who started as equals to find themselves in completely different financial situations. One 2015 study found that when friends’ class positions move, it puts a strain on the relationship, as money begins to impact one’s hobbies, personality and tastes. But there’s no need to be apologetic if you find yourself in this situation – just try to keep it positive. “Suggest ideas that do not cost a lot but are still an opportunity to get together with friends - like a picnic in the park or a ‘bring your own’ barbecue. You’ll get to socialise with your friends without shelling out your life’s earnings,” says Maike.

Jamie concurs: “Then suggest an alternative activity. Or, suggest another date to get together with them so you are not asking them to forego something they may really want to do.”
 

When You’re The Well-Off Friend

It’s not just hard for the friend without much money, it can be hard for the friend that does well, too. Money is always a sticky subject and you shouldn’t feel bad for earning good money, but there are some ways to make sure your friend doesn’t feel bad when she’s around you. Jamie says it comes down to three simple rules: Listen, be understanding and don’t make a fuss.

“It’s probably a big deal for them to say they cannot afford to do something and the last thing they need is to dwell on the topic. Instead, acknowledge how good it would be to get together and suggest something else for you to do together.”

But when it comes to that thing that you plan to do together, Maike says that it’s best just to be conscious and sensitive to their situation – so no lunches at Michelin star restaurants. “Suggest a sandwich at Pret or packed lunch in the park. Or, if you can afford to pick up the bill and do so without resentment, then go ahead.”
 

When You Borrow Money From Friends

Asking a friend for money can be awkward, but when you don’t have a partner or parents to rely on it can be your only avenue. But somehow, it feels entirely different borrowing from a friend than, say, a boyfriend. It can make you feel resentment towards them for earning more than you. Or it can go the other way – your friend can begin to resent you for borrowing money. But that doesn’t mean you shouldn’t ask if you’re in need – you just need to sort out a system that works for you. “The first step is to speak to your friend and let them know you are going to send a text or email outlining the borrowing," advises Tashema. "If you’ve agreed a date on which it will be paid back, make a note of that too. Make sure they send a confirmation in return, to acknowledge your message."

And when it's time to pay the debt back, she says there's plenty of great apps designed specifically for repaying your friends. "Try Ping It or PayPal - or even just your banking app. You can do this just by entering their phone number, as long as you have both signed up to Paym, a free service that lets you send money to your mates using just their mobile number.

When it comes to bigger amounts, Jamie says being upfront is always the best policy. “Agree what’s going to happen before any money exchanges hands. This means agreeing with them a repayment structure and sticking to it. Make sure it’s manageable, rather than promising the Earth out of embarrassment and then not being able to stick to your word. 

“If you feel a contract would make you both more comfortable then, by all means, draw one up. For some people, this might be too formal, though. The most important thing is to set out a manageable plan and stick to it. It’s worth keeping a record of your payments, just so there is no chance that confusion or memory can muddy the friendship waters.”

But, as Tashema concludes, the main thing is to maintain communication: "If you’ve lent your friend some cash, and they haven’t repaid you, speak to them about it. For some people it can be quite embarrassing that they haven’t repaid a debt, so make sure you are careful with how you do this. On the other side, if you’ve borrowed money from a friend and need more time to repay, again the best way to avoid confrontation is to talk to them about it. Let them know you are aware the repayment date has arrived, but that you need a little longer to repay.

"Whenever it comes to money, it is easy to get frustrated. By taking a few minutes to speak to you each other, you can avoid a lot of problems further down the line."