The dangers of social spending -- and how to avoid them

By Marianne Curphey

Have you ever bought a round of drinks that you couldn't really afford, or ended up splitting the bill at a restaurant that was more expensive than you thought? Chances are, you've been in these situations and forked over the money to save face in front of friends.

But the pricey nights out add up and if you use your credit card to cover the gap, you might end up paying the tab for months after the fun is over. Find ways to avoid the peer pressure and strategies that work for you to prevent cringing next time you open your credit card bill.

Peer pressure never ends -- it just gets more expensive
Nearly half of respondents to a June 2014 study from the Money Advice Service admitted to overspending on their social lives. Most (58%) said they didn't want to appear "tight" or "stingy" in front of friends, and a good chunk (36%) said they simply get carried away with spending when they're out. social-pressure

As a result, the study participants estimated they had about £1,260 in "social debt", which they said caused them to have to cut back on food costs or left them struggling to pay utility bills -- ironic, since people often overspend on social occasions to forget about day-to-day worries such as money and bills, according to Dan Britton, founder of the Personal Finance Academy.

A bigger part of the problem, he says, is our need to belong and be part of the crowd. "There is a big pressure to conform and to appear to be better off than we are," Britton says. "Also, the more you earn the more you spend. Our aspirations rise and so do the price tags."

"There is a perception that how much you are able to spend is a reflection
of who you are," agrees Jenni Trent Hughes, social psychologist.

Laura Mostaghimi, money adviser at National Debtline, says that people who come to National Debtline for advice have often economised on basic living expenses such as food, but then splash out on gadgets and clothes to keep up with "everyone else". For example, she commonly sees people who have two smartphones because the new model came out and they had to have it, despite not finishing the 18-month contract on their current phone. People would rather spend more per month for two phones than be seen with last year's model.

Overcoming pressure, avoiding superfluous debt
"When you are out with your friends, if you have got something to say about your finances then say it at the beginning of the evening," Hughes says. "Explain why you are saving or why you don't want to spend a lot that evening. Or think about doing different things that are not expensive."

Mostaghimi advises calculating your expenses over the course of a month, then over the course of a year. Then, if you see that your weekly nights out are sending you deeper into debt, cut them down to monthly or bi-monthly outings.

"I'd urge anyone in debt, due to their social spending, to take action now to avoid getting any further into the red and instead work at clearing it," Jane Symonds, a money expert at the Money Advice Service, said in response to the Money Advice Service report. "You'd be surprised at how empowering saying ‘no' can feel when you see how healthy your bank balance looks, and you can spend the money on things you really value or need."

Hughes suggested tips on avoiding overspending without looking "tight":

  • Be upfront and honest, both with yourself and your friends about your money situation. When you say no to a social occasion, make it a firm decision -- don't let your resolve waver.
  • Take cash and leave your cards at home. Set a budget for yourself while you're alone and without the influence of alcohol. Take only that much cash with you when you leave the house. Not only will you be unable to overspend, but you may be less likely to spend all of your cash when you can see it physically leaving your wallet.

Don't get carried away. Alcohol or just the good vibes around you can lead you to spend more than you'd planned. Do your best to keep a level head and make solid decisions.

See related: Are you a candidate for Debtors Anonymous?, Remedying credit card purchase remorse

Updated: 14 October 2016