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Dr. Irene S. Levine

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Friendship and Money: Minimizing Losses

Posted: 03/05/09 12:53 PM ET

Given the uncertainties of the economy and the high rates of unemployment, money seems to be on everyone's minds these days. This is the second part of a two-part interview on Friendship and Money with MSN Money columnist Emma Johnson. Part I of this interview can be found here: She's Fired, You're Not.

How do economic inequities between friends affect relationships?

In a perfect world, money wouldn't affect friendships. But there are a few things going on here. For one, in our culture we measure success in terms of professional accomplishments and money, and we often judge ourselves by these sticks. So when one friend gets ahead financially, another might start feeling left behind and less successful all around.

The other thing that happens is that money often has a big impact on our lifestyles. When one friend starts making big bucks, she might move to a tonier zip code, start worrying about private schools for their kids, and spend weekends researching a second home to buy. This is her new life. The friend from way-back-when can't identify with these new concerns, and vice versa. These are not trivial differences and can create big rifts in how people relate.

There are practical considerations, too, depending on the relationship. If a pair of friends is in the habit of spending money together -- be it dinners out, shopping or vacationing -- that can all come to a grinding halt once one party can no longer afford it. Worse, the unemployed woman may feel the need to now live beyond her means just to keep that much-needed friendship alive.

Should women talk openly with each other about their financial woes or those of their partners? Why?

I believe we all need someone to talk to about the important things in our lives. We've been raised to believe that talking about money is impolite, but it is such an important part of our lives -- and often our worries -- that the practice of bottling up all our money woes might just be at the root our country's lousy financial habits.

Blabbing about the nitty-gritty of your income, credit card statements, taxes and inheritances is probably not a great idea most of the time, but there are no holds barred when you have a really truly great friend who will not judge you, will give you some tough love when needed and, most importantly, listen. On the other hand, if you're tickled because your husband got a raise, your great aunt died and left you a chunk of change and you found a wad of cash in your attic, remember: no one likes a braggart.

Are there circumstances when you should lend a girlfriend money to keep her afloat? What are the perils? What safeguards would help preserve the friendship?

Lending money to a friend or relative is always a tough situation, and can be a real stressor in the relationship. Whenever you get together, the money will be on everyone's mind, but no one will talk about it. And there is no better way to create resentment than to have an unpaid debt between parties.

If you do decide to lend money, write up a contract signed by both friends, and have it include terms of the loan, repayment dates, interest, etc. But lending money should be a business decision, not an emotional one, and that is tricky between friends. Ask yourself:

- What is this person's financial history?
- What is the likelihood they will be gainfully employed soon?
- Is the loan for a true emergency or basic living expenses, or something frivolous?
- And perhaps most important, Will this loan put my own finances in peril?

In the piece I wrote for Psychology Today about friendship and money, I profiled a woman who made all her own money and had a very modest existence, one she shared with a girlfriend who later came into a significant inheritance. The newly rich friend felt guilty about it and insisted on treating her friend to meals out, vacations and trips to the mall -- which the working woman resented very much. They were able to talk it though, but that financial inequality proved to be a big deal.

Emma Johnson is a New York journalist who writes about business, finance and money topics for publications including the New York Times, Wall Street Journal, Entrepreneur and Psychology Today. Her series on MSN Money, Jump Start Your Life, explores money topics for people in their 20s and 30s.

Irene S. Levine, PhD is a freelance journalist and author. She holds an appointment as a professor of psychiatry at the New York University School of Medicine and is working on a book about female friendships, Best Friends Forever: Surviving the Myth, that will be published by Overlook Press in September, 2009. She recently co-authored Schizophrenia for Dummies (Wiley, 2008). She also blogs about female friendships at The Friendship Blog.

 
 
 

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