How to pay off debt without isolating from friends

If you're tackling debt or even facing a bankruptcy, you're making major changes to your budget and spending habits. Maybe you used to take an annual family vacation, go out to nice restaurants once a week with friends and sign your kids up for several extracurricular activities. Now that you're situation has changed, how do you politely duck out of expensive social events while you get your bank account in order?

Experts say maintaining your old social norms when you're adjusting to a new financial lifestyle isn't easy. According to a July 2015 poll conducted by CIBC, 32 per cent of Canadians admit to making sacrifices and cutting back on spending in order to manage their debt, and 13 per cent said they worked more hours or got a second job to accelerate their repayment.

But there is a way to pull it off

"It is a fresh slate, looking at long-term goals versus short-term gains," says Beth Anne Bone, a BDO Canada insolvency counsellor who provides guidance to people going through bankruptcy. "But this is not about stepping into the shadows, hiding in your house until your [financial] problems are over and done with." You shouldn't be embarrassed about being responsible.

"We went through years of a recession, so people understand other peoples' financial situations have changed," says Peter Post, managing director of the Emily Post Institute, which specializes in business etiquette.

Talking to your friends, family
As you tighten your budget, everyone else in your world will probably keep going as usual. You'll have a hard time avoiding invitations and opportunities.

Your job is to be honest with your loved ones. Tell them you care about them, but you can't afford to go. Post offers this script: "I can't join you all right now. Although I'd love to be able to, it just doesn't work for my budget at the moment."

You don't owe anyone any further explanations, and your friends will likely understand. Post says your loved ones may even offer to adjust the get-together or plan a less expensive event to make sure you can attend. But if you keep your friends in the dark, you may end up isolating yourself.

A little communication goes a long way, Post says. "It's better than saying nothing and letting rumours and difficulty take over."

How to be supportive if the situation is flipped
If you've noticed your friend's credit card has been declined a few times, or that they're opting out of more expensive outings, you may find you're on the other side of the situation. To be a supportive friend, you must tread the line between minding your own business and showing understanding of your loved one's predicament.

For instance, if your friend declines an invitation to dinner with a flimsy excuse, don't push for answers, Post says. "Accept a person's rationale at face value and don't keep asking what happened," he explains.

You may offer a cheaper alternative and see if your friend is more amenable to that, but don't insist if they say no again. Your goal is to maintain your friendship, even if there are financial disparities.

Though you may be tempted, you shouldn't offer to pay, either. Post says this could come off as charity and creates tension because your friend may feel obligated to pay you back.

Accept the lifestyle change
Brad Klontz, a financial psychologist and associate professor at Creighton University, says giving up a group of friends for peers who match your socioeconomic status is a harsh reality you may encounter.

"You have to have an open relationship with people to talk about money and feelings," Klontz says. "If you don't have that intimacy, your friendship has a significant risk of ending." Even so, guilt may surface on your affluent friend's end, while resentment may bubble on your end, and the stress may cause you to drift apart, he says.

Drifting away from some friends and making new ones that match your new lifestyle doesn't make you a failure. In fact, a major shakeup to your finances is the ideal time to reshape your life and consider your priorities, Bone says.

"It starts off with fear of the unknown but it turns into relief," she says."You're protecting yourself, you're budgeting, making smart financial choices and figuring out what's important to you and your family."

See related: How to budget on an unpredictable income, What's first to go when downsizing budget?
Published December 8, 2015

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