What happens when you become the rich friend? – Diana Clement

Detailed summary

Diana Clement is a freelance journalist who has written a column for the Herald since 2004. Before that, she was personal finance editor for the Sunday Business (now The Business)…

Lending to friends can strain relationships if the money is never repaid. Photo / 123rf

I had the experience of being the “rich” friend, surprisingly early, in my late 20s. I wasn’t “rich”. But I had a job while my former best friend had been on benefits since school.

It was mighty awkward with a dollop of envy and expectations thrown in. One particularly difficult exchange was when I was asked to loan money so that my friend could go on holiday. I did and the money was paid back. But the experience was not one I’d like to go through again.

We have an unequal society and financial realities can start the same, but diverge. Some people marry up, earn huge salaries, run successful businesses, benefit from property growth or simply budget well and save. I’m now at that age where some people are receiving sizeable inheritances, which changes their economic reality.

Financial inequality shouldn’t be a barrier to friendship when both parties are secure enough in themselves. Self-awareness, or a lack thereof, is what makes it work or fail.

I’ve reflected for years and there are some rules of thumb, although everyone’s situation is different.

Be mindful of asking your friends to spend more because you can afford it. This is awkward where one person expects to stay at a luxury lodge and the other can only afford camping. Think about the language: “I would like to stay here, but can be flexible” is different from “we have to stay here”. Saying things like “it’s only 50 bucks extra” is tone-deaf.

If the more expensive option is your preference, would you be prepared to pay the difference? But be aware that constantly picking up the bill can create an unhealthy dynamic or expectations.

Friendship doesn’t have to be financially equal to be reciprocal. If a friend says “That’s too expensive for me”, take them at their word. They may not want to explain their finances.

Opening of the article, excerpted from NZ Herald Business. To read the rest, open the article on the publisher's site.