Choose Friends Who Are Financially Responsible

When my kids were growing up, I closely monitored who they were hanging out with. You probably do the same. Why? Probably because who you hang out with can have a profound influence on who you are. When it comes to your finances, who your friends are can help or hurt on your own personal journey to financial security. With all that's happening at this time of the year, the holiday season provides a nice barometer for how your friends might be elevating, or undermining, your plans for financial independence.

Here are a few tell-tale indicators on both sides of the discussion:

They've got to have the latest and the greatest. With roughly 2/3 of our economy powered by the American consumer, the economy is in good hands. Earlier this year, personal savings hit a 10-year low of 2.4%. That's plain pitiful. If you're in your early 20s and just getting started, you can probably get away with saving 10% for retirement, but most people have a variety of goals that will require even more saving. So, the Joneses and their 2.4% savings rate is a joke.

They're celebrating your frugality. Ever wonder how the Jones family affords that never-ending carousel of slick new vehicles? Maybe they can't. Instead, much to the delight of their car salesman, they are stretching out car loans to the point where the payment is "affordable." Every quarter, Experian produces a "State of the Automotive Finance Market" report. The latest indicated the average new car loan was over 69 months. You know how averages work, and that means there are a whole bunch of loans out there with terms longer than 69 months. Shoot for an un-Jones like approach, something that's affordable with a loan of no longer than 5 years.

They don't egg you on. The Jones family apparently doesn't need any stinking life insurance. Three kids, a big mortgage, a couple car loans and a lot of underfunded financial goals wouldn't even phase the survivor if the unthinkable happens. That probably sounds ridiculous, but according to LIMRA, one in three people indicate they know they don't have enough life insurance. The Joneses are clearly skimping; you shouldn't. Check out a life insurance calculator and see where you stand.

They've got financial savvy. In January, the Bankrate Financial Security Index survey reported that 61% of Americans surveyed would be unable to draw from savings to respond to a $1,000 unexpected expense. They'd be forced to borrow from family, sell stuff or break out the good old credit card. Not very good.

They pressure you to spend. This is good for credit card companies, not so good for long-term saving. Having friends who pressure you to blow all your money today with no long-term plan is like having that one childhood friend who tells everybody to jump off that cliff while they sit back and watch. While others may take the bait and end up hurt, you would be smart not to.

Choose your friends wisely - don't make it a competition. Fear can be an enabler, but it can also motivate positive behaviors. In this case, I hope I've created a compelling case against trying to keep up with the Joneses, and choosing friends who don't try to make you follow their lead down the pathway to financial ruin.