I have never been popular. I have always been the person with 3–4 very close lifelong friends and have accepted that I will never be the girl who has 14 bridesmaids standing beside me at my wedding.
The introvert in me loves this.
However, when I started University, it was the first time in my life that people wanted to infiltrate my circle. The braces were gone, my eyes temporarily lifted from the books to check out this new world, and people thought I was cool!
I had an awesome time, but 10 years later looking back at things with the perspective and lessons that time gives you, I now see that a lot of those connections that I made were actually quite toxic.
We are often told the tales of toxic romances, are warned about jealous friends, and are told to look out for disloyal people.
However, what is much less talked about is how some friendships can completely derail your financial journey and have sometimes irreversible effects.
So, let's take a look at how to identify some of these toxic people in your life and some constructive ways to deal with them.
The Business Partner
I am certainly not telling you never to go into business with a friend, but I am giving you fair warning that it can be a difficult path.
The reason I have put these friends under this category is because it is so easy for a business partnership to become a toxic friendship when you do not treat your business as a business. It can be extremely difficult to draw a line where the friendship ends and the business relationship begins.
Most importantly, you may find that your judgment can be clouded or affected and you may agree to things that you would not normally think are good business moves.
Peter Yang, who founded Pokéworks with his college buddies suggests discussing the following in an article he contributed to for Forbes (Shelchy V. Joseph, Forbes magazine):
- Who will have what responsibilities?
- How will profits be split?
- How will disagreements be handled?
- How much time will each person dedicate to the business?
- Will a contract or written agreement be signed?
- How much does the business want to grow?
- How will things be dissolved if the business is terminated?
The “Let's Get Rich Quick” Friend
This is the friend who approaches you with that “once in a lifetime” opportunity that you need to invest in.
I love having friends who are dreamers; in fact, it is a quality that I search for in people. However, the problem arises when a friend approaches you to invest your money in something that:
- Has no business plan
- Has some sort of pyramid structure
- Is questionably quick money
Things like pyramid schemes are actually so risky that governments often warn against them — the Australian government has an entire portion of their website dedicated to scam and pyramid scheme prevention.
They warn that sadly it is spread and prevalent amongst close friends and family members due to the trust that has been built in these relationships. The government website continues to warn against the following behaviours (Australian Competition And Consumer Commission):
- You are offered a chance to join a group, scheme, program or team where you need to recruit new members to make money
- There is a large upfront cost to join
- The scheme involves offering goods or services of little or doubtful value that serve only to promote the scheme, such as information sheets
- The promoter makes claims like ‘this is not a pyramid scheme’ or ‘this is totally legal’
While I have never been approached for a pyramid scheme, I was once approached by a friend who wanted to pool money together to make a large investment in a cryptocurrency ETF. The thinking behind it was that the larger the amount invested, the larger the growth and then we would eventually split the funds and walk away.
This was a classic red flag scenario that did not have a proper plan, adequate market research or knowledge, and also screamed of a quick money scheme.
I politely passed on the offer and later learned that the 3 or 4 friends who did invest lost the majority of their money.
Luckily, there is a quick and easy way to deal with this sort of situation. Simply be direct and upfront in declining the offer — the longer you take to “think about it” the more excuses you will have to make.
These scenarios can be difficult for people-pleasers like myself, but your financial health needs to take priority.
The Friend Who Always Has a Crisis
This is the friend whose life is always full of drama and doesn’t have an issue bringing you along for the ride. In other words, they have a pattern of making their financial problems your financial problems.
When I was in my second year of university, I had a friend like this and despite the fun, we had together I found myself going down multiple rabbit holes with her.
At one point, she had a falling out with one of her roommates and asked me if I could pitch money towards her first/last month's rent on a new place. She constantly had boy drama and always wanted to go out to party her sorrows away and find new attention — cue the bar tabs.
Let’s just say there was always some sort of crisis that not only required my friendship, but also required financial backing.
While natural instinct always tells us to help our friends, these can actually be the most difficult kinds of friends to help. Your money is often just a bandaid on problems that need much deeper healing.
Never give away money that you can’t afford to lose.
I will say from personal experience that if you do lend these kinds of friends money, be prepared not to see that money back. Remember that it is not just big chunks of money that you should be concerned about, the small and frequent amounts add up as well and can really impact your journey to financial independence or investing.
The Friend Who Steals Your Ideas
This is my least favourite kind of person and unfortunately, I have experienced this on both a friendship level and on a professional level.
This is the person that you open up to, share your plans and ideas with and they turn around and do the exact same thing.
Regardless of it being a big idea or a small idea, this stings.
This is someone who is taking advantage of the time, work, and research that you have put in to something so that they can profit from it themselves.
So, how can you avoid this?
Dr. Patricia Alvarez-Campos of the Linnean Society of London explains that identification is key. She also notes:
“By all means, share your ideas once you have executed them . . . but don’t give them the chance to steal your thunder.” — Dr. Patricia Alvarez-Campos, The Tag-Along Friendship: Epibiotic Protozoans and Syllid Polychaetes)
Finding good friends is like dating — sometimes you have to go through a lot to find the good ones.
While there are many types of people who can derail your financial plans, there are just as many who can really help to encourage you on your journey. Be on the lookout for people who will support you, push you towards your dreams, and help you to strive towards your financial goals.