Polls / March 3, 2011

Do you tend to spend less when dining out with friends who are living frugally?

Half the respondents to the latest eZonomics online poll tend to spend less when dining out with friends who are living frugally. The rest are almost evenly divided between those who do not spend less in the circumstances and those who do not dine out.

I like you – and I behave like you too
We are influenced by people around us, so frugal friends’ habits of eating cheaply or scanning the internet for a discount dinner can end up being passed on. In technical terms it’s called the “peer effect”. It means that people tend to “catch” habits from the people around them. We can catch good habits (such as studying hard if those around us do) as well as the bad habits typically associated with peer pressure. Remember, just as we catch frugal habits from friends trying to save, we can also tend to splash out when with friends who like to live the highlife.

Beware “keeping up with the Joneses”
Behavioural economists warn about the financial risks of “keeping up with the Joneses” – or spending to fit in with friends and neighbours. An earlier eZonomics article by Investors Chronicle economist Chris Dillow noted the huge influence peers have on choices. Dillow cited Dutch research that found having a neighbour win a car “has the same effect upon the decision to get a new car as a €10,000 windfall”. Hollywood movie The Joneses picked up on this idea in its tale of a trend setting “family” of paid marketers moving into a suburban neighbourhood.

Set a budget before a night out
Being aware of the tendency to pick up on what friends are doing is a good start to keeping habits under control. Perhaps also consider strategies to offset certain habits. It might be a good idea to set a budget before a night out with big spending friends.


eZonomics team
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