Sandy Smith is no stranger to being cheap—and it’s served her well. When the now-48-year-old’s stepfather lost his job during the Great Recession, she was left struggling to support two households.
To make ends meet, she became the self-proclaimed “crazy personal finance person” in her friend group. She kept a binder full of coupons, regularly shared deals she heard about with friends and even filled holes in worn-out shoes with cardboard. In 2008, she created a personal finance site called Yes I am Cheap to share her approach with others.
“There definitely is a negative connotation with being cheap, and that’s why I embraced it,” Smith told the New York Times. “Let me not even play with the word frugal — I’m cheap,” she said. “I had to be.”
Then she started a Facebook Messenger group with friends and began hosting an annual PJ party on Zoom to set financial goals. She’s now gone from being $200,000 in debt to a net worth of over $1 million. And those friends who thought she was “out of her mind?” They now come to Smith for financial advice. As it turns out, your friends can have a bigger impact on your financial life than you might think.
Why do friends impact your finances?
So how did Smith’s approach end up impacting her wider social group? It’s a concept called social contagion—and it’s not about viruses. Social contagion is the spread of behaviors and attitudes through groups. Think of how kids started randomly shouting ’six seven’—a phrase with no real meaning from a viral rap song—until it spread to classrooms and sports games across the country and you’ll understand how quickly behaviors can spread through a group.
“No one should be surprised that people are affected by the financial decisions of those around them—even indirectly,” Nicholas Christakis, the Sterling Professor of Social and Natural Science at Yale, told the New York Times. “You are affected not only by your friends but by your friends’ friends and your friends’ friends’ friends—people you don’t even know.”
A study from the National Bureau of Economic Research used data from Facebook and found that people with connections to higher-income friends are more likely to save and invest. In fact, having a stronger network of wealthy connections was associated with a 10.6 percentage-point increase in stock market participation and a 9.2 percentage-point increase in savings.
Dr. Christakis says the reason is fairly simple—copying others is efficient. Which means the same social pressures that can cause us to fall into the trap of ‘keeping up with the Joneses’ can also be used to build financial wealth.
“If you’re finding yourself having really bad financial habits because all of your friends have terrible financial habits, that can reinforce what you’re doing,” Dr. Christakis said. “It would be helpful to you if you got a new community.”
How to find (or build) a community that matches your financial goals
To find the right financial community, look for ways to make small, sustainable changes over time. Here are a few ways to get started.
Become the frugal friend
You don’t need a new social circle to shift your financial trajectory—sometimes you just need to be the one who sets the tone. Jen Smith and Jill Sirianni, hosts of the Frugal Friends podcast, suggest being upfront with friends about your goals and the timeline involved, so they understand it’s not permanent. Rather than declining invitations outright, try redirecting to cheaper alternatives, such as cooking dinner together instead of going out to a restaurant or a free outdoor activity instead of a pricey night out.
Connect with local or online groups
If your current social circle isn’t moving in the financial direction you want, it may be worth expanding it. Smith built a Messenger group with like-minded friends and scheduled quarterly check-ins to discuss money goals.
Similar communities exist online through Reddit forums like r/personalfinance, local meetup groups focused on financial independence, or podcasts with active listener communities. The goal isn’t to ditch your existing friends but to add relationships that reinforce the habits you’re trying to build.
Cull your social media feed
Social media can make it feel like everyone is buying new outfits daily, purchasing the newest tech gadget or going to brunch weekly. Instead of consuming content that makes you want to overspend, limit your feed to people or brands that support the changes you’re making.
Some accounts actually focus on “de-influencing,” which encourages people to spend less and use what they already have.
Start slowly
You don’t have to overhaul your finances or your social life overnight. Cutting expenses to the bone all at once may be unsustainable. Instead, make quiet, incremental changes: space out discretionary spending, swap one expensive habit for a cheaper alternative, or simply start tracking where your money goes each month. Small, consistent changes compound over time.
The reality is, your friends shape your financial future—whether you realize it or not. Making small changes and connecting with like-minded people can help social contagion work in your favor.
Danielle is a personal finance writer whose work has appeared in publications including Motley Fool and Business Insider. She believes financial literacy key to helping people build a life they love. She’s especially passionate about helping families and kids learn smart money habits early.
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