Back in university, a typical night around 11pm, my friends and I were chipping in for the famous Domino’s 5×5 deal (five pizzas for £5 each).
One guy usually said “no thanks” to chipping in, but then, when there were just a few slices left, he would always want in.
Eventually, we started to call him “The Social Bomb” – when he came around we would all scatter in every direction. You know the type: never contributing his fair share and always trying to mooch off others.
We knew we’d never get paid back for that pizza, the beers or whatever activity he wanted in on. Every group has a social bomb (side note: if you think your group doesn’t, I’m sorry to say you are it), but this story illustrates the difficulties we face around money, friendship and navigating daily necessities that can stress us out and damage relationships.
Being the social bomb (or knowing one) can cost people big time: a recent PayPal Money Habits study found that one-third of US adults have lost a friend over an IOU. Even though the money owed might be relatively small, these situations can get ugly, very quickly (instinct tells me it’s not so different in the UK).
Splitting expenses is a normal part of social life – 77% of people surveyed split costs with friends or family for everything from dining out to group gifts. Sometimes it’s just easier to pick up the check, but asking for reimbursement is awkward.
If you owe me money, I feel bitter nagging you about it. If I owe you money, it makes me feel worried and embarrassed. These situations are so stressful and uncomfortable that most people I talked to about sharing costs have come up with two less than ideal solutions:
Some say, “You shouldn’t ask for the money back – just consider it a gift”. The problem is, the study found the average person is owed nearly $450 (around £300) in unpaid IOUs from friends and family. If you’re keeping track at home, that‘s about $50 billion dollars (or £33 billion) globally. And it doesn’t take a happiness researcher like me to tell you, if you received £300 tomorrow you’d be pretty happy. You might tell yourself that loan or dinner check you covered is a gift, but that probably won’t prevent you from feeling angry that your buddy never paid you back.
Other people I spoke with said, “Just pay for yourself and don’t loan money”. But are you really going to be that guy who asks for a separate bill at dinner or pulls out his calculator at the bar? Have fun with that. It’s so quick and easy these days to reimburse someone using digital peer-to-peer (P2P) payments with a click of your smartphone, you can avoid those awkward conversations around IOUs. In fact, one third of people surveyed prefer a digital wallet to a traditional one – they like to skip a trip to the cash point.
Two fields of psychology called “positive psychology” and “the psychology of spending” give us better ways to navigate these potential hassles around owing money. Nothing is more important to your happiness (and personal finance) than maintaining strong friendships and being connected to your family, so what does science tell us about sharing costs and being a good friend?
- If you’re in a situation where you owe people money or have been lending money to friends, talking about it can be really uncomfortable. But an awkward conversation is better than losing a friend over an IOU. My advice: pay back the money you owe quickly, and don’t be afraid to ask for yours.
- Better yet: never talk about IOUs again. Use digital P2P payment options like PayPal.Me or Venmo to avoid awkward conversations and get paid back quickly and securely.
- If you have let an awkward IOU situation go on too long, once the debt is settled you might need to do some damage control to ensure your friendship is strong. This doesn’t have to be a major emotional experience, but getting paid back will be invaluable to regaining some of the trust that was lost.
Seriously, don’t lose a friend over an IOU. Pay back the money you owe your family and friends promptly. That way, you don’t even need to talk about it. You can start planning what you are going to do with that extra £300 you have coming your way, and you’ll never have to wonder if you are a social bomb.