"I bought dinner because I was the girl who could afford it"

Posted at 7:19 on Wednesday April 26, 2006 | Filed Under Saving

I flew to NYC to hang out with some friends this weekend. While we were out one night, my friend Kimen introduced me to one of her friends. We're both bloggers, so we started having a nerdy conversation about readers, comments, etc. Then, when she found out I write about personal finance, we started talking about money.

I found our conversation totally fascinating.

She makes $80,000 a year. She did her taxes last week and just discovered how much money she really has: $245 in savings and $8,000 in credit-card debt.

Don't gasp or laugh. From the thousands of people I've talked to through this site and around the country, it's very, very typical.

What was really interesting was how perceptive she was. I asked her how come, and she said this:

"I live in New York and I go out all the time. Every time my friends and I go out, I usually buy a few rounds of drinks and dinner. (Points to a group of friends we're all out with): I might even buy all the drinks tonight."

This is the kind of thing you can easily dismiss as someone who's just out of control, but I really urge you not to. I asked her why she did that, and she continued:

"I have a great job and I just always figured that I could. I was the kind of girl who bought everyone dinner because I could afford it."

Becoming Rich isn't just about rational choices and saving and investing. It's about emotions. It's about feeling like part of a group because you spend money. It's about getting into a role with your money, finding it hard to change, and finding that spark that makes you think hard about what you're doing. It's about changing your spending behavior into something you admire about yourself.

Don't dismiss this girl. She's smart and eloquent and more self-aware than most people I know. There is something singularly interesting here to learn from, and I hope she does--and so do we.

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Comments (20)

1.: Ramit are you in love? You sound like you are enamored with this woman... How cute

Posted by Matthew Vieke at April 26, 2006 07:47 AM

2.: Ramit, true it's about emotions but i don't believe being a hermit and hoarding cash is the answer. I actually have a buddy who sells high-end servers for IBM and makes upwards of $200k per year in Phx where the cost of living is a fraction of NYC. He ran his finances through a personal accounting program that allowed him to categorize his spending and learned that he spent $40k last year in bartabs alone (he's the same role as this lady you reference- the guy that buys everyone a drink when he doesn't have to). I'd say it's easy in hindsight to say "save more, spend less" but one has to wonder how many of his sales were directly attributable to his striking up a conversation with a stranger in a bar who ended up becoming a customer or a referral source... this reasoning seems to me to be the fallacy of thinking you can change variables in retrospect and assume they have positive intended effects.

Sean

Posted by Sean Tierney at April 26, 2006 07:55 AM

3.: Fantastic piece. Embodies the whole "spend money 'till you're broke, live your life" mantra. I enjoy spending money on certain things (within my means) because it's how I want to live.

I've seeded this article on my Newsvine column along with some of your other articles.

Posted by John Ratcliffe-Lee at April 26, 2006 08:07 AM

4.: Ramit, you say that you hope she learns something (you don't specify from what -- from her disucssion with you?) Is she truly dissatisfied with her life? Until she is, there's nothing for her to learn. She might never be. Most likely, she will be fine eventually. You talk about Becoming Rich but you never said whether this is a goal of hers -- or if the only goal is yours: to try to tell people how to Become Rich.

Posted by Flexo at April 26, 2006 08:07 AM

5.: Buying everyone dinner is a good thing, I don't think she did much wrong. Being rich means to me also being rich of friends and experiences. What's better than an evening where nobody has to worry 'bout money?

Posted by Julian at April 26, 2006 01:25 PM

6.: You did imply that she just found out her financial situation after doing her taxes. Clearly she isn't particularly financially self-aware.

I hear what you're saying about living life and enjoying it. I imagine that at that level of income she's proven capable in many ways. But I struggle to see exactly how this is something that will help your general audience here--fact is, when you bring emotions into the picture, like you did with your user-car/new-car piece then you automatically throw out solid financial advice.

Your friend may be popular and she may enjoy the reputation she shares amongst her peers. I'm not implying that her popularity stems from her covering the check, but I can say that if one's habit leaves one in continued debt then it's not a good habit. It's wonderful to treat people, but a wise person who wants to Be Rich can take people out and still be judicious enough to keep track of their bank account. I imagine all of us run into this dillemma in dating...but financial stability doesn't have to be mutually exclusive with fine tastes.

Maybe a better ending to this story would be advice about taking that money out of a HELOC instead of a credit card or something that can remedy the poor situation your friend is in. I empathize but I hope she can dig herself out. Then she can be rich in both meanings of the word...

Posted by Jared Goralnick at April 26, 2006 01:58 PM

7.: Wow. Just trying to score some brownie points w/ a shorty from NY. You know you dropped your AIM name, ICQ number, and blog URL. It's nerd love!

Posted by sahil at April 26, 2006 07:10 PM

8.: I don't think she has to reach the stage of being "truly dissatisfied with her life" before she can learn something.

Sure she can be very happy, but having a high salary, high maintenance lifestyle with no fallback fund must be sitting on her mind.

If she didn't care she would not likely have been so forthcoming on the conversation topic that night.

Posted by Dan Hill at April 26, 2006 09:39 PM

9.: Julian. _She_ needs to worry about money.

Being generous is good, but only if you can afford it.

Don't get me wrong. Probably, inviting her friends is the smallest of her problems. But it's an indicator of her approach to finances.

Cheers, Beni.

Posted by beni at April 27, 2006 05:27 AM

10.: You're the one who met this girl, so you know best, but from what I'm hearing, this girl might be a doormat.

I can understand enjoying your wealth by spending along with a high-rolling group, or even throwing parties for friends to enjoy. But it's dysfunctional if you must "buy your friends". It's also dysfunctional if people hang around you just because they know you'll pick up the tab.

From some of your verbiage, you almost seem to be promoting the Socialist slogan, "from each according to his ability, to each according to his need".

Posted by Milind at April 27, 2006 07:05 AM

11.: I was just like her till early this year. And I can see most of you commenters don't have friends.

I've worked hard, made some money (more than most of them, less than a few of them). I like their company, sharing experiences and I don't want anything to be a hardship to them. It's not about popularity.
I reduced it by
1. setting financial goals
2. creating a budget
3. going out less, and each time i go out, I treat it like a special event, planned and budgeted in advance.
1 led to 2 led to 3, and 3 was the most important in reigning it in. #3 will be hard on extroverts.
I still don't care about picking up the tab and i never nickel and dime bills, but I don't get into that position as often :). Keeping a fixed budget keeps me on track, more here means less there. It's working.

Hey, maybe you should track the savings of introverts vs extroverts!

Posted by Drew at April 27, 2006 09:59 AM

12.: She lives in New York where real estate and/or rentals are through the roof. Making $80K in New York is peanuts.

Posted by Kestral at April 27, 2006 06:12 PM

13.: I think Rammit likes this chick because she paid for all his drinks...

Buying everyone dinner is a good thing, I don't think she did much wrong. Being rich means to me also being rich of friends and experiences. What's better than an evening where nobody has to worry 'bout money?

80k in NYC is not rich, it's a step above working poor.

Posted by Jimbo at April 28, 2006 06:34 AM

14.: Amen Jimbo.

Check this out, assuming a 40% tax bracket, making $80K nets you $48K after taxes, that's about $4K take home in a month.

A quick perusal of New York's Craigslist shows that it costs about $2K to rent decent apartment. Half of take-home pay to pay the rent (and this is not including utilities, food etc) is pretty brutal imo.

Posted by Kestral at April 28, 2006 02:18 PM

15.: One thing that concerned me about your story was the impression that this girl spends more money than she should *giving people the impression* that she has money. Suze Orman once mentioned (either in a book or on her show) that one of the first things you need to do to improve your financial situation is to begin admitting, not only to yourself but to others as well, that you are not necessarily as well off financially as you may have appeared. It's a hard thing to do, but worth it. Coming clean lifts a huge weight that is a barrier to improving your situation. If you honestly can't afford to be buying dinners and rounds of drinks for everyone, then you shouldn't.

Posted by Lisa at April 28, 2006 07:00 PM

16.: Hey Lisa, good points. I think there's an even bigger question that we've all missed - why should someone buy anyone else dinner/drinks/etc? We all are responsible for our own selves and are not responsible for feeding other with our hard earned money. No other person should have a claim on someone else's hard work.

Posted by Kestral at April 29, 2006 11:15 PM

17.: You buy other people dinner or drinks because you are their friend. It is a gesture that says "Hey, I'm glad you spend time with me. Let me do something nice for you" or whatever. It should not be a frequent occurence if you cannot afford it (unless you can, and when you have $8000 in credit card debt and only $285 in the bank, you obviously cannot).

It is nice to be able to buy things for other people you care about, if it isn't extremely detrimental to your potential well being. She needs to cut down on her spending (is it ok that she spends that much because it's on her friends, as opposed to shoes for herself), and pay off her debt. She then needs to focus on creating a savings cushion for unexpected events.

Posted by Carlin at April 30, 2006 08:09 PM

18.: Lets face it, Ramit wasn't mean to her because he knows a good deal when he sees one, free drinks & potential lay. :P

Posted by balls at April 30, 2006 09:57 PM

19.: When I was working at my previous job and making great money for a college student, I would pay for peoples food quite often. After I got laid off and realized that I had saving no money and had spent it all, I decided that from now on I need to be saving before thinking about spending and now I am in the process of elminating debt and building up my savings.

Posted by Mike at May 1, 2006 08:15 AM

20.: One of the better examples of:
Its not what you make, it's what you keep.

Posted by baselle at May 11, 2006 09:02 PM

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