9 Smart Ways to Deal With Financially Toxic People

Do you have friends, family, business associates or even clients who are financially toxic? You know, those people who seem to live in — or on the edge of — financial disaster, but do it so effortlessly that it almost seems normal?

While you may think that your association with them is harmless, it often isn’t. Surround yourself with enough financially toxic people, or have one or two of them really close to you, and you may find your own financial situation being sabotaged.

Since it’s not always possible to completely eliminate financially toxic people from your life, here are nine smart ways to deal with them.

1. Keep Time With Financially Toxic People to a Minimum

Bad habits, negative behaviors and destructive psychological vibes are usually transferred from one person to another in a gradual, almost imperceptible way. It happens most effectively when you spend a lot of time with toxic people. The negative or self-destructive way that they talk about money, the freewheeling way that they spend it, and a complete disregard for saving and investing can negatively affect your own attitude.

Because financially toxic people are often important in our lives, it’s impractical to completely end your association with them. But you can keep the time you spend with them to a minimum.

This is especially important if you are working on major financial goals in your life. If you spend too much time with people who spend money freely, you’ll lose your focus. You’ll risk being pulled away from your goal, while the toxic person just does what they do naturally.

2. Keep the Number of Toxic People in Your Life to a Minimum

It’s been said that you’re the average of your five best friends. Are any of your best friends of the financially toxic variety? If they are, then they may be dragging down your average. And if there’s more than one, you’ll be down even more.

“If you want to take yourself to the next level financially and are looking to streamline that process, you need to surround yourself with individuals that live the kind of lifestyle you want to live,” Brearin Land, financial adviser and CEO of Irvine Wealth Management, said.

If three of your five best friends can be considered financially toxic, then there’s at least a 60% chance that you are engaging in some seriously toxic financial behavior yourself. You can’t keep it from happening – you just do it because it’s normal in your social circle.

Every one of us has people in our lives that are financially toxic, and sometimes you have no choice in associating with them. But as a matter of your own financial self-preservation, you may want to make sure that the number of them who you consider to be friends is at an absolute minimum. (Zero would be even better, if possible.)

3. Use Them as a Cautionary Tale

If you do have financially toxic people in your life, use them to some sort of advantage. Observe their financial situation and their financial behavior.

Recognize the toxic influences. Then mentally record how the negative behavior manifests. You can use that behavior as a lesson for yourself in how not to do things.

Sometimes the best way to learn good financial habits is to see what happens to people with bad financial habits. In that way, your financially toxic friends will be doing you an unconscious favor.

4. Don’t Try to Keep Up With Their Spending Habits

As a way of fitting in with the group, you might adopt their spending habits. When you do, that takes you completely off of your financial game. The more time you spend imitating someone else’s spending habits, the farther you’re moving from your goals.

This is where it’s important to understand that financially toxic people often overspend as a way of denying their own financial problems. For example, they may spend money freely as a way of convincing themselves that they don’t have a serious debt problem.

If you have well-established financial goals, you shouldn’t let yourself get distracted in the web of someone else’s coping strategy. It hasn’t helped your financially toxic friends, and it can’t possibly help you either.

5. Ignore Their Financial Advice

Financially toxic people often pontificate with financial advice, even when no one asked them for it. Spouting off solid-sounding advice is another tactic that makes them feel better about their own tattered financial circumstances.

It’s unlikely that you’ll gain any wisdom from people who are nowhere in the vicinity of being financially stable. You wouldn’t turn your money over to an investment adviser with a long history of underperforming, so why would you trust the financial advice of a person drowning in debt?

When you’re around financially toxic people, you should work to keep the conversation away from anything remotely financial. The advice could prove detrimental to your money situation.

6. Don’t Do Business With Them

If you jump in the water with a drowning person, there’s a very good chance that you’ll drown, too. Doing business with people who have serious financial problems has the potential to spill over to you.

Of course, what I’m talking about here are more intimate business arrangements, like partnerships and joint ventures. The financially toxic partner’s money problems would impair their ability to uphold their responsibility in the venture, and eventually lead you into a money-losing situation.

It could be in your best interest to do a good background check on anyone you are looking to partner with in business. At a minimum, this could include getting a copy of their current credit report — you’ll need their permission to do so. (You may want to check your own credit standing as well. You can pull a copy of your credit reports for free each year at AnnualCreditReport.com and see your credit scores for free each month on Credit.com.)

You may also want to review independently prepared financial statements as well as a series of recent bank statements. If they don’t look right, consider finding another business partner.

7. Don’t Lend Them Money

There’s a reason why banks and other lenders run credit reports on customers. Experience has shown that if a borrower has a history of defaulting on loans to other lenders, there’s an excellent chance that the outcome will be repeated.

And so it should be with you. If you shouldn’t do business with financially toxic people, you shouldn’t lend money to them either. Doing so may just invite trouble. If they can’t repay the loan, not only will you be out the money you loaned them, but it will almost certainly end any personal relationship that you had with them before.

8. Recognize That They May Have a Hidden Agenda

Financially toxic people are usually more than casually aware of their own monetary distress. Given the human tendency to resent people who are a better position in life, there may be more than just an accidental effort to tear you down. It happens in situations where people come to view their own circumstances as insurmountable. Their reaction to people who are in a better place is often to try to tear them down, and in doing so, to bring you down to their level.

This effort isn’t always obvious. In fact, some people are so good at hiding it that you won’t even know that it’s happening. The clues are subtle, and often look something like this:

You find yourself feeling a little bit down after meeting with your financially toxic friends.
You notice disinterest anytime you share good news.
The friend has an obvious tendency to discourage you from following through on your plans.
He or she can usually quickly reel off a list of a half-dozen or more reasons why whatever you’re contemplating won’t work.
When you share your plans or good news, the conversation is quickly redirected into a financially toxic subject.

Though the methods may be subtle, the financially toxic friend may have one objective: to sabotage your efforts to continue moving forward toward greater prosperity. They have no sense that they can join you in your quest for a better future, so they pull out all stops to prevent you from moving forward.

9. Stay Focused on Your Goals

We all have financially toxic people in our lives, but it’s often in your best interest to never get sucked into their poor financial plans.

Despite any other common ground that you may share, your financial destinies are heading in very different directions. Yours is the better path, so try not to allow it to be compromised by someone who is going the wrong way.

There’s a secondary benefit to this strategy, if the financially toxic people in your life are willing to seize on it. Because you are on the right path in your life, you have the potential to be a positive influence on the people who aren’t.

It’s a good idea to recognize your way as the better way, and be prepared to never surrender or even water it down for the benefit of financially toxic people. It’s a win for everyone involved.

This story is an Op/Ed contribution to Credit.com and does not necessarily represent the views of the company or its partners.