law of association

Does The Law of Association Impact Your Finances?

It’s better to hang out with people better than you. Pick out associates whose behavior is better than yours and you’ll drift in that direction.

Warren Buffet

One of the most basic things to consider when managing your money is the Law of Association. Although this doesn’t seem to be linked to your finances in any way, it can impact both your income and spending tremendously.
First, let’s take a step back; what is the Law of Association exactly?

The Law of Association states that you are the average of the 5 people you spend the most time with or talk to the most. With this in mind, look at your own circle of close friends for a second and list the 5 people you hang out with, text or call with the most. These people most likely, but unconsciously, have a great impact on your life as a whole.

My own experience with the Law of Association

To illustrate this better, I’ll share a story with you. When I was 18/19 years old and living in Denmark, I was working at a company and I am pretty sure I was all the way down the corporate ladder and thus received one of the lowest salaries that went around.

Because I was literally always working, I didn’t really have a social life outside of work and the only people I hung out with were my colleagues (this sounds kinda sad, but they genuinely were lovely people). Anyhow, my closest friends were all further up the corporate ladder and received a much bigger paycheck than me. Besides that, they also had a different lifestyle than I had.

Among other habits and preferences, they liked to eat out on average 2 times a week, they went clubbing every weekend and shopped expensive clothing. And here I was, trying to keep up with their lifestyle. You can imagine that I blew through my monthly salary within moments and was always stressed about paying bills and for sure didn’t have anything left to save. There was always too much month left at the end of my money.

How does your circle influence your habits?

This was an example of how my circle influenced my spending habits. Your circle can also be an important factor to consider when it comes to your income. Maybe you picked up on a skill of one of your friends and now you can leverage this in the workplace. Hence, you’re able to negotiate about a higher salary.

Maybe you think that the Law of Association absolutely doesn’t apply to you, but look closely. What do your friends do with their money? Do they spend it on, mostly, unnecessary and materialistic items or are they saving and investing, paying off debt? Are they prioritizing spending their money on drinks and partying over saving? Are they continuously improving themselves by learning new skills?

Recap

I am a firm believer of surrounding yourself with like-minded people, preferably those that already have what you want. Of course the Law of Association goes way deeper than finances. It is about habits, interests, behavior, hobbies, mindset etc. If your circle is holding you back, not supporting you or just has a negative influence on you in general, it is time to get a new circle.

To get ahead in money management, develop relationships with those that know where their money is going and with those that have a sense of financial stability. I swear, their ways and mentality will rub off on you if only you spend enough time with them. And then just do what they do. I cannot make it any simpler. Make the Law of Association work for you.

Without getting too specific, do you think your circle is helping you get ahead in money management, or in life in general? Or are they holding you back?

Lots of love,

2 thoughts on “Does The Law of Association Impact Your Finances?

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