At first I'd try to steer the suggestions to less expensive, but still good, restaurants, without saying why. After all, you should have an equal say in suggesting places. If your friend won't budge, then you can politely mention that you were thinking about something less costly. You don't have to throw a pity party or attempt to make your friend feel guilty; you should just simply state why you don't want to spend that much money. Your friend should understand.

This might also be an opportunity to try to find some new restaurants that are less costly. The upside to this is that, if they turn out to be good, you'll both have a new place to go and you'll have shared that experience.

I used to have this happen all the time with a friend of mine back before I was self employed. His payday and my payday didn't mesh, so he would get paid around the same time I was on the last couple days of my pay period, so I'd be broke and he'd have money. It would never fail that he would call me up and ask me to go out for dinner and I'd have to tell him, "Sorry, I'm broke."

On occasion, he would (rarely) offer to take me out his treat and I could pay him back when I got paid by taking him out my treat. This worked once in awhile, but we didn't make a habit of it.

But there have been times he'd suggest going out to the hibachi grill over in Midland. This place is an easy 100 dollar bill for two people, and that's without drinks! I would often have to tell him no when he'd suggest this, because that was just too much money for a single mom to spend on any one meal that wasn't for a special occasion. The way I'd say no is just flat out - sorry, I can't afford that. He's a single guy with no kids and no house payment, so it's not as big of a deal for him to blow money once in a while.

Now I can afford the classier restaurants and such and I like to treat myself once in awhile, but even then, I've been known to tell a friend whose asked me to go out, "Nah, I really don't want to spend that much money right now."

The hard part for me isn't telling them I don't want to spend the money - that's easy. The hard part is when they sometime offer to pay for me, and then I feel guilty, and then I end up going, and paying for myself anyway.

I sorta have a hard time letting people pay my way.... and saying no too.

I like @thebandit 's idea of trying new places though that are less costly. Sometimes the best food/restaurants are the little hole in the wall kind of places with stains on the menus and a little old lady in the kitchen who comes out and greets your personally.

My exact conversation with that friend...

"I'm sorry _____, but that place is out of my price range. I appreciate you asking though. Let me know if you wanna try another place (make recommendations)"

A true friend knows you and understands your situation. This person may not really know you as well as you think they do.

I just say, "I'm on a budget."

Even if I'm not, I'll say that sometimes, because in north America, that's a generic enough phrase to mean anything from, "I'm broke", to "I'm working on a takeover of Ford and my accountant says I'll blow the deduction structure before the securities commission if I don't modulate the architecture of the expenses schedule according to a Bayesian spending pattern which will bust up the tax write-off", to "I'm saving for a vacation in orbit around the earth, and I'm so close...", plus it's indeterminate in time, so it could mean just today, or it could mean for the rest of your life... nobody knows, and it doesn't matter...

In north America, at least, it's the universally accepted generic, non-judgmental, non-crisis way to say, "Let's find something cheaper".

And if you're wondering why people don't just say, "Let's find something cheaper", it's because, I have found, if you do, then they ask *why*, but if you say, "I'm on a budget", they don't.

I have totally been there! If you're social circle is diverse (and that's the best kind to have!) you are bound to reach points of tension like this. The simple answer is to just tell your friend the truth... but we all know life is never so simple.

You should be prepared to offer your own suggestions. There's nothing worse than a naysayer with no ideas of his/her own. If you have time, do some research and find out which eateries are withing your budget. Especially note the ones that might appeal to your friend, according to what you know of him/her.

If you are using the word "friend" in the real sense that person should be understanding and supportive. Just say, "Well I'm kinda watching my budget right now, but what about {restaurant name}? I hear they have great {food item}."

My best advice is to simply tell it like it is. I know that discussion about money are still very taboo in polite society, but you'll look even more foolish when you go broke to keep up appearances. In fact etiquette experts often advise that you should just be up front in these types of situations.