For some they are embarrassed that their funds can't stretch as far as they like. I have never been one of these people. I have been broke for the past 5 years. No income and the college lifestyle is something that only those with a job can afford. Now I tried to find work but retail managers do not want college students we are not flexible enough for them (one of the reason's why I dislike the management style of the retail industry).
Everyone has a broke stage, if you didn't you are very lucky; but I personally feel you need that broke stage to build a respect for money. Anyways social engagements are a bit of nightmare if you are looking in your purse and all you see is your only €2 in the world. You have two choices make up a lame excuse and go on your merry way or casually say that the budget is tight but a water will be fine so you don't miss out on the bants!
For me informing whoever it is your meeting beforehand that your funds aren't looking too tasty, at least if you tell them in a neutral environment they 1, don't care 2, thankfully (yes i am actually saying this) we are in a recession so being broke is not as much of a embarrassment as it may be pre-recession. It an accepted part in society nowadays that people don't have the funds that we once did.
Basically long story short, I find being honest about it works a hell of a lot better than lying about it.