There are many reasons why people knowingly spend outside their means, but a common culprit is FOMO.
FOMO – or the Fear Of Missing Out – has become even more prevalent with the dawn of social media. Even if you’re not familiar with the acronym, you’ve probably experienced this “fear of missing out” phenomenon. In this day and age, we are more connected and more aware of what everyone else is doing than ever before. In some ways, this is a good thing, but when it comes to your finances and long-term goals, FOMO and financial planning don’t always mesh.
What’s your FOMO threshold?
Are you someone who has good command over your ability to understand that a person (in other words, you) can’t reasonably do every single thing, or do you easily find yourself feeling left behind or missing out when faced with the knowledge that others are having fun?
If you’re overcome with jealousy as you scroll through a social media feed full of coworkers cruising the Caribbean, neighbors eating at top-rated hotspots and your college best friend showing off his new McMansion, you are not alone. Psychologists studying the existence of FOMO found it to be nearly ubiquitous among certain age groups, with even higher occurrence among social media users.
Hotels.com recently encapsulated the concept of FOMO and social media in a series of commercials promoting its travel-booking website, in which people “hate-like” their friends’ posts from the wine country or on a white sandy beach, in a sadly realistic showing of travel envy.
However, when you let the fear of missing out govern your decision-making process, rather than carefully laid-out plans or a responsible budget, you run the risk of spending with reckless abandon.
How FOMO Can Wreck Your Finances
Consider this example: Your best friends are planning a long-weekend trip to an all-inclusive resort in Mexico. You’re currently living paycheck to paycheck, and you already have plans for a summer beach vacation on the books. Do you begrudgingly decline your friends’ invite to join them and instead enjoy the fun by vicariously following their posts on Facebook or Instagram? Or do you throw caution to the wind and pay for the trip with your emergency fund or credit card, in an effort to avoid feeling that you’re missing out?
Obviously, if you let the fear of missing out rule your life, it can wear you down emotionally and financially in no time at all. It’s just not financially responsible – or even possible – to keep up with the Joneses. And the Smiths. And the Millers. And your other 782 Facebook friends.
It’s important to remember that you can still take trips and experience adventure. It may just take a little more planning and budgeting. (Read our recent blog post: 8 Steps to Planning a Trip Without Breaking the Bank.)
Don’t Get Fooled by the ‘Facebook Effect’
Social media may have extended our reach and connection to others, but it has also increased the potential for jealousy and resentment. People on social media tend to share the best and most positive posts, which may often not be the most realistic. As a matter of fact, the lives that most people present on social media could best be described as a “cherry-picked” version.
And people aren’t always completely honest. A well-known YouTuber recently shared a social experiment in which she posted photos of herself vacationing in Bali, later revealing that the photos had actually been taken in a local IKEA.
It’s easy to get caught up in the “grass-is-always-greener-on-the-other-side” mentality that social media tends to conjure up, but try to keep in mind that people’s lives (just like yours) involve far more than what is shared in social media posts, and that everybody has highs and lows in their lives, good days and bad days. It’s just that the boring, day-to-day tasks don’t typically make it to your feed.
Make a Plan and a Budget for Trips/Adventures
Remember that you, too, have ebbs and flows in your life, and that for every epic vacation you take, you have to spend a lot of Tuesdays at the office and weekends doing yard work.
To plan for those post-worthy trips, map out your annual vacation plans ahead of time – if possible, at the start of the year when you’re creating a new budget. This not only offers a mid-winter mood boost and gives you something to look forward to, but planning ahead may also get you the best accommodations and the best deals since you’re making arrangements in advance.
You’re likely to be less tempted to say yes to expensive, impromptu trips when a quick check of your calendar reminds you that you have your own travel plans scheduled.
Focus on Long-Term Goals
At PAX Financial Group, we focus a lot on our clients’ long-term goals – and we remind our clients to do the same. Remembering what you’re ultimately working toward is one of the best ways we’ve found to stay on track. Once you’ve established a comprehensive financial plan, you can prioritize your savings goals easier. Saving to buy your first house or to pay for your kids’ college education, for example, may remind you what you could really be missing out on if you take a trip you may not even really want.
Setting and keeping sight of long-term savings goals like these can help you remember what’s really important in your life. Don’t let FOMO break the bank.
Work with an Advisor who Can Help You See the Reality of Your Finances
When in doubt, ask for help. A financial advisor can help you establish your (and your family’s) long-term financial goals, be it retirement or purchasing your first home. A financial advisor can also help you create a realistic budget that works for you, and help you determine and achieve realistic financial savings goals, as well as determine the steps you need to take to reach your goals.
Remember, once a financial plan is created, that doesn’t mean it’s set in stone for life. Your life changes. Your wants change. Your situation changes. And your financial plan should change along with it.
We recommend reviewing your plan with a financial advisor at least once a year, or whenever a life-changing event occurs, such as a marriage, the birth of a child or a divorce.
FOMO and financial planning don’t always have to work against each other. When financial planning is put first, having the right tools can actually help you tame FOMO and unnecessary spending.
This material is provided by PAX Financial Group, LLC. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. The information herein has been derived from sources believed to be accurate. Please note: Investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs and expenses, and cannot be invested into directly. All economic and performance data is historical and not indicative of future results.