No individual is an island, as the saying goes, and we are all influenced by our surroundings for better or for worse. Peer pressure is not confined to the high school campus, and the Fear Of Missing Out—or FOMO—can trigger decisions that might not always be in our best interests. This is true in all aspects of our lives, especially when it comes to our relationship with money and spending. For this reason, it is vital that we all understand how FOMO is harming our personal finances.
There are two parts of this equation. In this article, we will unlock the dangers of spending FOMO, and how it leads to unwise and unnecessary consumption. In this companion piece, we will explore how this tendency can harm our finances by seeping into our investing choices as well.
Does FOMO Cause Bad Choices?
FOMO is the idea that we will lose the opportunity to have once-in-a-lifetime experiences if we do not simply say “yes.” We worry that we will hear about the incredible time had by all, and deeply regret not being a part of it. Or, we see our friends with the latest gadget, and feel compelled to purchase the same one even if we lack the means to afford it.
Of course, there is plenty of reasons to go to that destination wedding, spend weekends away with friends, or even attend local concerts of your favorite music star. Or, maybe you actually do need to acquire the most recent electronic device to help you perform better at work. However, this is not an excuse to make spending choices that do not fit within the confines of your overall budget.
FOMO becomes dangerous to your finances when it leads to spending decisions that are not aligned with your long-term goals. For instance, let us say that you are saving up for a down payment for a house by putting aside $1,000 every month. Suddenly, your best friend from high school surprises you by announcing that she is getting married. Next month. In Tuscany. Do you have an extra $5,000 to blow on flights, accommodations, and other wedding-related items?
Perhaps you do, but maybe you do not. If the only way to make it to this wedding is to eat into the savings you have put aside for your down payment (or worse, go into credit card debt), then you should think long and hard about whether this purchase is right for you.
How Can You Recognize FOMO Spending?
With the advent of social media, it has become exceptionally easy to see what your family, friends, and extended network are doing with their lives. This includes the trips they are taking and the purchases they are making, and it can trigger intense envy for the lives they are living.
Jealousy is a powerful emotion, and it can cause us to make bad choices due to FOMO. Buying experiences and items because our social connections or neighbors have them–a phenomenon known as Keeping Up with the Joneses–can lead down the path of overspending and debt.
You can begin to recognize FOMO spending by taking the time to understand if your purchases are ones that you truly desire. There is nothing wrong with treating yourself if it aligns with plans your and fits within your budget. The issues arise when you go above and beyond your intentions, while spending money that you do not have.
How Can You Avoid FOMO Spending?
The single best way to avoid FOMO spending is by being intentional with your finances. Creating a budget will help you do just that.
Budgets have a number of advantages, with the most straightforward one being the ability to view your spending behavior in stark, black-and-white figures. This can help you cut out purchases both big and small that might not make sense for you.
In addition, there are other techniques that you can use to decrease impulse purchasing. Removing your credit card from your wallet, instituting a 24 hour waiting period for purchases over $100, and lessening your social media consumption could help you avoid the trap of FOMO spending.
Lastly, if you feel particularly susceptible to social pressure, consider loud budgeting, the social media trend whereby users broadcast their spending intentions to their networks. Sharing your objectives has been proven to help keep people on track with all sorts of lifestyle goals. It also has the built-in advantage of giving you an excuse to say “no” to various opportunities to spend your money if they do not align with your predefined, now public goals.
Conclusion: The Importance of Long-Term Planning
There is something romantic about dropping everything on a whim to jet off to Paris for the weekend. It is also a great way to ruin your financial plans, by diverting money away from your long-term goals.
The best way to achieve the financial objectives that you desire is by creating a roadmap for your spending choices. Whether you are using the 50-30-20 budgeting rule or another method, it is important to balance your short-term spending with your long-term goals.
It is okay to give into temptation now and again, and FOMO-inspired purchases can occasionally lead to some memorable experiences. However, if you are always focused on instant gratification, you will eventually miss out on your long-term financial desires, for you and for your loved ones. That would truly be FOMO that you would deeply regret.
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