How to prevent 'FOMO' from wreaking havoc on your finances
Loonies in Vancouver, on Sept. 22, 2011. (THE CANADIAN PRESS / Jonathan Hayward)
Published Monday, June 13, 2016 6:20AM EDT
A new report suggests that "FOMO" – the fear of missing out – is hitting millennials' finances, and one financial expert is warning that over-spending on social outings today can have serious effects for years to come.
A new report by RateHub.ca surveyed approximately 900 Canadians about their spending habits and found that 26 per cent admit they suffer from FOMO, and 70 per cent attribute up to a quarter of their debt to FOMO spending.
The survey also found that 48 per cent of FOMO spenders are millennials.
In the age of social media, where it may seem that every concert, vacation and brunch is prominently featured online, financial planner Sophia Bera says the pressure to spend has intensified.
"So many people are taking photos of everything they do," Bera told CTVNews.ca in a phone interview. "But a lot of what they're putting on social media is the highlight reel."
Bera, a Texas-based financial planner who specializes in advice for millennials, says FOMO spending tends to be a bigger problem in larger cities.
"My clients who live in New York have a really hard time to saying no to going out for brunch, or out for drinks," she said. "They also have other financial goals, like paying off school loans, but those maybe don't align with other constant social pressures."
Bera said young adults often feel pressure for "smaller-ticket items," such as music festivals or weekend getaways.
But she noted that the pressure doesn't necessarily go away with age.
"I would say, for older generations, there's pressure to have a nice car, or nice house, or take the kids to Disney."
Interestingly, the report found that Canadians with yearly incomes less than $35,000 and those with salaries of $100,000 or more, are more likely to have FOMO debt.
Bera said, with lower-income earners, a smaller extra expense such as a dinner out can take a big bite out of their monthly budgets.
Alternatively, on the higher end of the income scale, individuals often feel pressure to keep up with their peers.
"For that demographic, it feels like everybody is always doing something," she said.
Effects of FOMO spending can last decades
But Bera notes that FOMO spending can impact your personal finances for the long-term.
"It might be $2,000 of debt in your 20s that balloons to $20,000 in your 30s, which leads you to filing to bankruptcy in your 40s."
While it may be hard to ignore you friends' social endeavours, Bera said keeping larger financial goals in mind may make it easier to say no social outings.
"It's really about using you money to match your values," she said.
Bera admitted she's a foodie, so she'll allow herself to splurge on an occasional dinner, but not necessarily on a shopping spree.
"If you make smarter financial decisions in your 20s, it's going to pay off in your 30s, it's going to give you options and opportunities in your 40s and you're going to be able to retire earlier in your 50s and 60s," she said. "But it starts by making good decisions when you're young."
If you're finding it difficult to shake the FOMO feelings from your consciousness, Bera suggests more drastic measures may be needed.
She said she once advised a client to "get new friends" – ones who don’t necessarily value going out to the newest, hottest restaurant.
"Always keep your bigger goals, whether that's getting out of debt, building up savings, getting on track for retirement or saving for a home, in mind," she said.
"Do you really want to let your friends deter you from those kinds of things, or do you want to have friends that support you?"
Here is the infographic from Ratehub.ca: