About a month ago, I talked about how “fear of missing out” is an actual phenomenon and how it has a real impact on people’s mental health. Well, I’m revisiting the topic today to talk about another aspect of it that affects people: FOMO spending. FOMO spending is when someone spends money on experiences or items in order to match his/her friends’ lifestyles. Although it isn’t inherently a problem, it is definitely an issue that people need to be aware about. In the past, it was about keeping up with the Joneses and now people are Keeping Up with The Kardashians. All jokes aside, FOMO is costing people money – in particular, the youth (1).
In a 2018 study conducted by Credit Karma and Qualtrics, it was revealed that a significant percentage of American millennials are putting themselves in debt just to keep up with their friends. Of the 1045 people surveyed, about 40% of them admitted to spending money they didn’t have in order to participate in activities with their friends (1). These activities ranged from food to drinks to clothes, with 60% of them saying they spend their money on food (2).
In their heads, they rationalized the purchases as acceptable because their peers seemed able to afford similar products. The odd thing was that many of those who went into debt over FOMO spending did not tell their friends about it (1). Although they could somewhat rationalize the purchases to themselves, they were not able to dismiss the financial strain it also brought.
From further analysis, researchers learned that millennials have reasons as to why they don’t tell others about the financial stress, and it has to do with social anxiety:
It appears that the millennials are spending their money because they are afraid of the potential (and maybe imagined) backlash that they could face in return. If they don’t join in the festivities, the others could think they are boring or not part of the group.
However, research shows that two-thirds of millennials regret spending more money than they had planned on different outings and items. It would have been easier for them to skip that music festival or not buy that last round of drinks, but their want for social connection got the better of them. At the same time, about 27% of millennials feel awkward turning down their friends when they suggest plans out of their budget.
Just to give some perspective, Credit Karma found that its millennial members in the US who already have debt have an average of about $46,713 in debt. As to how much of this debt can be accredited to FOMO spending is not exactly distinguishable, but there is no doubt that it is pretty hefty. Credit Karma found that about 38% of millennials spend over $100 over the weekend when they’re out with friends. That amount of money can build up over time without you noticing (or you do notice and you’re panicking) (2).
In a different study by Allianz Life Insurance Company, almost 90% of the millennials who filled out the survey stated that social media makes them compare their own finances and lifestyles with their peers (3). This generation reported feeling the effects of social media on their spending at a much higher level than every other generation.
And a lot of this has to do with how much attention they pay their friends and colleagues. About 3 in 5 Americans pay more attention to how their friends spend money compared to how they save money (4). It’s no wonder at all that people are spending quite a bit of cash to maintain good appearances.
Now, that was a whole lot of numbers and statistics to give you.
To sum that all up in words, here is the main idea: through popular social media platforms, people are able to catch glimpses into the lives of their friends and peers. While this can be a fun and exciting thing, it also can cause social anxiety and feelings of inadequacy among the app users.
In response, some of the users spend money in order to replicate what they see in posts and stories – sometimes spending much more than they can really afford.
1. Albert-Deitch, Cameron. “A New Study Reveals the True Cost of FOMO.” com, 1 May 2018. https://www.inc.com/cameron-albert-deitch/study-finds-the-cost-of-fomo.html
2. Devaney, Tim. “Nearly 40% of millennials overspend to keep up with friends.” Credit Karma, 5 April 2018. Credit Karma, Inc. https://www.creditkarma.com/insights/i/fomo-spending-affects-one-in-four-millennials/
3. Carter, Shawn. “Social media may be making you overspend—and it’s not just because of the ads.” com, 15 March 2018. NBCUniversal. https://www.cnbc.com/2018/03/15/social-media-may-make-you-overspend-and-its-not-just-because-of-ads.html
4. “Modern Wealth Survey.” Charles Schwab & Co., Inc, n.d. Charles Schwab Corporation. https://www.aboutschwab.com/modernwealth2019