It’s probably happened to you before: You’re scrolling through Instagram and see a friend’s recent trip to the Caribbean. Then a targeted ad interrupts your feed with a pair of shoes you’ve been eyeing. Before you know it, you’re hitting “purchase” on an item you don’t need — or worse, one that puts you into debt.
“We are looking at our phones, constantly scrolling through social media,” said Dr. Robi Ludwig, a psychotherapist and author based in New York. “And it’s evolved into an online mall. We receive regular ads based on what we like and shop for. If you see something often enough, it turns into a feeling of ‘Oh, I should get this.’”
Americans rank social media as their worst influence when it comes to managing their money, according to Charles Schwab’s 2019 Modern Wealth Index Survey.
“The pressure ‘to keep up with the Joneses’ is now more heightened than ever due to social media,” said Rob Williams, vice president of financial planning for the Schwab Center for Financial Research.
How FOMO can lead to debt
Ever gotten jealous of your friend’s new car or splashy vacation? You aren’t alone.
The Modern Wealth Survey found a third of Americans say they’re influenced by social media to spend money. Pressure to spend is especially strong among millennials: Around 50% admit to spending more than they can afford to avoid missing out.
“It’s driven by the feeling that it's worth buying more than you otherwise would, or buying something you wouldn't normally want, because others are doing it,” said Alia Dudum, millennial money expert at LendingClub, a peer-to-peer lending company.
Social media conditions you to want what you don’t have, like that latest outfit or phone, said Dudum. Features like one-click purchasing have made it easier than ever to spend.
“It’s hard not to overspend when we’re inundated with posts of celebrities and friends alike showing off lavish lifestyles or a recent major purchase,” she said.
Avoiding social media temptations
Building a healthy relationship with money is a good way to avoid social media temptations, said Williams.
“Spending is not the enemy,” he said. “Rather, it’s about balancing spending and saving so we can enjoy life’s experiences along the way and still achieve long-term financial security.”
While it’s easier said than done, take a breath before purchasing something online. Think about the broader financial implications of your purchase, said Dudum.
Next time you have the urge to buy, Dudum suggests this trick: Keep the item in your cart for 72 hours. If you forget about it, you probably didn’t need it. Or consider a “tech cleanse” and ditch social media for a week or two. This may eliminate impulse buying and one-click shopping, Dudum said.
Improving your spending habits in 2020
Have a resolution to do money better this year? It doesn’t need to be complicated. Here are some simple steps to get started:
- Set goals. Setting achievable financial goals can help you feel confident purchasing something without ruining long-term financial security. Create a financial plan that includes your goals and current financial situation.
- Make a budget. Once you have your plan in place, create a budget to monitor your spending (we have a downloadable one here).
- Seek out professional advice. A financial adviser can help make a plan to reach your financial goals.
“Social media can create a ‘fear of missing out,’ and this pressure will only continue to become more extreme,” said Williams. “Instead of completely resisting the urge to spend at all, think about finding the right balance between spending on treats and your long-term financial goals.”
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Image: Hilthart Pederson