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In general, money decisions should be made in a mindful, considered way — not as the result of an subconscious reaction. That’s why FOMO, or the “fear of missing out,” can be harmful to personal finances. Read on to learn more about this psychological phenomenon, how it may affect your money decisions, and what you can do about it.
What is FOMO?
Even if you’ve never heard of FOMO, you’ve likely felt it at some time. It’s the sensation of unease or anxiety that comes from feeling like other people are having a better time, getting a great deal or living a better life than you. It can be a moment of discomfort when you hear about a coworker’s promotion or scroll past a friend’s vacation pictures on social media. Like “keeping up with the Joneses” before it, FOMO appeals to emotions and can prey on insecurities.
FOMO originates from the marketing world and hit the mainstream alongside the popularization of social media. It makes sense. Advertisers try and convince you you’re missing out in order to sell their products.
Social media use is connected to FOMO, so it’s crucial to remember that these accounts are curated. Social media posts contain, at best, only part of the true picture.
FOMO and money
When you experience FOMO, you might feel dissatisfied, anxious, restless or sad. The sensation of missing out may spur you to make impulsive or ill-considered decisions.
This is especially dangerous when it comes to managing finances. Usually, money decisions are best made after research and with a clear head, but FOMO can lead to feeling like you must act fast or lose your chance.
FOMO may lead to hasty money decisions, including:
Excessively risky investments
Overspending on social activities or luxuries
Making yourself vulnerable to scammers
Neglecting savings and retirement planning in favour of immediate spending
How to manage FOMO when it comes to finances
Even simply understanding what FOMO is can empower you to make better financial decisions, but there are some other tactics you can use to improve your outlook.
Limit social media. Fear of missing out, along with anxiety, depression, and loneliness, is reduced when you limit your time on social media, according to researchers.1 Additionally, you might consider unfollowing accounts or blocking ads by financial “influencers” who advertise get-rich-quick schemes.
Take a time-out. FOMO can have conscious and unconscious causes — some you may aware of at the time and those you may not be. If you feel drawn towards a hasty money decision, give yourself a day or two to consider the matter. It’s important to make conscious choices based on personal financial goals and circumstances.
Get a second opinion. If you’re considering an unusual purchase or investment, consult others. This could be a friend, colleague, or financial professional. Remember: If you feel uneasy or embarrassed about sharing your idea, your intuition could tell you something is off.
Build an investment strategy. Having an investment strategy — that is, one that’s built on your goals, risk tolerance, and time horizon — can help you stay on track. It’s a good idea to consult with a financial professional both to build your strategy and periodically thereafter to ensure your financial position is where you want it.
FOMO is a surprisingly common experience; you don’t have to let it hijack your well-laid financial plans. Build a financial plan that will work for you and leave the fantasies where they belong — on social media.
This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.