Buying a Home

FOMO pushing millennials into debt

(Special) – For younger people it’s often referred to as the “Fear of Missing Out” (FOMO) while for older ones it’s commonly known as “Keeping up with the Jones’.” Both are very real human impulses and tendencies, but no matter how you define them they are helping to put Canadians in debt.

FOMO is a belief that others might be having rewarding experiences from which one is absent, a social anxiety characterized by a desire to stay connected with what others are doing, a fear of regret which may lead to a compulsive concern that one might miss an opportunity for social interaction, a novel experience, a profitable investment, or other satisfying events.

Keeping up with the Jones’ is an idiom in many parts of the English-speaking world referring to the comparison to one’s neighbours as a benchmark for social class or the accumulation of material goods. Failing to keep up is perceived as demonstrating socio-economic or cultural inferiority.

A recent survey from credit score agency Credit Karma found that half of Canadian millennials admit to going into FOMO debt by at least $500, mostly for vacations, weekend trips and after-work dinner or drinks.

Overspending on FOMO is leaving them feeling guilty half of the time, shameful 24 per cent of the time and angry or resentful 20 per cent of the time. Sixty three per cent of those who went into debt to keep up with what their friends were doing typically kept the debt a secret and 35 per cent said they don’t feel comfortable saying “no” when a friend suggests an activity they can’t afford.

“FOMO is all about experiences and momentary satisfaction not about assets like Keeping Up with the Jones’, which is more about getting a bigger home or more expensive car,” Monisha Sharma, head of development for Credit Karma in Canada, said in an interview. “At the end of the day once that meal with drinks is over, no matter how enjoyable what has it really done for your future?”

While FOMO spending is mostly about experiences, it is not entirely about trips or nights out with friends.

To keep up with their peers many young Canadians feel pressured to go into debt to buy clothes (32 per cent), electronics (29 per cent), cars (13 per cent) and homes (11 per cent). Thirty per cent said they spend money on an item or experience at least a few times a year just so they can post about it on social media.

“Young adults clearly care about maintaining strong friendships and social live, which is great, but it shouldn’t come at the cost of your financial stability,” Sharma said.

The first thing people should do to try and avoid FOMO spending and keep on budget is to be honest about their finances.

The survey found that 69 per cent of young adults in Canada think their friends make more money than they do, but in reality far fewer (41 per cent) actually know how much their friends make.

Sharma says sticking to a budget doesn’t have to mean not having fun with friends. Consider cheaper alternatives to going out for dinner and drinks or a fancy vacation by having a potluck supper, going for a hike in the park, having a party at home and taking a stay-at-home vacation.

Also, leave the credit cards at home to help avoid overspending. Consider keeping a separate savings account that you can use for short-term spending and consider taking cash or a card linked to that account when you go out so you have a fixed amount you can spend.

The survey showed that 32 per cent of respondents went into debt of $100 or less to keep up with their friends, 17 per cent went into $101 to $250 of debt, and 18 per cent $251 to $500 and 33 per cent went into debt of more than $500.

These are not large amounts, but over time they can compound and throw you off your budget and financial plan.

Talbot Boggs is a Toronto-based business communications professional who has worked with national news organizations, magazines and corporations in the finance, retail, manufacturing and other industrial sectors.

Talbot Boggs , The Canadian Press