How “FOMO” Can Hurt Your Finances

The acronym FOMO (fear of missing out), coined in 2000, has already made its way into the Oxford Dictionary. Its staying power as a colloquialism is mainly due to it being such a relatable experience.

We’ve seen FOMO play out in many ways: job FOMO, Instagram FOMO, social gatherings FOMO, vacation FOMO. But what does it mean to have financial FOMO?

Financial FOMO is the belief that you are missing out on both savings and spending opportunities (often in pursuit of the opposite). 85% of surveyed Americans report having financial anxiety. It’s no wonder financial FOMO can feel paralyzing, especially given how much financial FOMO comes from scrolling through social media.

So how do we tackle financial FOMO before it tackles us? Following are a few common “FOMO traps” I see often, plus how to evaluate if you really are missing out or if it’s best to leave your fears in the dust.

Fast Cash FOMO

It may surprise you to know that day trading individual stocks is not a part of my investment strategy.

Why? Simply put, I see day trading akin to gambling. The risks are extremely high in comparison to the potential reward.

It’s easy to look at crypto wizards and Reddit vigilantes and see massive gains on small investments, but there is an ugly downside to day trading and speculative stocks (think low cost and high risk) that we often miss.

There’s a reason why they call these stocks volatile — one minute, they’re soaring, and the next, they’re crashing. If you don’t sell or buy at the right times, you can face some pretty financially devastating consequences.

Think of this in contrast to well-diversified funds. A well-diversified portfolio means that you have your investment separated across sectors and classes, with the idea that each balances the others out.

The perks of a diversified portfolio are that when the market is volatile, you’re less likely to see widespread damages to your portfolio. Because you’re playing the long game, you won’t feel the pressure to sell when you’re at a loss (when the stock is less valuable than the price you purchased it for).

I’m not saying that you should avoid speculative investments altogether, but it’s easy to be taken in by the “shiny object syndrome” when it comes to watching others invest in this manner.

Remember, not all that glitters is gold, and if you’re in the investing game for the long haul, getting tripped up by the “fast cash” mindset can derail you from your long-term goals.

So next time you’re struggling with whether or not to invest in whatever hot, new stock is on the rise, take a second to check in with your financial goals and your risk tolerance — is the risk worth the possible reward?

And better yet — is the risk in line with my overall investment strategy?

Read More: Making Sense of Risk Tolerance

Budgeting FOMO

We’ve all seen it — a friend (or influencer) starts posting photos of a margarita in hand and toes in the sand at their latest tropical escape. Suddenly, your clothes begin to feel itchy, the room gets smaller, and your cursor has magically opened up a new browser window tracking flights to your next bucket list vacation.

But you’re on a budget. One that definitely isn’t going to cover an all-inclusive vacation next weekend in Cabo. And do you even want to go to Cabo? Or do you just need some fresh air and a meal at your favorite Mexican restaurant?

There is no doubt in my mind that social media has dramatically increased our FOMO.

This kind of FOMO is the hardest to cope with when you’re paying off debt or aggressively saving for your next big goal. It’s also where I disagree with many budgeting ideologies, which tout cutting out all luxuries of life when you’re paying off debt or saving.

Unfortunately, when we cut out life’s small “non-essential” joys, we become overzealous. We say no altogether to anything “outside” the budget, and in our pursuit of financial purity, resentment begins to bubble under the surface.

Resentment is a big part of FOMO, especially when it comes to budgeting.

So how do you handle FOMO on a budget?

In a previous article, I broke down how I recommend basing your non-essential spending and larger goal setting on three values. My personal values are travel, eating out, and nesting (think pillows, plants, and cozy things).

When you’re calculating the risk vs. reward of a financial decision, it’s helpful to have a list of your big three values in front of you.

I’m not going to create a space in my budget (or dig into savings) for a new pair of shoes or the latest handbag (no matter how cute they are) because clothing isn’t a part of my big three.

However, booking a flight when there’s a sweet deal? That I’m open to looking into it, and that’s because it’s a part of my values-based spending.

Make a list of your three biggest values and keep it handy. You’ll be more likely to evaluate your FOMO when you can directly stack your values against the purchase you have in mind.

Read More: Values-Based Spending: How I Budget for What Matters to Me

Achievement FOMO

When you first start saving or investing, it can be easy to look around and see so many others further ahead of you. I was one of the lucky ones who opened my first accounts at 21, but I talk to people daily who are 25, 40, even 55 who are just getting started.

The number one reason they didn’t start sooner?

Aside from lack of financial education, they compared their situations to others and either thought they didn’t have enough money to start investing or that it was too late to make a tangible impact on their finances.

One of the nastier elements of FOMO is that it can bring up all kinds of negative internal messaging. We feel too ill-equipped, too old, too young, too inexperienced, too whatever, to do the things we see others doing.

We all start somewhere, and you have to do yourself the favor of putting on your blinders when you start getting serious about your finances. It’s also important to remember that no matter how similar someone’s life looks to yours on the outside, you’ll never know the extenuating factors that might be contributing to their success.

When you focus too much on the achievements of others, financially or otherwise, you fail to see the big wins in your own life — and celebrating your accomplishments, big and small, is an important part of the journey.

Celebrating might look like setting a savings goal and treating yourself to a nice dinner and drinks with a friend when you hit it, or grabbing your favorite latte on the way into work every Friday after a week’s hard work of hustling at your day job.

I often find that when I allow myself to celebrate my wins, I’m less likely to build up FOMO for the things that I may have sacrificed to achieve it.

Finally Kicking FOMO to the Curb

There are so many intangibles when you’re working with your finances, and FOMO is mainly personal and will feel different for everyone because emotions are a part of finance, whether we like it or not.

If you’re still struggling with FOMO, especially surrounding a specific purchase, here are a few more questions to help separate emotions from facts:

1. Does this purchase solve an immediate need?
2. Can this purchase wait?
3. Is what I’m going to be spending worth the experience?
4. Is this purchase in line with my big three values?
5. What will happen if I don’t make this purchase? (i.e., are there consequences to not making a purchase?)
6. Is the risk of not purchasing this item greater than the reward of its use? Or vice versa?

FOMO isn’t going away anytime soon, and the more we learn how to recognize it and evaluate it against our goals and values, the sooner we’ll learn to find gratitude for the things that we have and a deeper clarity in the choices we make.

To better understand your financial values, I recommend scheduling a monthly money date with yourself. During this time, you’ll make a note of any mindless purchases and how you can avoid making them in the future. You’ll also spend time canceling unwanted or forgotten subscriptions, looking for fraud, checking your account balances in full, and making sure you are advancing toward your financial goals. By using Personal Capital, I’m able to see all of my accounts in one place, so my money dates go a lot more smoothly. In this way, I’m better able to make the money decisions that align with my values.

Start Tracking Your Financial Life

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