The True Cost Of FOMO Debt

We all deserve to enjoy good times with the ones we love, but eating out, activities and experiences cost money. 2019 research shows that FOMO, the fear of missing out, induced debt is on the rise, increasing 40% from 2018.

FOMO is the worry that something fun, enjoyable or exciting might be happening elsewhere, and you’re not involved. There’s no doubt that this sensation is most acutely experienced by those who actively use social media. This could be because tagging, live-streaming and sharing triggers our need to be involved and included. Yet, research shows that this could be driving debt, particularly amongst millennials, with more than a third expecting to spend more than $500 every year to avoid FOMO.

Here at Wizzcash, we know that it can seem tempting to borrow a little money to enjoy a night out with friends or to buy something new because the reward is instant and paying back what you owe is something you can think about later. However, payday loans or short term loans should only only to be used when you are facing a one off, financial emergency. This is because it is a high cost short term credit and is not a sustainable way to continuously borrow. We’re looking at why FOMO debt is creeping up on millennials and what you can do to protect your finances and still enjoy your social life in our guide.

What Is Our FOMO Money Going?

As we have already highlighted, FOMO debt is on the rise, but the food industry and eating out is the leading culprit for over-spending to avoid missing out. 47% of respondents to a Credit Karma survey stated that they spend money they don’t have on food to keep up with their friends. We all know it’s cheaper to eat in or at home but enjoying a meal with friends is such a social activity, it’s not surprising that this is top of the list. This is supported by Barclaycard data that shows spending in pubs had increased, whilst spending in restaurants had increased 16% in just a year.

Interestingly, clothing was reported as the second most common thing that younger people spend on, pushing themselves into FOMO debt even further. 41% of respondents said they bought clothing to keep up with their friends. This is interesting because it is a material item that you keep, rather than an experience. Millennials are the generation cited to prioritise experiences over physical stuff, but this data suggests the younger generations haven’t completely rejected material items and their value when it comes to their social life.

Psychologist and trend forecasting experts highlight that travel, holidays and once in a life time experiences are more personalised, which means they have more value to us. The majority of cited reasons for going into FOMO debt was because of this kind of experience:

  • Travel – 33% said they financially overstretched themselves
  • Music Event Tickets – 25% said they spent money they didn’t have on attending gigs or festivals
  • Novel or once in a lifetime experience – 18% of respondents reported this as a contribution to their FOMO debt.

FOMO Debt, Who’s To Blame?

Marketing Tactics

FOMO put a name to an experience that marketers effectively exploit. Although time-sensitive marketing tactics are not new, in the age of social media, they have changed and arguably become more valuable. Marketing tactics take advantage of FOMO by showing consumers the most popular, in-demand items or options. This gives customers a kind of urgency and a fear of missing out on the best product. It also can install trust in a consumer, because they can see that the thing they are committing to buying is popular and has been well-reviewed by other consumers. This is particularly important tactic for the travel and experience industry, because customers take a risk when they buy something, receiving nothing tangible in return, just the hope of a good time and a ticket.

It’s common for companies to run offers or promotions with a very limited (and obvious) time frame. For example, sales that “only last until Monday,” are extremely effective, with one consumer saying, “I had major FOMO when I saw the ads for that Black Friday sale!”

Social Media Involvement

UK millennials and Gen Z-ers spend approximately £400 million every month to ‘keep up with the Joneses’ on social media. One article highlights that it is the speed and the amount of social content that we consume if fuelling our FOMO debt. Before social media, ‘influencing’ was done at a much slower rate, perhaps suggesting that we spent much less money to keep up. Now that we spend approximately 2 hours 23 minutes on social media per day, we are exposed to the things we feel we need more often.

Social media FOMO is about our friends as much as influencers that promote goods and products on behalf of a company. Social influencers present this picture-perfect lifestyle. Research shows that the top Instagrammers’ photos feature £6,700 of luxury items. This is an unrealistic goal to achieve for the average person with articles highlighting that spending to keep up is one of the reasons 70% of under 40’s are in debt, and FOMO debt is a huge contributor to that. Experts are highlighting that this rotating spending of ‘keeping up’ and ‘social spending’ is preventing us from achieving our financial goals, such as saving for a house, as well as our ability to cover “everyday costs”. This is most concerning because mismanaging your finances in this way could lead many people to reach out for an emergency loan when they cannot cover an unexpected bill.

Are We The Problem?

40% of millennials said that they regularly (at least once a year) buy something so that they can boast about it on social media. This kind of behaviour could fuel FOMO-debt for the individual posting, as well as their followers, friends and family who want to buy a similar product or experience just to keep up. This is supported by the number of respondents who said they overspend because of FOMO because they fear not being included in future activities (41%) and don’t want to feel like an outsider (36%). This highlights that FOMO debt could also be fuelled by a social anxiety or rejection and we pay money we don’t have to be accepted. This could be dangerous financial behaviour and lead to serious debt problems or a debt cycle.

Similarly, amongst our friends and peers, there is a stigma around admitting you cannot afford something. 80% of millennials said that they kept their debts a secret from their friends (which was in increase from 2018), because of feelings of shame. Unfortunately, there is a stigma around talking about money and affordability in social circles. 24% of people asked said that their friends can afford to buy things they can’t.

Here at Wizzcash, we understand that it can be hard to be the lower-earner in the social circle. However, it’s so important to not over-commit yourself. There are so many cheap alternatives for socialising, including great deals and vouchers available for eating out, apps like Groupon and Wowcher for experiences. FOMO debt is extremely common, so the chances are your friends are in a similar situation and a cheaper alternative might be well-received!

Wizzcash are a payday loan direct lender, as well as a broker. This means, if you have found yourself in a one-off financial emergency and need help covering your bills, we might be able to help. It’s important to note that we work to a very strict lending criteria, but you can find out more on our website.