Financial FOMO hurts your social life, attacks your confidence, and can lead you to making decisions that hurt your wallet and limit your ability to grow wealth. Yuck! Needless to say, being self aware and identifying financial FOMO in its early stages gives you a major leg up in life.
In this post we’re going to cover the basics of financial FOMO and its most common triggers. Then we’ll get into how to avoid this ugly character trait and boost your happiness and overall financial wellness!
What is financial FOMO?
It’s like regular FOMO (fear of missing out), but specifically related to personal finance.
Example: You might feel some significant FOMO seeing individual stocks like Tesla soar over the past few years while you are investing in plain old index funds. Or sometimes seeing house prices sky-rocketing can make you feel like you are the only person in your peer group not building equity in a home. This can make you feel like everyone else is getting rich, and you are aren’t. Not fun.
But living life according to that financial FOMO could cause you to speculate and make dumb money decisions. Like buying Bitcoin just because others have seen success. Or rushing the purchase of a home just to be like your friends when it’s actually a horrible choice for you personally.
Who is most susceptible to financial FOMO?
So is susceptible to FOMO? Or do some folks more inclined to feel a more severe emotional reaction? Stats certainly point towards younger folks, who have grown up being constantly “connected,” as having more financial anxiety in general and an increase in that fear of missing out.
But it isn’t just the youngest folks in our society. People who consider themselves news junkies and even social extroverts are at a higher risk for feeling FOMO as well. The truth is, we all feel like we’re missing out every now and again. But acting on that feeling is what can get us in trouble.
Just remember there was once a life without internet. (Or at least when it was just dial-up internet which was pretty similar to life with no internet 🤣).
Main triggers of financial FOMO:
Here are some of the main reasons financial FOMO rears its ugly head in today’s world.
Comparison: In the world of money, comparison can be the enemy of attaining our investing or savings goals. It’s the keeping up with The Jones’ and ‘Treat yo self’ mentalities that cause us to put too much emphasis on the here and now. It harms our ability to delay gratification for our own future good.
Excessive media consumption: When you absorb too much information (without taking any *action*) it can lead to you feeling off balance and behind in life. Of course you’re not really behind, it’s just the story that you’re telling yourself because of all the social media you consume.
Unhealthy friendships: Everyone has insecurities. But some friends cover them up by boasting and over-exaggerating their successes. This subconsciously (or sometimes purposely) puts others down in order to prop themselves up. Having friends that “showboat” all their financial success (even if it’s not all true) can make you feel financial FOMO.
How to avoid financial FOMO
OK, so we’ve talked about some of the ways that financial FOMO can creep into our lives and wreck our personal finances. Now let’s get to ways that you can avoid financial FOMO so that it doesn’t lead you in the direction of regrettable money moves that prolong your ability to achieve financial independence.
1. Cut the noise as much as possible
And by this we mean news, social media, advertisements, etc. Many people soak up as much as they can and use the excuse that we are just trying to ‘stay informed’. But is all news relevant and adding value to our life? Nope!
Try and confine your news intake and attempt to find better venues to get information. When we had Rachel Cruze on our show she admitted that she used to check her email first thing when she woke up. That can start the day off on the wrong foot! So allow yourself at least a cup of coffee and a few moments of silence before you check Twitter or work stuff.
Avoiding financial sites touting the latest investing trend will help lessen the tug at your FOMO feelings. Stop watching CNBC, stop looking at your retirement account statements so frequently, and definitely don’t check stock prices every 5 seconds. Stats have shown that the more frequently investors check their 401k statements the more likely they are to make ill-informed changes to their investments.
Another recommendation: Begin to cut the number of ‘influencers’ or lifestyle accounts you follow on social media. Most of what you see is the “highlight reel”. People often display the best parts about themselves online.
Did you know that some influencers even rent rooms that make it look like they are in a private jet just to signal wealth and status to their audience!? Faux opulence is in full force. Remember that next time you feel the tinge of FOMO while scrolling Instagram.
2. Audit your friendships & social circles
Speaking of unfollowing influencers, maybe that even means unfollowing some of your actual friends as well. This doesn’t mean that you’re not still friends with them IRL. But give them a call and actually catch up about the stuff that matters, instead of just seeing their social media posts, which can be misleading.
This might sounds like a weird suggestion, but having more open and honest conversations with your friends about money might help with financial FOMO. Typically friends only discuss the money wins and successes they have. And don’t feel comfortable talking about losses or silly mistakes. Or they avoid talking about money altogether. But being more vulnerable and having more ‘real talk’ money convos is a healthy trend worth starting amongst your peer group. Not only will it avoid FOMO feelings, it’ll strengthen your relationships at the same time.
3. Create a money plan (and stick to it!)
Having a plan is great. Having one that you can stick to is even better.
I’ll admit that I’ve had some serious financial FOMO not being in on booming meme stocks and even some cryptocurrencies. It crosses my mind to switch up my portfolio completely. But then I remind myself that I’m not investing to get rich quickly. I’m doing it to gain financial security, freedom, and stability for me and my family. And by putting my portfolio at risk by not diversifying, I’m putting that goal of financial stability at risk.
Writing that plan out is a key part of having a plan. Our brains can easily play tricks on us and allow us to bend the truth when we’re in an emotionally vulnerable spot. And that’s exactly what is happening to us when financial FOMO is coursing through our veins. We’re far more likely to react emotionally.
Another way to ensure that you stick with your plan is if your plan aligns with your values. It needs to be durable, through thick and thin. We talked about this with Morgan Housel on the podcast. He paid off his home even though it wasn’t the best use of his money from the strict numerical standpoint. But that allows him to stay 100% invested in stocks through thick and thin. Not to mention the peace of mind that it brings.
All in all, being patient and having a solid written financial plan directs your behavior in the moments where you’re inclined to shake things up, and it helps you avoid financial FOMO.
Pro tip: Sometimes having a question checklist before buying something helps!
4. Have a release valve
It can also be helpful to have a release valve that allows you to scratch smaller financial FOMO itches so they don’t become full-blown FOMO chicken pox.
For example, you could create a spending release valve. When you feel like you’re missing out on expensive trips or hobbies that your friends are blowing their cash on, you could opt for a personal splurge (but on a much cheaper activity). Think a nice 4-pack of a delicious hazy IPA. It allows you to still treat yourself, without absolutely blowing your budget.
The best investing release valve is to dedicate a percentage (5% or less) of your portfolio to investing in companies or sectors that intrigue you. Want to own a little Tesla stock or have the ability to do some investing experiments? That’s totally fine! But it’s important to confine those experiments to a tiny portion of your overall portfolio.
Interestingly enough, allowing yourself just that little bit of wiggle room can be just the release valve you need. It’ll keep the 95% or more of your money in more boring investments for your future.
Related: 12 Cheap Hobbies to Try
5. Be mindful of unrealistic comparisons
Don’t compare someone else’s end-game to your start game. Sometimes what we see is someone just crossing the finish line, not comprehending the full marathon they’ve struggled through.
For example, a friend of mine just bought an apartment complex. I’m stoked for him, but I’m also a little jealous – I want to own an apartment complex, too! So I sat down with my friend and asked if he could help me buy an apartment complex, ideally in the next 60 days. And that’s when I realized the entire backstory… My friend has been researching and learning about apartment complex investing for 3 years. He’s attended conferences, worked with mentors, and evaluated hundreds of deals just to finally buy one of them. There’s no way he could help me do the same thing he did in a short period of time. If I wanted the same end result, I’d have to go a route similar to his. Which would involve a lot of sacrifice and intentionality.
Another example is listening to a gambler detailing his or her most amazing day at the table. It makes you think gambling is easy, and maybe you could achieve similar results in just one day at the Blackjack tables. But that gambler’s story likely left out the part about them losing a fortune over the prior years.
To combat financial FOMO, you can’t compare yourself to other people’s successes. You can learn from them, and even use their story as inspiration! But if you dig deeper into the backstories, you’ll probably realize that achieving the same outcome as them is unrealistic.
6. Be patient, and think long term.
If all your friends are going out and buying brand new SUVs, does this mean you should do it too? You might be tempted by financial FOMO, feeling bad that you’re the only person without a new truck.
But think about this… what if instead of following suit you invested all that money?
Let’s say instead of a $1,000 per month car payment you socked away that money into the stock market for 15 years. At an 8% average growth rate, this would grow to a whopping $325,825!!! You’d have enough to buy a $100k brand new truck, own it free and clear, and still have $225k left over. Actually, if you wanted to, you could buy 3 SUVs!
Delayed gratification is a valuable character trait. Practice it regularly to grow your net worth. You don’t need to have it all “right now”. You will have everything you want in life (and more) in due course. Your patience, not giving into FOMO, will pay off over time.
The Bottom Line:
Financial FOMO, at its heart, is reactionary. We’re tempted by various inputs (like the news and social media) to buy something new or make changes to our lives when just a few minutes ago we were mostly content with the our lives just the way they were. Knowing the subtle ways that FOMO works its way into our personal finances can be helpful so that we can nip it in the bud.
It’s important to cut out unnecessary noise and create a plan that you can stick to. Remind yourself that everything you see doesn’t always accurately reflect the truth. We’re always being sold a version of the truth instead of the full meal.
And honestly, living life on your own terms is way better than buying into much of the stuff that FOMO is pushing you towards. Being content with your work, life, and finances is a great goal to have amidst the sea of everyone wanting it all.
Beer Tasting Notes:
While talking about financial FOMO we shared a Daaank Daniel by Heist Brewery in Charlotte NC. We could really use your help to spread the word- let friends and family know about How to Money! Hit the share button, subscribe if you’re not already a regular! And give us a quick review in Apple Podcasts or wherever you get your podcasts. Help us to spread the word to get more people doing smart things with their money in these difficult times!
Best friends out!
