Social media makes it easy to stay in touch with friends and family, spot the latest trends, and follow the news while enjoying the occasional cat meme. But your social media habits could have a negative effect on your finances if you feel pressured to spend unnecessarily in order to maintain a lifestyle that you can’t really afford.
FOMO or fear of missing out is a well-documented phenomenon that can drive people to make decisions based on things they see other people doing on social media. When the concept of FOMO is applied to money, it can lead to overspending and dangerous financial behaviors, all for the sake of getting likes and clicks.
Understanding how social media can hurt your finances can help you break the FOMO cycle and make smarter decisions with your money. Read on to learn:
• The negative financial effects of social media
• At worst, how social media can impact your finances
• How to reduce the financial impact of social media.
Negative Financial Effects of Social Media
If you’re busy checking your favorite influencers, you may not realize how social media keeps you poor. After all, these people might be making a living on social media, so how can it possibly be bad?
The reality is that social media can influence how you manage your finances in a number of ways. If you’re wondering how Twitter or Facebook can impact your finances or whether Instagram and Snapchat are contributing to your lack of cash, here are some of the potentially dangerous side effects to consider.
Social media can contribute to impulsive or compulsive spending if you’re constantly trying to keep up with trend-setters or you’re buying “stuff” to satisfy your emotional needs. For example, you might see your favorite beauty influencer touting a new $50 lipstick or $500 dress and decide that you need to buy it too to feel beautiful.
What you might not know is that the influencer is being paid to advertise these items on their social media accounts and they didn’t purchase it themselves. In that sense, social media can be a trap for overspending because it’s easy to adopt the mindset that since everyone else seems to be doing it, you should too.
Distractions Causing Less Time for Budgeting and Managing Finances
Social media can also keep you poor if you’re spending so much time online that you’re not keeping up with your budget. Whether you use an envelope system or the 50/30/20 budget rule, a budget is at its core a personal plan for spending the money that you earn each month. Without a budget, it’s much easier to lose track of expenses and give in to FOMO spending.
You might also turn a blind eye to how much debt you might be racking up as a result of social media-driven spending. By the time you get around to taking a break from social media, you could have a stack of credit card bills to deal with.
Trying to Keep Up With Your Friends
The types of people you surround yourself with can have an impact on how you manage your money. If your social media feeds are full of friends who are going off on expensive vacations, driving flashy cars, or buying big homes, it can be very tempting to try to match those behaviors in your own life.
The problem is that unless your friends have spilled the beans, you don’t really know how they’re able to afford those things. They could be living in a beautiful home, for example, but struggling to make the mortgage payments each month. Or they might drive a luxury vehicle with a four-figure car payment. Or perhaps their family is wealthy and helps them with their bills.
If you try to replicate their lifestyle, it’s possible that you could quickly find yourself struggling financially. On the other hand, developing financial discipline can make it easier to live a lifestyle that you enjoy, without causing yourself unnecessary stress.
Buying Trendy Items
Ever bought something just because you saw it advertised on your social media feeds? That’s one tricky way that social media platforms keep you broke.
You might buy something because the ad makes the items seem as if it will dramatically improve your life. Or perhaps it’s something that everyone else is buying and you want to feel like you’re part of the trend. The trouble is that once the trend eventually dies, you’re stuck with that item and you’re out the money you paid for it.
That’s not just limited to clothes, bags, or accessories either. Meme stocks, for example, saw a huge uptick in the early part of 2021 thanks to a group of Reddit traders touting the benefits of GameStop and other stocks.
While some investors who jumped on the trend were able to make a lot of money in a short period of time, others saw big losses once the trend began to lose steam. In other words, proceed with caution.
Dealing With Constant Advertisements
Ever been searching for something on Google, then you open up social media and see an ad for it? If you’re trying to wrap your head around how Snapchat or Facebook can impact your finances, targeted advertising could be the answer.
The average person can see as many as 10,000 ads per day and quite a few of them are concentrated on social media outlets and search engines. And once you see an ad, it’s hard to unsee it. The flashier the ad, the more you might be tempted to click and make a purchase. If you’re trying to quit spending money, ads can be the biggest roadblock to your success.
Falling Into the Trap of an Influencer’s Fantasy Life
At first glance, influencers seem to have it made. They’re living in nice homes and wearing the latest designer clothes, they look perfect, and they’re rich. Or at least, that’s the way it seems.
Following influencers can be harmful to your mental and financial wellbeing if you feel like you need to try to emulate their lifestyle. Once again, you don’t know what their life is like behind the scenes or how they’re financing it. For every big influencer making six or seven figures, there are scores of micro-influencers who are making much less. And in some cases, they may be dressing up their lifestyle for the camera to hide the fact that they’re not truly wealthy. Or they may just be showing off swag that they got for free or are being paid to promote. Try to keep up, and you could see your financial wellness spiral downward.
Helpful Tips to Reduce the Financial Impact of Social Media
What happens if you fall into any of the traps above? High credit card debt, empty bank accounts, and increased stress can all be signs that social media may be negatively affecting your money management.
Fortunately, there are some things you can do to reduce the negative impacts social media might be having on your financial life.
Unfollowing Brands and Influencers
Hitting the “unfollow” button on brands and influencers can remove those accounts from your social media feeds. And it can be a major, positive moment in your financial self-care. When you can’t see what an influencer is up to or what a brand is advertising, there’s much less temptation to spend. You can instead focus on following accounts that add to your quality of life in some way (perhaps with money-saving hacks).
Focusing on Yourself and Managing Finances
Turning your attention to mastering personal finance basics is another way to break the cycle of allowing social media to influence your money decisions.
For example, if you don’t have a budget in place yet, you can block off an afternoon or evening to sit down and make one. Or you could spend time researching the benefits of an emergency fund and the best place to open a savings account.
Replacing social media time with these kinds of tasks can help you to improve your financial situation little by little. And the more you learn about personal finance, the more motivated you might become to save more while spending less.
Improving Your Money Mindset by Removing FOMO
Taking the FOMO out of your financial decision-making can go a long way toward bettering your money situation. Instead of automatically allowing yourself to spend, ask yourself why you feel tempted to do so. For example, if you see an influencer sporting a new $500 bag that you’d like to buy, take time to analyze what that bag is really going to cost you.
How many hours of work will you need to do to make the $500 after taxes needed to pay for it? And how often will you use the bag? What will it add to your life? Asking these kinds of questions can help you to decide if a purchase that’s FOMO-driven is truly worth it.
Budgeting for Any Purchases You Make
A budget is a simple but powerful tool for controlling spending. You can use a budget to minimize the negative impacts of social media by committing to only spend money on planned purchases. That means no impulse buys or unanticipated spending.
True financial emergencies can be the exception to this rule. If you’re building an emergency fund, you can use that money to pay for any unexpected expenses that might come along. Otherwise, if it’s not in the budget, you don’t spend it.
Recommended: Guide to What Is (And Is Not) a Financial Emergency
Setting a Waiting Period Before Making a Purchase
Applying a temporary 30-day rule can help to curb FOMO. The 30-day rule advocates delaying impulse buys for 30 days to decide whether you really want to spend money on them or not. Taking time to let the idea of the purchase cool off can give you perspective on whether you should spend the money.
At the end of the 30 days, you might decide that the purchase isn’t that necessary after all. Using the 30-day rule can keep you from wasting money on things you don’t need or won’t use.
Setting a Screen Time Limit on Your Phone
Globally, the average person spends two hours and 27 minutes on social media per day. If you’ve never kept track of how much time you spend scrolling each day, you might be surprised by what it adds up to.
A simple fix is setting limits on screen time. So, for example, you might allow yourself 10 minutes to check social media on your lunch break and another 20 to 30 minutes in the evening. Spending less time on social media can free you up for other things, like managing your finances or developing healthy, inexpensive hobbies.
Deleting Social Media
If you continue to feel like social media is negatively impacting your finances, you could simply delete it altogether. Removing social media apps from your phone means you can’t just scroll mindlessly and find yourself in a sea of ads and promotions.
This action can also make it easier to set limits on screen time if you’re having to open up your laptop to check social media. Yes, you still have your accounts; removing the apps alone won’t delete them.
If you want to take your social media purge to the next level, you can delete your accounts and profiles altogether.
Recommended: Are You Bad with Money? Here’s How to Get Better
Curating Social Media Feeds
If you don’t want to abandon social media entirely, you could try curating your feeds instead. Social media algorithms are designed to show you more of the things you’re already searching for or suggest things based on your search history. By focusing your searches on things that provide you with real value and inspiration, you may be able to weed out influencers or excessive ads that could lead you to overspend.
Removing Payment Apps From Your Phone
Mobile payment and mobile wallet apps can make buying things online or in stores convenient. Instead of fishing out your debit or credit card and typing in all those digits, you can pay with a click or a tap at checkout.
The problem is that mobile payment apps can make it all too easy to make purchases without thinking. Removing those apps from your mobile device (typically, just by holding your finger on the app till the x appears), unlinking your cards, or deleting your accounts altogether can make it easier to avoid situations where you might spend without thinking. Having to take the extra time to break out your plastic and type in the digits might provide much-needed time to think over the urge to buy.
Improving Financial Accountability
Being accountable to yourself about what you spend can act as a motivator to limit unnecessary or frivolous spending. If you’re having a hard time staying accountable and sticking to your budget, you might enlist the help of a friend or family member to reinforce positive financial behaviors.
For example, if you’re about to spend money on the latest accessory or electronic gadget, you can call up your accountability partner and ask for advice. They can talk you through whether the purchase is a good idea or not and help you put into perspective why you should — or shouldn’t — spend the money.
Managing Finances With SoFi
Being aware of how social media can hurt your finances can help you take steps to counteract its negative impacts. For example, streamlining your financial accounts can make it easier to keep tabs on your money.
When you open a new bank account with SoFi, you can get access to checking and savings in one place. You can manage your money online or through the SoFi mobile app and enjoy special member benefits, including a competitive APY on balances and getting paid up to two days early with direct deposit.
Are there positive financial impacts of social media?
Social media can have a positive impact on your finances if you’re following accounts that genuinely help people manage their money better. For example, you might learn about new budgeting techniques, pick up savings hacks, or get tips on how to reduce expenses by following reliable financial accounts on social media.
Does social media lead to debt problems?
Social media can lead to debt problems if you’re charging more than you can pay off on your credit cards or taking out loans to finance a lifestyle that you can’t realistically afford. You might get into a situation where you can’t afford to pay your bills.
What are good financial accounts to follow on social media?
When deciding who to follow on social media for financial tips or advice, do your research. Look at their follower count, but also consider the quality of the advice they’re offering. You can look at their credentials to see if they have any financial certifications, are affiliated with respected financial institutions, or have personal experience dealing with the type of advice they’re offering. And be wary of any influencer whose only goal seems to be to sell something to you.
Photo credit: iStock/Suwaree Tangbovornpichet
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