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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 can actually keep 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 money, along with the balance in your bank account, 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.

Overspending

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 likely 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 staying on top of your financial situation and making sure you’re sticking to 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 are being open about their finances, 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 item 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. Many young people turn to “finfluencers” to get their financial, and even investment, advice. This exposes them to potentially bad advice, as well as outright fraud.  

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 thousands of 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 checking 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.

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

The average person spends two and a half hours 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.

Recommended: Online Banking vs Traditional Banking: What’s Your Best Option?

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.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 3.60% APY on SoFi Checking and Savings.

FAQ

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.

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*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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Income-contingent payment (ICR) plans are one kind of Income-driven repayment plan, which can help make federal student loan payments more affordable. The income-contingent repayment plan allows you to extend your loan repayment period while reducing monthly payments to help them better align with your income. Any remaining loan amounts due at the end of your ICR plan term may be forgiven.

An ICR may be a good fit if you’re just starting your career and aren’t earning a lot of money. You may also consider an income-contingent repayment plan if you’re hoping to qualify for federal Public Service Loan Forgiveness (PSLF).

But is an ICR plan right for you? And what are the pros and cons of income-contingent repayment? Weighing the benefits alongside the potential downsides can help you decide if it’s an option worth pursuing managing your student loan debt.

What Is Income-Contingent Repayment (ICR)?

Income-driven repayment plans, including ICR, determine your monthly payment amount based on your household size and income. Depending on how much you make and how many people there are in your household, it’s possible that you could have no monthly payment at all.

Like other income-driven repayment plans offered by the Department of Education (DOE), an ICR plan aims to make it easier to keep up with federal student loan payments.

With income-contingent repayment, your monthly payments are capped at the lesser of:

•   20% of your discretionary income

•   What you would pay on a repayment plan with a fixed payment over the course of 12 years, adjusted for your income

Of the four income-driven repayment options, income-contingent repayment is the oldest plan, and it is the only one that sets the payment cap at 20% of a borrower’s discretionary income. With income-based repayment (IBR) and Pay as You Earn (PAYE), monthly student loan payments max out at 10% of your discretionary income. The Department of Education recently introduced a new IDR plan called Saving on a Valuable Education (SAVE), and starting in July 2024, borrowers on the SAVE plan could see their payments reduced from 10% to 5% of income above 225% of the poverty line.

The interest rate for an ICR plan stays the same for the entire repayment term. The rate would be whatever you’re currently paying for any loans you’ve consolidated or the weighted average of all loans you haven’t consolidated.


💡 Quick Tip: Ready to refinance your student loan? With SoFi’s no-fee loans, you could save thousands.

How an ICR Plan Works

Income-contingent repayment can reduce your federal student loan payments, allowing you to pay 20% of your discretionary income each month or commit to making fixed payments based on a 12-year loan term.

You have up to 25 years to repay all loans enrolled in the plan. If you still have remaining payments after 25 years of monthly payments, the DOE will forgive the balance. But while you may not owe any more payments on the loan, the IRS considers student loan debts forgiven through ICR or another income-driven repayment plan to be taxable income, so you may owe taxes on it.

Income-contingent repayment plans base your monthly payment on your income and family size. This means that if your income, or your family size, changes over time, your monthly payments could change as well. With all of the federal IDR plans, borrowers must recertify their loan every year to show any changes to your income or family size.

If you’re enrolled in the 10-year Standard Repayment Plan, your monthly payments would be the same for the entire repayment term, and you never have to recertify your loan.

Here’s an example of what your payments might look like on an ICR plan versus a Standard Repayment plan, assuming you’re single, make $50,000 a year, get 3.5% annual raises, and owe $35,000 in federal loans at a weighted interest rate of 5.7%.

	Standard	ICR Plan	Savings
First month’s payment	$383	$319	$64
Last month’s payment	$383	$336	$47
Total payments	$45,960	$49,092	-$3,132
Repayment term	10 years	12.4 years	-2.4 years

As you can see, an income-contingent repayment plan would lower your monthly payments. But it will take you longer to pay your loans off and you pay more than $3,000 in additional interest charges over the life of the loan. If you start earning more while you’re on the ICR plan, your payments could also increase.

If you get married, and you and your spouse file your taxes jointly, your loan servicer will use your joint income to determine your loan payment. If you file separately or are separated from your spouse, you’ll only owe based on your individual income.

Recommended: How is Income Based Repayment Calculated?

Who Is Eligible for an Income-Contingent Repayment Plan?

Anyone with an eligible federal student loan can apply for the income-contingent repayment plan. Eligible loans include:

•   Direct student loans (subsidized or unsubsidized)

•   Direct consolidation loans

•   Direct PLUS loans made to graduate or professional students

Other types of federal student loans may also be enrolled in income-contingent repayment plans if you consolidate them into a Direct loan first. For example, you could use an ICR plan to repay consolidated:

•   Federal Stafford loans (subsidized or unsubsidized)

•   Federal Perkins loans

•   Federal Family Education Loan (FFEL) PLUS loans

•   FFEL consolidation loans

•   Direct PLUS loans for parents

The income-contingent repayment is the only income-driven repayment plan option that includes loans taken out by parents. So if you borrowed federal loans to help your child pay for college, you could enroll in an ICR plan (after consolidating your loans) to make the payments more manageable.

Two types of loans are not eligible for income-contingent repayment or any other income-driven repayment plan:

•   Private student loans

•   Federal student loans in default

If you’ve defaulted on your federal student loans you must first get them out of default before you can enroll in an income-driven repayment plan. The DOE allows you to do this through loan consolidation and/or loan rehabilitation. Either one can help you get caught up with loan payments and loan rehabilitation will also remove the default from your credit history.

Pros and Cons of ICR Plans

Income-contingent repayment is just one option for paying off student loans, and it may not be right for everyone. It’s important to look at both the advantages and potential disadvantages before enrolling in an ICR plan.

Pros of income-contingent repayment:

•   Can lower your monthly payments

•   Parent loans are eligible for income-contingent repayment, after consolidation

•   Extends the loan term to 25 years to repay student loans

•   Remaining loan balances are forgivable

•   Qualifying repayment plan for PSLF

Cons of income-contingent repayment:

•   Other income-driven repayment plans like PAYE or SAVE base monthly payments on 5 to 10% of your discretionary income

•   Taking longer to repay loans means paying more in interest

•   If your income changes, your payments could increase

•   Enrolling certain loans requires consolidation first

•   Forgiven loan amounts are taxable

If you’re interested in an income-driven repayment plan, it may be helpful to do the math first to see how much you might pay with different plans. An income-based repayment option, for example, might lower your payments even more than ICR so it’s worth running the numbers through a student loan repayment calculator.

The Takeaway

Income-contingent repayment plans are something you might consider if you have federal student loans. With an ICR plan, your monthly payments may be lower than they are with the Standard Loan Repayment Plan, allowing you more money for other bills.

You won’t receive a lower interest rate when you sign up for an income-driven repayment plan. The only way to change your interest rate is through student loan refinancing. But if you refinance your federal loans, you will lose access to benefits like ICR and other income-driven repayment plans.

When you refinance student loans, you take out a new loan to pay off your existing ones. If you’re able to secure a lower interest rate on the new loan and don’t extend the term length of the loan, you could pay less in total interest over the life of the loan while having lower monthly payments. This could give you more breathing room in your budget. If you have both federal and private loans, you may choose to place the federal loans in an income-driven repayment plan and then refinance the private loans.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

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Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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