Don't Let #FOMO Wreck Your Finances
A recent study conducted by the Lending Tree stated that less than half of Americans are able to cover an emergency of $1,000 or more. Millennials are having an even harder time, with only 40 percent being able to cover the same amount.
The fact that Americans are in debt isn’t a big secret. From credit card debt and student loans, to medical bills and mortgages, people are struggling – and yet, many can convince themsleves it’s totally normal.
“All my friends have student debt, so it’s not so bad.”
“They woudn’t approve me for this credit card if I couldn’t pay it back.”
Many people take on debt for situations that may feel out of our control, like an unexpected surgery, or a broken down car. Others are in control of the decision, although it may feel a bit forced, like the decision to take on student loans, because you don’t want to live in your parents’ basement for the rest of your life.
Then there are the rest of us with #FOMO. The fear of missing out (FOMO) is like the 2019 version of “Keeping up with the Joneses”, except you see the Joneses, their new car, Mr. Jones’ new watch, Ms. Jones’ designer shoes, the pure bred dog and all of their Amazon deliveries, 24/7 on social media.
#FOMO can be a dangerous thing when it comes to your money. I think most people would agree that they’ve been guilty of buying something just to join in or keep up with their friends or family at some point in their life. Sometimes, that’s going to your third happy hour this week, when you know you really need to reel it in. Other times, it may be feeling like you need to buy a home, just because your friend bought one, or it’s “what you do” as an adult.
So let me tell you about my recent experience with “The Joneses” — the fellow condo owners my building in Washington, DC.
According to Zillow, the median list price of a 1 bedroom apartment in DC was over $380,000 in 2019. The majority of owners in my building moved in 2017, meaning they took on a 15-30 year mortgage not too long ago (or they’re secretly Jay-Z and bought their unit in CA$H).
So when I found out the roof of my building was failing, and would take a deposit of around $800 per owner to fix, I assumed it was doable. I thought it would suck, but assumed it was doable, because we were all approved for these DC-sized mortgages. Right?
So I propose a vote to take care of the roof ASAP and pay the deposit in the next two months.
Could you believe I lost the vote?
REAL TALK: this means that over half the people in my beautiful building, that all look like they're living their best lives, couldn’t afford approximately $800 to pay for a roof we all agreed we need. For every person that says “I should really buy a home.” just because their friend bought one, another is house poor.
According to Investopedia, house poor is when someone spends so much on buying their home, that they can’t afford the other expenditures in their life. Forget about the roof, what if one of my neighbors loses a job? Has a medical emergency? They would have to take on debt — that’s the answer — and why an emergency savings account is so important!
And the owners of my building are just one example. People spend money on things ALL THE TIME just to keep up or show they’ve “made it”. It’s that group trip you just put on your credit card because you don’t want to be the one friend that says no. It’s the super expensive birthday party for your 2 year old, because all the other parents are doing it and you don’t want to be judged. It’s the fancy car you show off, but struggle to meet the monthly payment on.
My point here is, resist the temptation take on debt, just to keep up with the lifestyle of your others — because sometimes, they can’t even keep up with their own. Even more importantly, their life has nothing to do with your financial circumstances or goals.
So before you whip out the credit card or take out a loan, take a minute to ask yourself these three key questions:
Do I really need this? Or if I want it, will it make me happier?
Do I have an emergency fund? At least $1,000 to to start. And have I paid off all my high-interest debt?
Is this in my budget or financial plan (within your monthly spending cap or long-term savings goal)?
If you were able to say “Yes” to all of those questions and you still want the new iPhone, weekend getaway, apartment, etc. by all means, GO FOR IT! Just make sure to makes sense to you — not your bestie or your Instagram feed.
You’re the one in control of your financial future. Don’t let #FOMO call the shots.
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