FOMO – fear of missing out – is real. Very real.
It’s a force that acts upon us all the time and modifies our behaviour in ways we don’t always feel in control of. It can get really out of control, and in the area of our finances, it can be devastating.
Fear of missing out doesn’t only affect status spenders. It affects all of us, and especially when we are financially illiterate. This is the time in our lives that we are most affected by the fear of the future. The fear of passing by millions promised by some risky scheme. The fear of starting too late or messing up the very first step.
Even people who are actively becoming financially literate want badly to catch up on the time they’ve missed. They want to do ALL THE RIGHT THINGS right away, or ten years ago.
How does FOMO hurt our finances?
There are a number of reasons FOMO can be dangerous. There are a few specific reasons why it’s dangerous to our finances.
Greed. We want to be in on the new thing happening. Forex and stokvel schemes, fringe investment opportunities, crypto, wild new inventions and technologies, a neighborhood renovation that’s going to be the next Maboneng.
This is incredibly dangerous territory for our money-brains. Our reasoning becomes emotional and our belief in what we’re committing to becomes near-hysterical. The glitter of fantasy-money completely takes over our normal reasoning and leaves us wide open to fraud.
Worth. We decimate our finances to get what other people have. Sometimes it’s envy and covetousness. Sometimes it’s because we’re using other people as a template for our own lives.
This can be incredibly specific: from your social group to a celebrity idol to just one other person who’s just like you. The better and more successful version of you. Everything they do seems right and effortless and cool and a judgement against your whole life. You have to copy everything they have and everything they do, trying to accumulate and fake your way to a similar level of confidence.
Fear. We make rash decisions because we worry that we’re behind. That everyone else knows something we don’t. We know there are gaps in our knowledge. We know there will be very significant consequences down the line. But we don’t know what to do or where to look for answers. We fill those gaps with wishful thinking and assumption.
Worse, we leave it to others to make decisions with our money.
Related: 5 signs you’re a FOMO investor
FOMO is seen as an insecure ‘youth’ thing but of course it’s not. Everyone wants to be in the center of their particular circle and feel needed and included and important and admired.
As social animals, we’re all prey to this insecurity. We’re wired to follow the crowd. The crowd is where safety is, where resources, food and mates are. We outwardly prize the individual in modern society. At a very base level, we still defer to the crowd and to its ‘conventional wisdom’.
The crowd is both very very sensitive to social cues and very very bad at interpreting them. The crowd relies on deductive reasoning and isn’t very self aware, so it starts thinking and valuing bizarre things sometimes. “Sizo is important. Sizo has a Mercedes = A Mercedes makes Sizo important.”
That’s why status symbols exist. The object itself isn’t what’s important, it’s what the object is saying about it’s owner.
A fancy address says: “I’m exclusive/rich/cool enough to live here.”
Expensive art on the wall says, “I’m cultured and avant-garde and can throw vast amounts of money away on non-essentials.”
A trophy spouse says: “Look how desirable I am.”
Related: Money confessions and action plans
Conventional wisdom generally just means ‘the generally accepted idea about something’. In the case of money, by the national debt-stats alone, conventional wisdom fails us miserably…