“We all spend time, so much time, on social media, we tend to overspend because we see all the lifestyles on Instagram and Facebook.”
Farnoosh Torabi
Finance Author & Host of ‘So Money’ Podcast
Social Media provides the perfect platform to create an environment that entices people to seek to emulate their ‘neighbors’’ holidays and travels, events or parties, food, and entertainment. In a recent study 25% of social media users admitted to spending more to impress followers.
FOMO or ‘Fear of Missing Out,’ a mix of envy, jealousy, and disappointment, can cause us to spend our money to appear more successful to our online community, motivating us to appear to be living a lifestyle that more closely resembles that of people we follow and most admire. This of course continues the perpetuating cycle as those following us on social media will similarly be affected.
Further, many people make online purchases because they reported to being bored or needing distraction. While 27% admitted making a purchase while they were watching television and 13% admitted to making a purchase because they needed something to make them feel better. These spending habits lead to 60% of people being disappointed with what they purchased online, 40% then trying to return goods for a refund and only 5% are successful with getting their money back (1)!
Marketing and advertising are becoming increasingly sophisticated in exploiting and understanding the above dynamics, leaning more and more to user generated content and influencer campaigns that comprehend the need of people in a specific online community, and focusing marketing strategies that motivate people to spend money to feel part of and belong to a particular group or ‘tribe’.
Research has shown that Generation Z (born on or after 1997) and millennials (23 – 38 years) may be particularly vulnerable to social media when it comes to overspending, being a demographic that relies heavily on social media to obtain information and form social connections. Also, people will post exciting images of their travels and expensive restaurant meals; however, they usually don’t post about their savings and investment plans!
Further complicating the financial and social media landscape has been rise of Finfluencers, Social Media and Unlicensed Financial Advice social media influencers who are not only providing unlicensed financial advice but are often being paid by finance companies to promote a particular product or online service. Most are not compliant with the Australian Investment and Securities Commission or qualified financial planners, offering no legal accountability for consumers.
In navigating the contemporary complexities of planning for your financial future, Income Solutions believes it has never been more important to work together with a qualified and professional financial planner away from the distractions of social media or fluctuating commentary. This will ensure you have individualized financial advice that directly correlates with your identified goals and objectives, detailing a framework that will guide and provide you with long term financial security.
Referenced for this article:
https://www.digitalinformationworld.com/2020/10/a-new-survey-suggests-that-social-media.html
https://www.cnbc.com/2022/08/20/why-impulse-purchases-on-social-media-are-hard-to-resist.html
