You've set up a spending plan but your plan didn't consider the fun events that you see on your social media feeds. You can't afford to go to all of them, yet you can't afford not to thanks to the fear of missing out (FOMO). What do you do?
According to Charles Schwab's 2019 Modern Wealth Survey, you have about a one in three chance of giving in to FOMO and overspending and those odds jump to nearly even if you're a millennial.
Schwab's survey shows that younger consumers are greatly influenced by what they see on social media. Almost three-quarters 72% of millennials and 74% of Generation Z members wonder how their friends can afford all the expensive experiences they see on social media. (Hint they probably can't.) Close to half (49%) of millennials and 44% of Gen Zers said social media influenced them to spend money on various experiences, compared to 34% of all respondents.
Younger consumers aren't alone in temptation. On average, Modern Wealth Survey respondents spend around $500 each month on non-essential items, and 44% generally carry balances on their credit cards making it difficult to save. Almost six in ten respondents (59%) live paycheck to paycheck. Only 38% have put any funds away for emergencies.
This doesn't square with the 59% of Americans who think they are savers, or the 65% who claim to be willing to sacrifice and avoid spending money on current experiences to save money for future needs. Some consumers consider themselves savers when their habits suggest otherwise. Sad!
Why do they fail? Perhaps it's because they don't plan. The Modern Wealth Survey shows the importance of a written financial plan, yet only 28% of respondents had a written financial plan. (On the bright side, that's an improvement over the 25% mark in the 2018 survey.
Consumers with a written plan are much more likely to pay bills and still have savings each month (78% for planners compared to 38% of non-planners). They are also far more likely to have an emergency fund (68% to 26%) and to either have no debt or make all debt payments on time without carrying credit card balances (45% to 27%). If you want to reduce your interest payments and lower your debt, join MoneyTips and use our free Debt Optimizer tool.
Written plans increase confidence. Only 17% of non-planners feel very confident about reaching financial goals, compared to 56% of planners.
Planners even turn feedback from their friends to their advantage. Over half (52%) of planners focus on how their friends save rather than spend and use them as motivation to save. They have "savings buddies" to create positive reinforcement and negate any FOMO tendencies.
While 13% of those without a written plan claim they don't have time to develop one and 18% think written plans are too complicated, 46% think they don't have enough money to merit a formal plan. That may be the most disturbing finding of all. Consumers with less money have the greatest need for a written financial plan because they have little room for error.
There will always be temptations to spend instead of saving, whether it's from social media, your friends' habits, online shopping temptations, or other creative ways to blow cash. Be a planner and use a budget to help you resist all of those temptations.
Set targets so you can focus on individual savings goals like a vacation, a new home, or a retirement goal but don't forget to include a little extra for discretionary spending. If you don't leave some money in the budget for fun purchases, you'll never stick to it regardless of social media influences.
People with better credit can save more for retirement and emergencies because they pay less in interest. You can check your credit score and read your credit report for free within minutes by joining MoneyTips.
Originally Posted at: https://www.moneytips.com/modern-wealth-survey/180
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