The FOMO phenomenon goes further than social events and could be costing you serious money. So much so that it’s also been referred to as the “Fear of Many Overdrafts” because of how it can hit our wallets.
While we have all experienced the uncomfortable feeling of being excluded from an experience that others enjoy, it isn’t always worth making quick money decisions, or pushing the weekly budget.
Part of the gang
Copying others was essential when cooperation was needed for survival. Today, it can reduce the chance of missing out on something others get to enjoy. Following the crowd can be a pretty safe bet when making decisions and this herd mentality can affect us, not only because we love to belong but also because going against the grain can be uncomfortable.
But it can also have unintended consequences for our wallet, particularly if what everyone else is doing is relatively expensive. For example, fear of missing out on the fun, memories and photos of next week’s skiing trip might tempt you to go over your monthly budget.
But what if I lose?
None of us likes to lose. And in fact, we may go to great lengths to avoid it, even if we don’t know the potential losses involved. This fear of losing out can spur us to spend more than we intend, stretching our budgets.
Suppose you are buying a car. You know how much you plan to spend before you arrive at the dealership – but then you test-drive the latest model. This is fancier that you need and has a price tag to match.
To avoid losing the better option, particularly when we have already experienced what it's like to have it, we are tempted to spend above our budget. And once we own the expensive car, this fear of loss can mean we overvalue it, simply because it is ours and not someone else’s to lose.
Placing a high value on things we have – what behavioural economists call the endowment effect – makes losing them harder, and missing out on them even more disappointing.
Once we own the expensive car, we can overvalue it, simply because it is ours and not someone else's to lose.ING's Jess Exton on the endowment effect
“Just” missing out
As well as hating to lose, we tend to feel more regret when we only just miss out on something great. Missing a train by five minutes is usually annoying, but running to the platform to see the train just leaving the station is far more disappointing. Similarly, bronze medallists often report being happier than those who win silver.
When winning silver, it can be easier to focus on having missed out on gold rather than feeling that we have achieved something great by coming second, and this can mean that we invest more than we should to achieve our goals. If we then go the extra mile to ensure we don’t miss out, we can exhaust not only ourselves but our wallets.
Too many choices
One might think that having lots of options is a good thing. For example, it is often excellent students who can select any career or relatively wealthy families who can afford to buy a property in any part of the city. But having many options can also be a challenge.
The family who can live in any area must choose from many options, and when they do buy a home, they miss out on every other home in every other neighbourhood. Missing out on so much can be disappointing. While choosing a home is a rather extreme example, having fewer options does actually make people happier.
Restricting choice makes selecting easier and reduces FOMO. Behavioural scientists refer to a theory called the paradox of choice to explain why having more options doesn’t necessarily lead to better outcomes
No more FOMO
So if FOMO is costing you money, it could be useful to challenge this feeling. Some suggestions for managing it include focusing on what we have rather than what we might miss out on, reducing the number of choices available to us, setting strict budgets, or avoiding comparisons. Recognising what can feed your FOMO, such as constant social media use, could also be useful.
The next time you feel like you are missing out, take a moment to ask yourself whether this is simply an irrational reaction. It could have quite a positive impact on your wallet.