The acronym FOMO – the fear of missing out – first appeared in 2004. It was not very different from the pressure to surpass one’s neighbors (keeping up with the Joneses) in terms of social status, standard of living and possessions. With the growing importance of social media, this term now seems to have adopted a new meaning altogether.

Human beings are social creatures. We look to others for meaning and connection. We emulate, imitate and try to establish bonds and communities through similar thought, philosophy and behavior. This is where FOMO enters our lives.

“Fear-of-missing-out is more powerful than fear of losing.”
― Naved Abdali

FOMO refers to the feeling of not having what others have, or that feeling of emptiness or void that comes from looking at all others who may have it. The rosy images of luxurious living, exotic travels and expensive food on one’s social media feeds may give the impression of prosperity on the other side (for all except the self). This results in a sense of incompleteness and void.

FOMO and its impact on financial behavior have been investigated by social scientists. FOMO and the perceived sense of emptiness it generates is often associated with irrational spending and investing behavior.

Examples include:

• Irrational purchases: The purchase of that latest iPhone, gadgets or cars – way beyond one’s own affordability, using expensive borrowings or credit card debt.
• Highly risky investments: This has led to the mass mania (especially among the youth) for highly risky financial investments such as cryptocurrencies. If their friends are doing it, they must do it too.
• Shift of focus away from long-term savings targets: Diversion from what is really beneficial for us in the long-term (a retirement fund or money put aside for purchase of real estate) to short-term pleasures such as cosmetics treatments, the latest gadgets, and garments a la mode.

While FOMO may show up in different ways in our financial life, the result is always the same  – premature gratification. Happiness today, guilt and financial difficulty later.

“The best way to avoid FOMO is to focus on your own goals.”
Meb Faber, Cambria Investments

Building a long-term strategy and sticking to it before you change your mind may help prevent guilt. A simple technique could be setting up automatic transfers from your salary account towards investment products, on a monthly basis. This may reduce temptation by forcing you to save before any spending can happen.