Episode 275 – There’s a growing phenomenon in our society: the tendency to live beyond our means simply to impress others. It doesn’t bode well for the future.

Transcript of Podcast Episode 275

Hello this is Bill Rainaldi, with another edition of Security Mutual’s SML Planning Minute. In today’s episode, social media may be hurting the finances of millions of Americans, especially the younger generations.

Did you know that, according to a recent piece from CNBC, almost half of young adults suffer from what’s known as “money dysmorphia?” [1] It’s a feeling of inadequacy about your financial situation when compared to others. A recent study by Credit Karma[2] indicates that more than 40 percent of millennials and Gen Z are having a tough time being compared to others and feel like they’re behind financially.

Furthermore, younger generations have a tendency to obsess about the idea of being wealthy.  According to the Credit Karma study, 44 percent of Gen Z respondents and 46 percent of millennials admitted to being obsessed with the idea of being rich.[3]

And that brings us to another new term. Money dysmorphia could make you “bougie broke.”[4]  Someone who is bougie (as in bourgeoisie) broke spends a lot of money on travel, clothing, cars and restaurants, yet somehow lives paycheck to paycheck. It is the act of spending beyond your means simply to impress others.

The overall trends may be cause for concern. Since the end of the pandemic, credit card balances have gone up faster than incomes, savings rates have gone down, and the level of consumer debt is up.[5]  All of these are indications that people are going to gradually run out of money if they keep spending at their current rate.

Not surprisingly, social media and the urge to share a glamorous lifestyle may be at the root of both of these phenomena, or may be at least a contributing factor. Social media brings “keeping up with the Joneses” to a new level. Trying to keep up with your friends is perhaps the biggest negative effect social media can have on your finances. But there is more. The distractions provided by social media can take time away from managing and budgeting your finances. You may also be tempted to buy the trendiest items, whether you need them or not.

“FOMO,” or fear of missing out, explains a big part of the problem. Endless posting by influencers boasting about their fancy cars, clothing, vacation rentals and exotic trips can be dizzying, and you may be tempted to imitate them, even if you can’t afford it.

And finally, there is the constant barrage of advertisements. Tech giants have ways to find out what you’re interested in and target ads specifically in your direction. Anyone who has ever searched online for a pair of shoes knows how this works.

So, what’s the best way to prevent social media from messing up your finances? You can start by “unfollowing” some of the brands and influencers that may affect your financial choices in a negative way.

You can also devote some time to looking at your current situation in detail. You might be shocked to see where all your money is going. Once you understand this, it becomes easier to set up a budget. 

And don’t forget to pay yourself first. A direct monthly withdrawal from your checking account into some sort of investment, savings account or life insurance policy can work wonders. Your money can be invested before you have the chance to spend it.

Finally, you can set a waiting period before you make a purchase. Using, for example, a “30-day rule” on impulse purchases can give you time to decide whether you really need the item or not. After 30 days, you might decide that the purchase isn’t worth it after all.  This is a way to keep you from wasting money on things you don’t need or won’t use.

[1] Dickler, Jessica. “Nearly half of young adults have ‘money dysmorphia,’ survey finds. Here are the symptoms.” cnbc.com. https://www.cnbc.com/2024/03/13/nearly-half-of-young-adults-have-money-dysmorphia-survey-finds.html?utm_source=pocket-newtab-en-us (accessed March 18, 2024).

[2] Credit Karma, LLC. “Gen Z and millennials are obsessed with the idea of being rich, and it could be leading to money dysmorphia.” creditkarma.com. https://www.creditkarma.com/about/commentary/gen-z-and-millennials-are-obsessed-with-the-idea-of-being-rich-and-it-could-be-leading-to-money-dysmorphia (accessed March 19, 2024).

[3] Credit Karma, LLC. “Gen Z and millennials are obsessed with the idea of being rich, and it could be leading to money dysmorphia.” creditkarma.com. https://www.creditkarma.com/about/commentary/gen-z-and-millennials-are-obsessed-with-the-idea-of-being-rich-and-it-could-be-leading-to-money-dysmorphia (accessed March 19, 2024).

[4] Lebowitz, Michael. “Bougie Broke or Really Broke? The Façade of Consumer Spending.” advisorperspectives.com. https://www.advisorperspectives.com/articles/2024/03/13/bougie-broke-facade-consumer-spending?hsid=27993992&_hsmi=298423567&_hsenc=p2ANqtz-8xpGRBKr8LZ9rgwsXXOoRwD9XemKOGDbzyAMiBT0xQGL12FNkKmuY0PjwesRaFwEqtpCPk6UNjgPS0XT-JQAD8f9rLpg (accessed March 18, 2024).

[5] Lebowitz, Michael. “Bougie Broke or Really Broke? The Façade of Consumer Spending.” advisorperspectives.com. https://www.advisorperspectives.com/articles/2024/03/13/bougie-broke-facade-consumer-spending?hsid=27993992&_hsmi=298423567&_hsenc=p2ANqtz-8xpGRBKr8LZ9rgwsXXOoRwD9XemKOGDbzyAMiBT0xQGL12FNkKmuY0PjwesRaFwEqtpCPk6UNjgPS0XT-JQAD8f9rLpg (accessed March 18, 2024).