It is commonly accepted that social media can be of great value to us but studies have shown, that it also can be detrimental to our mental health. When we view photographs and videos of our friends and family's seemingly perfect lives, it's tough not to perceive our own lives in a less noteworthy light.
However, spending too much time on social media can have a negative financial impact. It's no surprise that social media has such an impact on our ideas and behaviours that it can even influence our purchasing habits.
According to a 2019 Charles Schwab research, 49% of millennials and 43% of GenZs said social media influenced their decision to spend money on experiences. What's more, 48% of millennials and 41% of GenZs said social media caused them to spend more money than they could afford. Other influencing factors, such as family, friends, neighbours, and coworkers, had a much smaller impact on spending than social media.
According to a second Allianz Insurance survey, 57% of millennials made an unplanned purchase as a result of something they saw on social media. Almost 90% of millennials said that social media makes it easier to compare their lives to those of others.
Is social media wreaking havoc on your finances? It's time to look into it.
According to the Pew Research Centre, most people use social media to engage with friends and share news and information. "But that’s not bad”, you could say. The problem is, as evidenced by Schwab's 2019 Modern Wealth Survey, that I mentioned above, there is one aspect of social media use that merits special attention - the cultural pressure to spend above our means.
"Keeping up with the Joneses" has taken on a whole new meaning in today's younger generation. Fear of missing out (FOMO) - on all the fantastic things other people seem to be doing, buying, and enjoying - has taken over. And for many people, this is putting a strain on their budget.
Thanks to social media, people can now influence how others perceive their lives in ways they never could before. According to Deborah Small, a professor of marketing and psychology, sharing personal experiences or products in a public way indicates our social status to others.
"Whether we recognise it or not, it is a method of attempting to gain power and goodwill. At its core, social media bragging is simply a modernised version of an ancient psychological term: social comparison. It's the idea that we all judge ourselves and others in relation to one another,"
"As a result, watching others driving a finer car or enjoying a more expensive vacation alters my perspective of their and my own worth," she says.
The impact is tangible. According to the same survey by Allianz Insurance, 35% of all respondents claimed they spent more money on gatherings with friends than they could afford based on what they saw on social media.
The percentages were even higher among younger people: 48% of millennials and 41% of GenZ overspent as a result of social media pressures.
Although it is nearly impossible to completely disconnect from social media these days, there are steps you can take to lessen its financial impact.
The first thing you should do if social media is driving you to overspend is to create a budget. A budget is like a road map for your money; it may not drive the car for you, but it will warn you if you've taken a wrong turn.
A well-planned budget should allow for immediate purchases and activities, but it should also account for long-term goals. This could include starting a business, going back to school for your master's degree, or a higher diploma.
Find a way to reconcile weekend brunch with friends, buying new clothes, and travelling within your budget, without incurring any unnecessary debt.
Why is there more pressure now than in the past?
One probable explanation is that; it's because people are tempted to keep up with more than just their neighbours or family, they are now tempted to keep up with everyone from intimate friends to celebrities, not to mention even fake posts.
Add to that the deluge of advertising that follows users across the internet and the ease of making purchases with payment methods that remove any realistic sense of how much money is being spent, and the bills start stacking up right in front of our eyes.
The idea that your emotions influence how you manage your money is well known. Have you ever bought something you didn't actually need just to feel better?
Well, with social media when many people see what others are reportedly spending money on, they may feel guilty because they are unable to do the same. So, what's the solution?
The best way to avoid being influenced by how others spend their money is to have your own well-defined spending strategy. Take a step back and look at the big picture of your financial situation. That may help you feel more grounded and confident with your finances. And resisting the allure of FOMO doesn't have to be difficult.
Know yourself and your goals, and then figure out how to get there. Is it important for you to eat at the latest restaurant in town? If that's the case, examine your budget to see how frequently you can afford it. Do you really want to go on that trip? Determine how much you can save each month to go toward it. Rather than feeling as though you're missing out, you'll start to believe that you're not.
Have you ever found yourself on Facebook only to realise 30 minutes later that you should have been calling your mom or responding to a text message? It's easy to lose track of time on social media.
One method for combating this behaviour is to log out of social networking apps after each use. You'll have to input your password the next time you want to log in, which is a surprisingly effective deterrent according to psychologists.
Adding one more hurdle to the process may make you less likely to log in as frequently, allowing you to take a breather and reconsider whether social media is truly how you want to spend and focus your time and energy.
While admitting to being affected, 60% of the survey respondents by Allianz were puzzled about how their friends could afford all of the extravagant events they highlighted on social media.
And this may be the root of the problem. Just because someone talks about something they've done or purchased doesn't mean they can afford it or they bought it with their money.
Alternatively, they could be incurring massive debt and paying exorbitant interest rates in order to live a fantasy life.
Don’t believe everything you see on social media. All that glitters they say, is not gold.