These are your finances on FOMO
The report from MassMutual, an insurance and financial services firm, polled 1,750 Americans and found the majority are experiencing FOMO as their friends and family cut loose.
Social media is playing a major role — 39% of all respondents said they feel pressure to spend more money when they see others living it up online.
Younger Americans are particularly susceptible. Millennial and Gen Z respondents are spending $1,016 more per month, on average, than they did last summer.
Much of that money is going toward activities that were abandoned during stay-at-home measures earlier in the pandemic:
- Travel and vacations
- Back-to-school supplies
- Back-to-office expenses
Overspending or back-to-normal spending?
The spending surge is astronomical — but it’s important to remember that the increase is based on a comparison to summer 2020, when consumer spending was abysmally low.
Could it be that spending is simply back to normal, now that Americans once again have money to spend and places to spend it?
In its own summer report, the consulting firm McKinsey agrees that “consumers’ pent-up demand” saw spending skyrocket — between 20% to 30% year-over-year.
But it goes a step further by factoring in the abnormally low spending at the beginning for the pandemic.
Current spending levels are 4% to 7% higher than pre-pandemic levels, McKinsey says, suggesting that revenge spending really is driving Americans to new excess.
Went a little overboard? Here’s what to do
Spending more can be problematic. Spending more than you have is trouble.
The use of revolving credit — like credit cards — jumped 22% year-over-year in June, the largest increase since 1998.
While credit cards are handy tools, the interest rates are so high that carrying a balance from month to month can bury you in debt faster than you might think.
So if revenge spending is draining your bank accounts or racking up debt, here are some essential steps to get your finances back in order:
Get your debt under control. If you have credit card debt, a payday loan or any other form of debt with a high interest rate, a debt consolidation loan may be a good solution. The right one can help you streamline your payments, lower your interest rates and even reduce your monthly payments.
Build (or rebuild) your emergency fund. Experts suggest setting aside enough money to cover three to six months of expenses. A six-month emergency fund for an average earner would be around $31,500 — an intimidating sum, but reachable if you make the right moves.
Stop overspending on insurance. Are you sure the company that offered you the best deal years ago is still the cheapest option? Experts suggest shopping around for better rates on your car insurance every six months and using the same strategy for home insurance — otherwise, you could be overpaying by as much as $2,000 a year.
Find better deals automatically. The internet is a big place with thousands of stores, so it's hard to feel like you're getting the best price available. To fix that, download a free browser extension that will instantly scan for lower prices and coupons before you hit the checkout button.
Use your “spare change” to invest. With time, even small investments can yield serious results. Using an app that rounds up your everyday purchases to the nearest dollar and invests the difference, you can capitalize on the rising stock market with little effort.
What are your spending habits?
When you know where your money is going, you can make better financial decisions.
With Rocket Money, get a breakdown of your spending to see exactly where your money is going. Manage subscriptions, lower your bills and put your savings on autopilot.
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