Social media is ruining your finances. This way not be shocking. But it is a topic that deserves an depth analysis. Instagram and TikTok create unrealistic expectations about money and take social comparison to the next level. The fear of missing out (FOMO) has never been so prevalent. In this article we take a look at how to live a better life by breaking away from the social media fantasy.
How Social Media Is Ruining Your Finances
1. Fake Influencers & Fake Famous
First off, I need to get something through to you. People have such a difficult time understanding this. The content you see on social media is not real. Most people are not that happy. Most people are actually broke and unfortunately sort of unhappy. You should not aspire to be like the people you see on social media. This is not the path to contentment and fulfillment. This type of social media content is ruining your finances.
Many of the so called influencers you see with luxury items are not even wealthy. They can’t even afford many of the very same items they talk about. It is all smoke and mirrors. At the end of the day it all clickbait and advertising. Let me break this down for you. The dude talking about the $20,000 watch probably can’t even to afford to wear the one he is reviewing. It is all done in the search for likes and engagement. Because maybe if he gets enough followers he can monetize his account and then maybe one day have enough money to get the expensive watch that is so important. You get the point.
2. Unrealistic Expectations Around Money
Children are growing up with unrealistic expectations about money. This leads to bad spending habits. They want to be TikTok famous. They watch all these stupid videos of Mr. Beast giving people a million dollars to quit their jobs and don’t understand that this is entertainment. It is not real life.
Children are so impressionable. These social media feeds of endless luxury and gimmicky financials stunts get things off to a bad start. It breaks the connection between wealth and hard work. Or wealth and sacrifice. This content makes life seem like the lottery. Money is sort of something that just happens. This is not the mindset you want your children to grow up with. Wealth should not be viewed as some fun, gimmicky thing.
3. The Era Of Social Comparison
There is study after study showing that social comparison is ridiculously toxic for teenagers. Adults at least have some ability to sort through the information presented to them with logic. Teenagers are much more impulsive and emotional. This makes social comparison on social media more dangerous.
Teenagers are more likely to feel insecure and left out by not having the same consumer items as everybody else. The stakes seem high to a young developing mind. But this type of comparison offers no upside. Teenagers should be focused on developing friendships with real people, building good habits, and identifying strong personal values. Not having their strings pulled by clever corporations trying to hijack their attention.
4. Impulse Buying
Did you know that “49% of US adults have made an impulse buy of a product because of a post they saw on social media”? Check out the by Giant Frickin Robot titled Instagram And TikTok Survey Reveals They Are Ruining Our Happiness And Finances. Being impulsive has been made to be cool for some reason. Maybe is because Gen Z grew up with social media platforms. They are use to instant gratification. They are use to getting items on Amazon Prime in two days. Companies love this impulsiveness. It is so much easier to sell stuff to someone who doesn’t think things through.
Social Media Leads To Overspending
My day job is in sales. You know what always cracks me up? When I have a customer tell them me they need to check with their spouse before making a purchase. This is the last things a salesperson wants to hear. Do you know why? Because their spouse will probably talk some sense into the person.
Social media reinforces impulsive mindsets and habits. For example, if you are unhappy buy this product. It will make you happy. It will be delivered really quickly. Here are a bunch of other people that did the same. Look how great their lives have become. This is pretty much the premise of every social media ad. Be wary. These purchases are ruining your finances.
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5. Fear Of Missing Out (FOMO)
Fear of missing out (FOMO) is not a new concept. But it has taken on a new meaning in the social media age. It is a standard part of the vocabulary for younger millennials and all of Gen Z. Let’s start with a definition so we are all on the same page. FOMO is the feeling or perception that others are having more fun, living better lives, or have better things than you. So at the core it is a comparison problem.
This is a horrible thing to get caught up in. There have been a bunch of studies about how the most important factor in satisfaction with compensation is how it compares to the people directly around you. According to Tim Liao “it’s the ability to compare ourselves with people of similar background, both people who earn more and others who earn less, that determine how our income affects our happiness – not the absolute amount we earn”.
If this is true for money it is going to be true for everything. It is a losing proposition whether you are comparing money or experiences with those around you. If you compare yourself to real people at least the standards for the comparison are set in reality. On social media you are only seeing an amplified version of the best of the best. Our brains are not equipped to calibrate this correctly.
The Downside Of Social Media
I always amazed about the popularity of the Youtuber Mr. Beast. The guy is seriously going to become a billionaire if he isn’t already. I watch the videos and I don’t get it. I see videos of him paying people big chucks of money to do things like quit their jobs. Or videos of him giving away houses and fancy cars. The content is always so ridiculous and extreme. I am told it is aimed at a younger audience. This scares me.
This idea of throwing around money and buying fancy cars is not the type of wealth that the younger generation should aspire to. This is not the type of wealth that brings contentment, happiness, and satisfaction. The fact that the pinnacle of entertainment for the younger generation is a guy throwing around large amounts of money as a stunt makes me sad. This type of content is corrosive to the mind in the same way as reality TV. If you spend your free time watching “Too Hot To Handle” on Netflix and Mr. Beast videos on Youtube I can guarantee that you will not end up with the right baseline expectations for life. FOMO will always be lurking around the corner.
6. Luxury Travel Industry
Have you noticed that every travel TikToker is a “luxury” travel person? People are obsessed with this idea of luxury. Everything on social media is about the extremes. The world’s most expensive hotel, underwater restaurants, and ridiculous private excursions. Travel does not have to be this expensive. Here is another example of how social media negatively impacts your financial wellness.
The problem with this type of content is that it makes people feel like they are not even on vacation if they aren’t doing the same stuff they see on social media. This is just not true. A satisfying trip can be simple and economical. A quiet getaway to a remote cabin. Or to a nearby beach. It doesn’t have to be some TikTok ready Airbnb with an aesthetically perfect kitchen. Again, this stuff is not real life.
The purpose of a trip or vacation is to get a break from the day to day monotony of life. It is to experience new things. To try some new food. To unwind and find peace. It is about building some good memories with the people you care about. Not spending every moment trying to get the perfect picture to show off to your friends back home. If this is how you approach travel you will never find satisfaction.
7. Stealthy Ads On Social Media
Social media could be affecting your finances even if you aren’t aware of it. Back in the day people worried about subliminal advertising. As technology progressed they thought companies would be able to prime our subconscious to do things like buy a product. The research has shown this concern was overblown. But we have something even worse that has taken over the marketing landscape. Brands getting more adept with product placement and organic promotion.
Brands realize that younger consumers do not want to see generic corporate advertising. This does resonate with Gen Z folks. So instead brands have hijacked the very places these consumers go to interact and get information such as TikTok. Companies cleverly get influencers to advertise products in a way that appears organic to their followers. Companies now pull string from the background rather than be out front and center pushing a product.
These marketing and sales strategies work too well. Teens and young adults get enamored by products and services without even realizing what is happening. It is important to have your guard up anywhere content is free. Based on the current advertising business model of the internet this means pretty much everywhere.
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8. Get Rich Quick Schemes
This one always makes me sad. I see some guy I went to high school with posting some get rich cryptocurrency post and can’t help but shake my head. If you get sucked into this stuff you are probably the product. Your engagement or participation makes you the product. This is not how wealth is built. If it was this easy everyone would do it.
The funny things is these patterns always follow the broader boom and bust cycles of the economy. If you paid attention everyone and their dog was real estate agent as the Covid pandemic caused housing prices to surge. Or during the crypto boom everyone because an expert predicting the next big thing. Frankly, this type of content is a sign you may need to clean up your social media feed.
9. Buying Useless Products
Have you heard about the success of Liquid Death? This example is the pinnacle of wasteful spending because of social media. Liquid death is a company selling still and sparking water packaged in aluminum cans with the slogan “Nothing murders your thirst better than water”. You can get eight cans on Amazon for about $13. Yes, they have an environmental friendly spin that adds some value for certain consumers. But really this is 100% marketing. The brand blew up on YouTube making drinking water seem edgy and cool.
I was at a friends house recently and saw a package of these cans sitting in his fridge. It amazes how people get sucked into the novelty created by brands. We can get caught up and manipulated with something as simple as drinking water.
10. If You’re Not Paying For The Product, You Are The Product
This phrase gets thrown around a lot these days. But people forget just how true it is. Based on the current business model of the internet you are always a product. Your time and engagement is being sold. Social media companies suck up your attention and then advertisers pay for this precious resource.
We live in the attention economy. This is terrible news for your financial life. You have to actively be aware of how you are spending your time. If spend a couple hours one evening going down an internet video rabbit hole you will be shown a bunch of ads. At the surface you will think much of this. But it definitely impacts your desires and spending habits.
11. Direct Social Media Selling – The Next Phase
What really scares me about this next trend is I don’t see it reversing anytime soon. Platforms like TikTok are pushing hard on live feeds and streaming. This will allow influencers to sell directly to their followers. This type of structure is already big in China. Meta tried this with Instagram marketplace. While it didn’t take off initially. Trust me, it will be back at some point soon.
In the future you will have an individual on social media with a big following who posts content only to pull the heartstrings of gullible consumers. The social media influencers of the future will be more powerful than brands. This is already happening. This is the same reason brands use micro influencers to push products. It comes off as more genuine and authentic to younger generations.
12. Normalizing Poor Financial Behavior
Does Social Media Cause Debt?
Does social media cause debt? It certainly doesn’t help. What is the cause of debt? Consuming beyond your means. Social media specializes in telling people a story about how their life problems can be solved by buying new stuff. It definitely has to be considered a contributing factor to increasing consumer debt.
I have noticed that financial technology companies advertise hard to Gen Z on these platforms. Companies like Acorn or SoFi. I find some of these services to be borderline predatory. Here is the thing, saving money and investing doesn’t need to be complicated. You don’t need a bunch of companies involved in your business. They only exist to find a way to carve out a little profit.
To avoid debt you to need to spend less than you make. To get ahead financially you need to consistently invest in broad market, low cost index funds. Preferably, in a tax advantaged plan. That is it. This can be accomplished at major brokerage like Charles Schwab or Chase. You don’t have to deal with all these gimmicky new age fintech companies. No one is building wealth because of these platforms. Other than the owners of the companies, of course.
13. Bad Financial Advice Going Viral On Social Media
Anyone can be an expert these days. Anyone that posts enough on social media can become a “micro influencer”. Consumers love this. The younger generation is tired of listening to the so called “real” experts. The don’t want hear a sound bite from a guy in a suit on CNN. This is good and bad.
On the positive side of things there is a lot of more information being shared these days. It is great to learn from the real life experience of other people. There are golden nuggets of personal finance advice in the FIRE and fatFIRE communities online. People have all kinds of tips on how to save money and live a better life.
The darker side of this is there is a TON of misinformation. People will take financial advice from someone that does not have any expertise or useful insight. This is a slippery slope. As brands are smart enough to insert themselves in these areas to push products. This is another way social media is ruining your finances.
You have to curate the information you are getting. Why are you following a certain person? What is their background? Why are they giving advice? Have they made decisions that you respect and want to learn from? Or is it only clickbait.
The stakes may be lower for entertainment and pop culture information. But personal finance is one of area that will have a significant impact on the trajectory of your life. You need to be careful on where you get information.
14. Targeted Social Media Ads
Do you know why companies are willing to spend so much money to advertise their products on services like Facebook, Instagram, and TikTok? The ads are precisely targeted. Never in history has it been easy to target and get in front of a specific segment of the population. In the past you could run an ad in the newspaper to target a specific geography. Or run a commercial on a TV show that caters to a specific age demographic. This is quite broad.
Well, things have changed. Companies like Facebook and Google have a lot of information. This means advertisers have flexibility in getting their ads in front of the most interested party. They can have Facebook push the ad to people in the 22-25 age range, that are single, don’t drink alcohol, like watching sports, have a religious affiliation, and like pets.
Have you every wondered why it feels like you need to buy everything you see on the internet? That is because companies are so good a getting the right product in front of you at the right time. Targeted ads are a danger to your savings. They are ruining your finances!
15. The Paradox Of Minimalism
This one always blows my mind. Most of you are probably familiar with the minimalism movement. It is this whole idea that we live in a materialist culture. Which is true. And that we are living in a rat race that will never bring happiness and fulfillment. The premise of minimalism is only having material possessions that bring value and meaning to your life. This requires being intentional with your purchases. This is a good thing.
But here is the problem. This good idea has almost became a style or an aesthetic. TikTok is full of people cooking in these aesthetic appealing modern kitchens. Or working out of beautiful offices with clutter and junk nowhere to be found. Every item is meticulously selected.
People go and make expensive purchases so that their living space can meet this cool, minimalist aesthetic. The movement has been hijacked as a design aesthetic to sell people stuff. Companies are clever. The whole point of minimalism was to break away from obsessing about material possessions.
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What You Can Do About It
There is no point in going on and on about how social media is ruining your finances without offering a solution. This is not a quick fix, simple answer type of thing. It requires being conscientious and reflecting in how you engage with social media, news, and the internet in general.
1. Curate Your Social Media Feed
This has been a game changer for me. I didn’t really think about it until my late twenties. The information you consume is one of the major factors shaping your life. It influences how you think, what you pay attention to, what you your prioritize, and so forth. Most people give this absolutely no thought.
They get news pushed to them on their Iphone and accept this as the reality of the world. You have to stop and think about incentives. The news industry has been radically disrupted over the last twenty years. Profits have been eroded and budgets slashed. These organizations will do anything to keep eyeballs on their content so they can keep the lights on. This doesn’t necessarily align with providing high quality worthwhile content to their audience.
I am extremely careful about how I consume information. I am a big fan of the Economist for world news and Barrons for financial news. To be frank, these articles are not as exciting as the clickbait stuff about Kim Kardashian. But being informed is different than being entertained. I don’t view news as entertainment. That is the purpose of sports, TV shows, and social media content.
Now, getting more granular. When is the last time you have reviewed the accounts you follow on Instagram? Is your feed just a bunch of celebrities begging for attention? Is it all sports related? Were you intentional in choosing to follow these accounts or did it just sort of happen. Sometimes when I am on a plane I will watch the person next to week scroll through their social media feeds. It amazes me the junk people look at!
2. Look At How Other People Save Money
We see how people spend money but we don’t see how they invest. This is interesting to think about if you want to pursue a path towards financial independence. Social media is made of people buying stuff and taking lavish trips. But what do these people’s saving habits look like? How much money have they invested recently? This lack of perspective is ruining your finances.
The person that slowly grinds away pouring money into the stock market each month gets no fanfare. It is not exciting. But a couple years pass, then five years, and then a decade. This person has substantial wealth tucked away that from an outside perspective seemed to just sort of happen.
Money is a taboo subject for some. But don’t let it be. Ask close friends and family about their financial habits. Try to get a behind the scenes look at how those around you spend, save, and invest. You will be blown away. It is all over the board. The point isn’t to be nosey, but to get perspective on how wealth is built. To go beyond looking at the car someone purchased or the house they live in. These things are not as important as you may think.
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3. Seek Out The Good Stuff
If you want to build wealth like the top twenty five percent or the top five percent you need to seek out high quality information. You need to read the best books, following the best blogs, listen to the most educational podcasts, and follow the right people on social media. Don’t be a mindless consumer. Spend some time seeking out people that have actually valuable input to share with the world. A little time invested in this up front can make all the difference.
4. Don’t Try To Keep Up With The Joneses
We consume so much information in the modern digital age. Our brains are not designed to handle this. In the past, keeping up with the joneses was comparing yourself to the next door neighbor. This was not healthy, but at least it was something that could be acknowledged and managed. These days we are bombarded with information about how other people are choosing to life. We are shown all the ways the lives of those around us may be better.
To truly be happy in life you have to know yourself. Also, you have to be true to yourself. This may not be groundbreaking. But the older I get the more I can connect with this sentiment at a deeper level. The things that bring you happiness and contentment will be different from everyone else. If you cam spend money in alignment with your true self you will be so much happier. It is okay to buy nice stuff. Keep a list of stuff you would like to buy for yourself at some point. Have fun researching and evaluating the potential purchase. They say the best thing about a vacation is not the vacation itself but the anticipation. Learn to appreciate the journey.