FOMO—or the fear of missing out—is a common feeling that can lead to impulsive spending decisions. In a world filled with social media highlights and a constant barrage of advertisements, it’s easy to feel the need to buy the latest gadgets, clothes, or experiences to keep up. However, letting this feeling dictate your spending habits can have serious consequences, especially if it means taking on unnecessary debt.
Singapore, with its vibrant lifestyle and emphasis on material possessions, is a prime example of how FOMO can impact financial decisions. But this isn’t just a Singaporean problem; it’s a global one.
Let’s break down why borrowing money to keep up appearances is a bad idea.
Debt Accumulation
One of the most obvious risks of borrowing money to buy things you don’t need is accumulating debt. When you use a credit card or take out a loan even from a money lending business, you’re essentially borrowing money that you’ll need to pay back later, usually with interest. This means you’ll end up paying more than the original cost of the item or the principal amount borrowed. In Singapore, interest rates on consumer loans can be quite high, making borrowing even more expensive and impractical.
Over time, this debt can snowball. As you make minimum payments, the interest continues to grow, making it harder to pay off the compounded balance. This can lead to a vicious cycle of debt that’s difficult to escape.
Impact on Long-Term Financial Goals
Using borrowed money to fund an impractical lifestyle can also jeopardize your future financial goals. Whether it’s saving for retirement, buying a home, or sending your kids to college, these things require money. If you’re constantly using your income to pay off debt, you’ll have less to put towards savings.
On the same note, it is also harder to build an emergency fund if you don’t have enough resources to put towards it. An emergency fund is your safety net for when life throws curve balls at you. These can be in the form of sudden unemployment, medical emergencies, unexpected but necessary home repairs, and other similar things. If your FOMO prevents you from building a hedge of financial protection, you will have a hard time facing financial emergencies.
Consider this: every dollar you spend on interest is a dollar less you could be investing for your future. Over time, this can make a huge difference in your financial well-being.
Stress and Anxiety
Having debt can be a significant source of stress and anxiety, especially if you’re not good at managing finances. Worrying about how you’re going to make your payments can affect your mental health and overall quality of life. It can also put a strain on your relationships with family and friends.
Numerous studies have shown a strong link between financial stress and physical health problems. When you’re constantly stressed about money, it can weaken your immune system and increase your risk of developing chronic illnesses.
Damage to Credit Score
Your credit score is a number that represents your creditworthiness. It’s based on factors like your payment history, amount of debt, and length of credit history.
A good credit score is important for things like getting a loan for a car or a home. Banks, lending companies, and financial institutions examine a person’s credit score when evaluating a loan application. They base their approvals on credit scores because they reflect a person’s reliability in making regular repayments.
If you miss payments or default on a loan, your credit score will take a hit. This can make it more difficult and expensive to borrow money in the future.
Potential Bankruptcy
In extreme cases, overwhelming debt can lead to bankruptcy and financial ruin. This is a legal process that relieves you of debt by giving up most of your assets. Bankruptcy can have a devastating impact on your life, making it difficult to find housing, employment, and even get loans in the future.
Bankruptcy is a serious matter and should be avoided at all costs. It is not a way out of debt. By being mindful of your spending and making responsible financial decisions, you can reduce the risk of ending up in this situation.
Wrapping It Up
Wanting nice things isn’t bad at all. It’s normal to want the good stuff in life. But if keeping up with the Joneses of FOMO gets you in a financial rut, you should consider your priorities.
