Social Media and Your Finances
There was a recent article I read that asked if you get financial envy. I thought this was a great question and one that I wanted to comment on more than just in a tweet or a Facebook post. Most of us are on some sort of social media platform where we either post pictures and provide updates on our lives or we just occasionally check in to see what our friends/acquaintances/co-workers are up to. Whether we use Facebook, Instagram (owned by Facebook) or in the case of our children, TikTok, the way the message is delivered may be different across platforms but the end goal is the same, there is something in my life I want to share with you. Again, in the case of TikTok, even if this just means sharing 10 seconds of dancing and lip synching to a song.
Many studies have been done about the harmful effects of social media on our mental well being. I am not here to rail on social media as a whole and say there is no redeeming value. There are plenty of people in my life that I care about on some level but am just not close enough to on a frequent basis where I can stay in the loop on their lives. Social media provides me a way to know something about what they are up to. It also provides us a way to communicate to a much wider audience in one shot than what was ever available to us before. And for that, there is value. We can have a whole other conversation on whether the darker side of social media makes the overall net experience a positive or negative one, but that is for another time and place.
I am pretty sure the Psychology 101 class I took in college in the fall of 1989 does not qualify me as an expert on what social media does to a person’s mental well being so I will not attempt to engage in that discussion here. Where I do have some degree of knowledge is people’s personal finances so we will focus on that. Now while we may not have professional psychology degrees, financial planners need to understand how people feel about money because there absolutely is an emotional component to our individual relationships with finances. This can be very tricky. Some of us have budgets, stick to them, understood the value of saving at an early age, and are in good financial shape. Others struggle with money. They don’t know where their money goes and as a result they may have debt and/or are not where they want to be financially. And there is everything in between.
The tricky side with most of our consumption of social media is that it shows people in their best moments. Nobody posts pictures of themselves on a Tuesday night doing laundry, doing the grocery store/Target/Costco runs, doing yard work on a Saturday afternoon, sitting on the couch and watching Netflix or scrambling to get home from work in time, being forced to get your kid dinner thru a drive thru as you try to get them to whatever practice or activity they have that night. Instead, for the most part, we see three main types of posts: celebrating our kids, showing off our pets, and highlighting our life celebrations like vacations and gatherings with friends and family.
So how does this impact our finances? This is where the financial envy can come into play, although there is likely minimal financial envy coming from posts related to pets. This is essentially the “keeping up with Joneses” syndrome. The trap is you start thinking, why don’t we take fabulous vacations? Why don’t we go out for expensive dinners with 12 of our closest friends? They look amazing, I need clothes that look like that. Whatever it may be, there is the appearance that they have the money to have experiences and material things that you don’t. The knee jerk reaction might be to start thinking you need that big trip, boat, new house or go on a shopping spree but where does that leave you? Here are some things to think about if you start feeling financial envy.
1. We’ll start with the big one. Your life is your life and you need to focus on what brings you joy. As an advisor, I think my ultimate goal is to help put you in a financial position where you can live the life you want. It is up to you to define what that life is and everyone’s vision of that is unique. We all have our own histories, life experiences, family, health situations, and interests that shape what we want to do and what makes us happy. Focus on the top 3-5 things that will bring real joy to you and target those. Others will have different things that make them happy. That’s fine, let them pursue those things and be happy for them. You do you, and focus on the joy, fulfillment, and satisfaction you take from your things. Don’t worry about putting resources into number 18 on your list because it looked cool on someone’s Instagram feed if that prevents you from achieving number 3 on your list. When you look back at things it likely won’t have mattered to you if you didn’t get to number 18 but you might kick yourself and have regrets for not doing number 3.
Also, know these goals might change at different times. For my wife and I, we are at that stage where our parents are thankfully still alive but the reality is they are aging. Our parents are spread across the country so while we really enjoy traveling, how we travel over the next few years will likely look a little different as we want to make sure we get to spend quality time with them while we can. We just went to see my mom earlier this month. There were no fancy dinners where we are all glammed up, no big events we went to. We hung out, watched a movie each night, went for walks and talked, and just enjoyed being together. For me, that brings a ton of joy and satisfaction. We will go see my dad in a few weeks and my wife’s parents in December. I plan on playing golf with my dad as that is something we have always enjoyed doing. Someday we’ll get back to pursuing bigger travel goals but for now, this will be a focus because I can live with missing a long desired trip to Ireland but I know we would really regret missing this time with our parents. Ireland will still be there when I’m ready.
2. You have no idea what someone’s real financial circumstances are so don’t get worked up about what they have. There is always that question about how well we really know someone, if at all. We know very little about what is really going on with our friends from high school, college, or work, especially with their financial lives especially since it’s through the prism of what they allow you to see on social media.
One of the lines my wife and I liked to use with our daughter when she was growing up and would talk about the cool stuff a friend might have was, “You don’t know if they have more money than us, they just spend more than we do”. That wasn’t meant to imply that we were better than others somehow or that the person she was referring to was somehow wrong for spending more. The point was that just because they have a newer house, nicer car or some other cool thing doesn’t mean automatically they are in a better financial position. It just means they have decided to spend money on certain visible things. We don’t know what people’s salaries are, how much they get in bonuses, or if they get stock compensation. You have no idea if they can actually afford that fabulous vacation. Do they have extra money because they aren’t saving enough for retirement and plan on working until age 72? Are they banking on money coming from mom and dad? Do they have an amount of debt that would cause you to lose sleep at night? Maybe they made a series of great investments and can reap the rewards. Maybe they do make a big income afford all of it. Good for them if they can. That dinner at the expensive restaurant, maybe that was a work event they didn’t have to pay for. You just don’t know.
An example of this for me was right about a year ago and it combines this and the previous point. My daughter was a freshman in college and all the parents were flooding social media with posts about moving their kids in, how proud we are of them, how we will miss them and they inevitably included pictures of the kids on beautiful campuses and some that were very expensive schools that were beyond what we felt we could afford. Now here is the thing. I have no idea what each of those families’ plans are to pay for college. Maybe they have the money, maybe they got big scholarships, maybe they are taking out big loans. I have no clue so it’s not worth second guessing if my daughter should be at that school that’s $10,000 to $20,000 more per year because other kids are.
Saving for college was very important to my wife and I. Early on we established a target and planned over the years to be able to meet our target. Did the amount we had to save over the years cost us the ability to go out for some of those dinners, buy more expensive clothes, have a nicer car? Yes, it did. But for us, we take deep satisfaction that we were able to meet that goal and the fact we were able to provide our daughter with options we didn’t have at that age was well worth it.
You can’t control what other people do with their money and you likely don’t know if they are even making good financial choices or not. Just focus on your own goals and doing what is right for you and your family.
3. Remember that you are seeing a composite of many people on social media. You may be able to scroll through 50 different social media posts in a 15-20 minute browsing session. So while you see this collection of people doing these wonderful things remember that each of them is doing those things once. It gives the appearance that everyone is living the beautiful life. But what you really saw was person A out at dinner, person B with their friends, person C on vacation. Maybe that dinner was all person A has done for a while. Remember that they still have to do dishes, laundry, errands, house projects and kid’s soccer practices like you that fill the majority of their time.
4. You are almost guaranteed to lose when you start playing the comparison game. If you find yourself thinking, “Why do they get to do that and I don’t? I think we make about the same amount of money.”, be very careful. Think of social media as the Las Vegas casino and you are the hapless mark trying to figure out whether to place your roulette bet on 5, 12, or 24. The house will win in the long run.
When you see a picture of someone on that nice vacation it is in a vacuum of other information. Again, you don’t know the details of their finances or how they prioritize their spending. Maybe they can afford that trip because they don’t mind driving older cars and instead of putting $800 a month towards a car payment they save it for travel. That right there is $10,000 per year someone might be able to spend on something. Maybe it is all on credit cards and they don’t know how they will pay for it. Maybe they just got a nice bonus at work.
It is also very easy to quickly lose sight of the things that you do have. If you wanted the $800 a month car above, great. Just remember that car comes with a cost and maybe you can’t do the travel then. You may be directing more of your income towards retirement savings because you want to retire early. Maybe you just got your dream kitchen remodel and are paying off a home equity loan. All of these are choices which could you leave you with less discretionary income to have what someone else puts on display on social media.
The risk is that you assume they have everything you do plus the thing you see on social media that you don’t. That is hardly ever the case. The truth is they have some things and you might have some different things. They can’t put a picture of their new kitchen if they don’t have one. They for sure are not going to post their smaller 401k balance so you can feel better about your retirement savings.
We all make choices with what we spend our money on. Be it a house, cars, travel, kids activities, eating out, clothes, financial goals, etc… and we all make different choices across the board given where we are with our lives and what we value. So please don’t assume that the person you used to work with has everything. Likely they have just made different choices and that’s okay. It’s okay to re-evaluate your choices but once you are good with those then move on and don’t worry about what someone else is doing.
5. This is really kind of a continuation of the first point listed above. Remember that the things that bring you joy and satisfaction are just as worthy as what brings someone else joy. Not all of our goals result in great photo ops that we share with the world. There is no right and wrong with what brings you joy (assuming we’re not talking criminal activities) as compared to someone else.
You may want to retire early, travel the world and enjoy fine wines because you are curious about other cultures, foods, and the adventures of unknown areas, and well, you happen to like wine.
You may want to work until 65, move to Florida and play golf because you want to be in the warm weather and golf has always been your favorite activity.
You may want to buy a lake cabin and fish every day because you love nature and appreciate the peacefulness of the lake.
You may love taking your kids to Disney every couple of years because you have a shared love of the characters, love laughing with the kids and have great memories from those trips.
You may want to buy the big house so you can host large family gatherings because you have three kids, seven grandkids and love to have everyone together and cook for the family.
You may place an emphasis on education and will make sure your kids can go where they want and then you want to be able to volunteer for your chosen organization once retired.
You may love to read, watch movies and enjoy going to local breweries because reading stirs your imagination and you like the community aspect of the brewery.
You may love exercise and want to be able to stay active by joining a bike club, playing tennis and going for hikes in the mountains.
All of these are completely legitimate goals for you to pursue with your time and money and there are thousands more. None is better than another. You likely cannot tackle them all though, so the trick is identifying which ones mean the most to you and then having the discipline to stay true to those. They each will require a different financial and time commitment to accomplish. As I said above, if traveling the world is what really lights your fire then your financial plan should make sure you have the resources to do that. So, when you see a social media post and you start thinking you would like the new house, a vacation property or be able to join a country club if it can happen, is it worth it if it costs you your two week trip to Italy, an African safari, or overwater bungalow in the south pacific that you have dreamed of? That is something only you can answer.
At the end of the day, your goals are about making yourself and the people you love happy. It’s okay to feel that pang of jealousy when seeing what an old college friend is up to. Just remember you are on a path that should be most rewarding for you and let everyone else do their thing.
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