Selfies and social media are bad for your finances.
Keeping up with the Joneses has been made a whole lot harder as a result of people posting selfies of themselves doing fabulous stuff on Facebook and Instagram. If you're a friend of the Joneses, you may know every restaurant and bar they've sampled, the beaches they've visited, the concerts they've seen and all the marvellous things their kids have done. People have always felt pressure to spend like their friends, but now it's a continuous, almost real-time distraction.
Financial planner Shannon Lee Simmons has noticed how the selfie phenomenon has added pressure on her fellow millennials to live up to the standards of their friends. Partly to have some fun and partly to wise people up, she's created an Instagram page called The Real Selfies. She's got pictures of herself at bars, restaurants and concerts and on vacation. But beside each is a picture of her holding the bill for each activity – that's the real selfie.
"Everything looks awesome on social media, but we never take a photo of our credit card bill after our vacation," Ms. Simmons said. "Then I thought, 'I'm going to put my money where my mouth is and start doing this.'"
The latest debt numbers came out last week and they were pretty bad. The average ratio of debt to disposable income reached 163.3 per cent at the end of last year – a new record. As usual, our story about the debt numbers scored a ton of clicks on The Globe and Mail website. People seem to understand that debt is a problem, but that doesn't mean they're changing their spending habits.
We need to think harder about why this is happening. Partly, it's low interest rates that make it very cheap to carry debt on an easily available home equity line of credit. Partly, it's because people have spent too much on houses and have to borrow to afford life's fun stuff. And it's because we're feeling pressure to live up to the lifestyles of our friends and relatives.
Ms. Simmons said social media let us see how people are spending their money, yet we rarely know what's happening with their finances behind that pretty picture. As a financial planner, she said, "I have the luxury of actually knowing what's going on behind the scenes. What I sometimes see is, 'Oh, they can't really afford it.'"
Do not make the mistake of putting this all on millenials who are such avid users of social media and are known for having a taste for socializing at restaurants and bars. Older people are just as vulnerable to spending to keep up with their friends.
Trevor Van Nest, a money coach in St. Catharines, Ont., sees this often in his business. People rationalize their overspending by saying they deserve it, he said. "They're barely getting by on the day-to-day, and they feel they deserve a new car and a vacation. It's staying not at a two-star resort, but at a four-star. It's going out and getting a high-end car with $550 monthly payments when they could have bought a $4,000 car with cash."
Mr. Van Nest thinks there are other factors at work here – banks pushing additional credit on their customers, a lack of financial literacy and retailers getting better at tempting people to buy. "It's the Costco effect – people go out for ketchup and toothpaste and come back with a couch and a ring. And then they wonder, 'What just happened?'"
Ms. Simmons said she's suggesting clients who are active on social media unplug for a few weeks – she calls it a social media detox – to give them a break from feeling the need to keep up with what their friends are doing. She also advises clients to unsubscribe from deal-of-the day e-mails.
There's little point in berating people for the big expenses they've already made, Ms. Simmons said. It's better to help them understand the consequences of these purchases in terms of what they won't be able to save for. She also thinks people should take a more dispassionate view their friends' exploits on Facebook, Instagram and other social media sites. "Every time you see something on social media, be reminded that this cost somebody money. You're not inadequate and you're not doing something wrong if you can't get there."