We have talked a lot about financial wellbeing in our past blogs and how not to let our emotions derail our financial plan, yet FOMO (fear of missing out) is trending now and deserves our attention.
Did someone ever say to you, “Would you jump off a cliff if so-and-so did?” My mother asked that…multiple times. Usually, ‘so-and-so’ was my idol or my competition, someone who didn’t know me and surely didn’t care about me. My answer was usually “no” with possibly an eye-roll as I turned my head away. I mean, who would follow anyone off a cliff, no matter how good they made it look or how competitive I was? Yet, we do all kinds of crazy things for crazy reasons.
I understand today that she was trying to help me acknowledge the dangers of FOMO.
Why, as grown adults, do we need this refresher? Because we are human (emotional beings) and because the stakes are just as high, maybe higher.
It might not even matter how much your investment account has grown to feel FOMO when a friend, neighbor, or stranger shares that their account has grown more, faster, picked the best zinger stocks ever, etc. FOMO is that yucky feeling in your gut. You want what they have. You missed out. And you don’t want to feel that. FOMO is real and it can be strong enough to pull us into doubting our decisions, strategy, and ourselves or can even cause us to recklessly invest in that shiny, bright, trendy stock (the metaphorical ‘cliff’) that made so-and-so rich!
Just as you were asked to reflect on your willingness to follow so-and-so off a cliff, step back and ask yourself these questions:
- “Do I have the same goals as so-and-so?” – Hmmm…probably not. YOUR financial plan is built around YOUR goals in life. Your investment strategy works to maximize your money for the longevity of your life, meeting your financial goals along the way.
- “Can I take the same risk as so-and-so?” – Hmmm…not sure. Not only do you each have your individual risk tolerance (how one emotionally handles the ups and downs of the market without jumping ship), but you could also have a different risk capacity (how much of one’s nest egg can one lose and still reach one’s goals) and a different risk required (the risk required to achieve one’s goals given one’s financial resources).
- “Do I have a financial advisor whom I trust?” This is a big one. Is your advisor with a fiduciary, fee-only firm that puts YOUR interests above their interests? (Hint: not all advisors can or will sign the fiduciary oath.) Do you have a financial plan with systems in place to make your plan work? Having a trusted advisor who not only creates YOUR financial plan and wisely invests your nest egg based on your risk tolerance, but keeps you from following so-and-so off a cliff that would sabotage your financial plan.
Think about it.
Pause and use these questions to calm your FOMO emotions and reflect on the cliff in front of you.