How to deal with financial FOMO: 7 effective ways to financial freedom

How to deal with financial FOMO: 7 effective ways to financial freedom 1

Did you know? Close to 3 in 5 Australians are worried about their financial situation and almost 85% say financial stress affects their well-being negatively![1]

Financial FOMO is real. It’s the virtual equivalent of keeping up appearances. Look around you. Look at your Facebook feed. Many are feeling the pressure to ‘keep up with the Jones’ and show off their lifestyles on social media to look like they’re doing well. And it’s sending many people broke!

In an interview by Sophie Elsworth from news.com.au, Mortgage Choice’s chief executive officer, Susan Mitchell, said that many people — particularly those who were yet to buy property — were showing off their lifestyles and putting it ahead of buying their own home. She points out that 38 per cent of Australians are choosing to forgo buying their own home in order to keep up appearances. A survey of more than 1,000 Australians proved how financially unfit many people are.

Want to get savvy with your finances? Curb the FOMO and start taking action towards your dream goals with these 7 tips to help you get financially fit and eliminate the money habits that set you back

  1. Save 10% of your earnings

If you can’t make more money (or if having a “side hustle” doesn’t work for you), don’t worry, instead focus on making the most of your existing source of income that you already have.  Put simply, for every $10 that you earn, put away $1 into a separate savings account. You’ll be surprised how quickly you’ll adjust to getting by on just 90% of your income.

What do you desire the most? Trendy clothes, that expensive watch, maybe that fine dining experience at Heston Blumenthal’s restaurant; things that are quickly gone and forgotten? Or is it that dream home, that piece of land that overlooks the ocean, or that investment property that brings in rental income? The 90% that you spend brings the first. But it’s the 10% that you save that brings in the second.

  1. Control your expenditures

Print out your bank statement and have a proper look at your expenses. There’s nothing more eye-opening than going through your statement line by line. Some of us earn more than others. Some have much larger families to support. But somehow, earnings are so easily spent and some have no money left in savings?

It’s an unusual truth that our ‘necessary expenses’ will always grow to equal our incomes unless we intervene. Cut back where you can and watch your savings grow automatically.

  1. Make your savings multiply

Money in your wallet is nice to look at and makes you feel good, but it earns nothing. Now that you have saved 10% and cut down on your expenses, it’s time to put your money to work. Start with a high-interest online savings account or a term deposit. Check out some new apps designed to motivate you to save here.

Your wealth is not the amount you carry in your pocket but it is the income that it builds that continuously flows into your pocket. This is the magic that is compound interest. It’s how you make your money work for you, even when you’re asleep.

  1. Set aside an emergency fund

Sometimes things don’t go the way you want. You lose your job, the car needs repair, or the hot water tank blows up. Life happens. You’ll be glad to know that you have some money set aside to deal with it. Unless you have adequate insurances in place, a rule of thumb is to set aside between 2 to 3 months of living expenses.

  1. Start saving for retirement

When you’re in your 30s and 40s, the majority of your income tend to be directed at paying off your mortgage and funding children’s education. Because we tend to live in the now and not in the future, retirement and old age is hard to visualise. Making additional contributions to superannuation by salary sacrifice or after-tax income is a form of forced savings. Ask yourself this question: how will you and your family live when you are no longer able to earn?

  1. Revisit your overall financial position at least once a year

Are you on the lowest interest rate for your home loan or credit card? Is your superannuation account charging too much fees and can you do better? Where else can you save money by changing providers or utility suppliers?

  1. Seek advice from a professional financial planner

It takes discipline and know-how to get started, but just like a personal trainer will help you reach your health & fitness goals, a good financial planner will help you set your financial goals and work with you to create a plan to achieve them. When choosing an adviser, you’ll want to know if they have the right life experiences and aligned philosophies, that they specialise in the area where you are seeking advice and whether they are a member of an industry association (such as FPA or AFA).

Your Turn

How do you make sure that you’re not caught up in financial FOMO? 

Steve Luman

[1] According to the Mortgage Choice Financial Fitness 2019 Whitepaper

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