Feb 04, 2019  | Tags: social media, budgeting, personal finance

Our Insights

Social media brings many benefits but also challenges, especially for your cashflow and wealth goals, writes financial adviser Ben Calder.

There is no doubt that the rise of social media has impacted our lives in a more ways than one. It has evolved into one of the most powerful means of connection, business and digital marketing. With over 3 billion active social media users worldwide in 2018, it would only make sense for companies to go to where the people are and promote their product on these social media platforms.

Companies use ads on social media to target the consumer directly, through cookies and your web history, or it can be just an unconscious influence – whether you see a celebrity or a friend wearing an item and you want to have it too.

It has given users much more exposure to different products and services than ever before, but the same exposure can become damaging if it starts impacting your life and influencing spending habits in a negative way.

A recent study revealed that social media really can influence the amount of money you spend to the point that you can’t control yourself. It also found that while on social media we are more inclined to spend money because we are not completely aware of the effects and usually it is an impulse buy.

This is especially the case for the millennial generation. According to a study by Allianz, 57 percent of millennials spent money they hadn’t planned to because of content on their social media feeds. This is compared to 28 percent of Gen Xers and seven percent of baby boomers.

Millennials are more likely to compare themselves to others on social media than any other generation, and as a result that translates directly to spending more. This is backed up by another study, where TD Ameritrade’s Millennials and Money Research found that 24 percent of millennials felt pressured to keep up with their friends’ spending habits.

How to reduce the influence of social media on your spending

Reduce screen time

Mindlessly scrolling through social media can be an addiction that is hard to break.

It is simple - the less you use social media, the less you will be influenced to spend your money – whether that be directly through an ad or indirectly by seeing a product through a friend or other influencer’s feed.

So by cutting screen time you will save money, but also free up your time, improve productivity and even deepen your personal relationships!

There are lots of tools to help you track and monitor screen time. A recently released iPhone software update tracks your use of apps and enables you to enforce time limits, if you wish.

Become intentional with your time, or try finding a new interest to focus on when you are bored, and in turn you will see your time spent on social media decrease, and your savings increase!

Create a budget

Set aside some time to reflect on your spending.  Creating a budget helps you figure out your long-term goals and work towards them. It also allows you to stay in control and keep track of your expenses. Knowing you are saving for something important, and have a budget to keep you accountable, will make you think more about where you are spending your money and reduce those impulse buys.

Additionally, you can put aside a percentage of your budget for when you do decide you want to treat yourself to something you have seen online.

Reflect 

Make your brain aware of the temptations online and ask yourself – is this a want, or a need? Think about if the purchase will benefit you in the long term, or are you just buying this item to fit in or follow the latest temporary trend? 

If you feel like buying something, take a break for an hour, then come back to the decision – the emotion will be taken out of it, and you may find this is something you don’t need to buy after all!

Get advice

Working with an experienced financial adviser is the best way to not only set up your wealth goals, but also help you develop a plan to achieve your vision (without the distractions of social media!).

Calder Wealth Management are the wealth experts, and can help you set up and manage your budget strategy. Call us on (08) 8373 3333 to schedule your free initial appointment. 

Written by Ben Calder, Private Client Adviser at Calder Wealth Management.