There is something about human nature that makes us wired to believe that anything which is scarce or available only for a limited time is something we must have, despite the price. It’s called FOMO – Fear of Missing Out – and it is without doubt the biggest driver of poor financial decisions. Everywhere you look there are examples of selling tactics that prey on our FOMO insecurities.
Advertising copy is the biggest culprit. How many times do you walk past a shop window or read an online advertisement that uses words such as: ‘limited edition’, ‘available for a limited time only’, ‘selling fast’, ‘only a few left in stock’? These descriptors are all designed to tap into our fear of missing out.
This same fear drives people to bid higher at auctions – whether it is an online auction for a pair of shoes on Trade Me, or an auction for a more expensive item such as a car or a house. Rational decisions can go out the window if bidders believe there will never be another pair of shoes, car or house as suitable or affordable as the one they are bidding on. To a rational observer this belief is complete nonsense.
Rapid inflation also drives FOMO. While inflation for most goods and services is now less than 2%, we have had double digit annual increases in property prices, combined with a shortage of real estate listings. For first home buyers in particular, the fear of missing out on their first step on the property ladder has caused many to take on more debt than they are comfortable with.
Financial decisions are best made without fear and emotion. Eliminating fear of missing out is simply a case of believing that in time, you will find what you desire at the right price.