Millennials are known for valuing travel and experiences more than material possessions. And in general this is a positive thing, since studies have shown that the joy and memory of an experience sticks with us longer than the temporary high of buying, say, a new piece of furniture. But there is a time when it doesn’t make sense to prioritize travel above everything else in life.
FOMO, Millennials, and Travel
We’ve talked about fear of missing out (FOMO) and how it can wreak havoc on your finances. Feeling like we need to keep up with or one-up everyone else tends to cause us to spend more, save less, and sometimes even go into debt along the way. That’s never a good combination when you’re talking about healthy money habits.
A recent report from Merrill Edge uncovered some interesting tidbits about Millennials and how FOMO is driving their money decisions:
The report found the ‘FOMO’ (fear of missing out) mentality of younger generations makes them notably more likely to prioritize personal milestones, such as landing their dream job and traveling the world. Millennials are also significantly less likely to focus on traditional priorities, such as getting married or having a family.
Now, it’s possible that some element of FOMO influenced previous generations to get married and start a family and buy that house with the white picket fence, in the same way that FOMO might be a major driving force pushing Millennials to travel, find a dream job, and jam out at live concerts (and get some totally sweet pics to share on Instagram in the process).
It’s highly unlikely Millennials are the only generation to deal with the force of FOMO, but the Merrill Edge report did uncover a troubling trend with Millennials and money:
Their ‘fear-of-missing-out’ (FOMO) mentality is also apparent in their spending habits, as the majority say they’re more likely to spend money on travel (81 percent), dining (65 percent) and fitness (55 percent) than save for their financial future.
There’s nothing wrong with traveling, eating out, or buying a gym membership or yoga classes. But those types of expenses should come after building a financial safety net, not before it.
A (Happy) Money Framework
This doesn’t mean you can’t have fun and enjoy life. You can travel and save money simultaneously; they aren’t mutually exclusive. Studies have found that people with more savings are happier than those with less savings, and people without debt are happier than those with debt.
Blowing every penny you have to voyage to Iceland and beyond might sound appealing, but you should maintain a savings emergency fund (maybe three months’ worth of your average expenses) even as you’re venturing off on world travels.
This is the framework I’ve outlined in the past to manage money in a way that minimizes stress and maximizes happiness:
Step 1: Take care of the necessities (food, shelter, and so forth)
Step 2: Pay off debt (all of it)
Step 3: Build a financial safety net (save and invest)
Step 4: Spend money on experiences, not material goods
Step 5: Spend money on others (friends, strangers, charities, and more)
Getting through each of these steps isn’t as daunting as it seems, but it might cause you to take a step back and rethink some priorities. Spending hundreds or thousands of dollars on a big trip when you’re saddled with tens of thousands of dollars of student loan debt and don’t have much saved in the bank? Probably not a great idea.
Spending more money than you earn is not a sustainable lifestyle — at some point, you will be forced to cut back your spending, go into debt, or both. That’s not a pleasant situation to be in, whether you’re 26 or 56. Paying off debt and building up a cash cushion in the bank goes a long way toward setting yourself on a sustainable financial path; one where you can enjoy those enriching trips and experiences without jeopardizing your financial future.
Have fun. Travel the world. Learn. Find yourself. Make your own Eat Pray Love experience happen. Just don’t go completely broke and obliterate your financial future in the process.
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Original published on thevantage.co and republished with permission.
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Photo Credit: Getty Images