FOMO vs BOOST This Black Friday

Black Friday is nearly here, and with it come the midnight scrolling, the flashing ‘limited deal’ countdowns, and the thrill of bagging a bargain.

But here’s a thought: what do 30 years of Black Friday splurges look like compared to 30 years of growing your retirement savings by starting and regularly boosting a retirement annuity (RA)? Hint: you could gain or lose a quarter of a million rand if you’re adding or withdrawing R2000 a year.

One leaves you with cupboards full of forgotten gadgets. The other could leave you with hundreds of thousands of extra rands when you need them most. What feels like a Black Friday steal today might end up robbing your future self.

Black Friday FOMO trap
“We all know the feeling,” says Annalise de Meillon-Muller, CFP®, Head: Technical Support, Business Development at Glacier by Sanlam. “You build up excitement for that must-have air fryer, smartwatch or gadget, convince yourself it’s worth it, and after the dopamine rush of checkout, regret can creep in. That’s Black Friday in a nutshell.” Frenzied spending driven by fear of missing out (FOMO), scarcity bias, herd behaviour, hyperbolic discounting (instant wins over future benefits), and loss aversion (worry about missing a deal).

She adds, “Now imagine that same pattern in retirement. Years of giving in to FOMO don’t just leave you with buyer’s remorse and increasing clutter in your home; they leave you with less income when you need it most.”

Running the Numbers
Your Black Friday habit could cost you hundreds of thousands that should have paid you an income during retirement. Here’s an example of someone who likely will lose around R250 000 by retirement, just by dipping into his retirement savings every year to spend at the end of October.

Musa is 35, sociable, and loves keeping up with the latest fashion, tech, and trends. Every Black Friday, he treats himself – and dips into his retirement savings for just R2000 before tax. It doesn’t sound like much, but here’s how those withdrawals snowball into big losses over time:

Firstly,
• He loses out on compound interest every single year on that R2 000.
• That means that each year’s withdrawal (plus its compounded growth ) adds to the hole – by Year 2 he’s lost R4 000, by Year 3, it’s R6 000, and so on.
• He never even gets to spend the full R2 000; SARS takes its cut first.

Let’s break it down further. Musa currently has R3 000 000 in retirement savings and contributes R5 000 a month. If he keeps withdrawing R2 000 every year for 30 years, assuming 8% annual growth, that “little splurge” will ultimately cost him close to R250 000 by the time he retires at 65.

A single shopping spree today could shrink decades of tomorrow’s comfort.

“That’s the true cost of FOMO,” says De Meillon-Muller. “It’s not about depriving yourself of joy now. It’s about perspective. Every time you choose to boost your RA instead of spending, you’re effectively gifting the future you more freedom and peace of mind. You’re building the ability to keep enjoying the life you love long after your paydays at work come to an end. Small, consistent choices today mean you won’t have to choose between essentials and experiences tomorrow.”

The BOOST alternative
Instead of withdrawing from retirement savings, she urges consumers to make a different choice:

“Imagine boosting your retirement savings with the same R2 000 every Black Friday, by saving for it during the year perhaps. You will be investing in creating a dopamine rush for yourself during your golden years. Over 30 years, you could build hundreds of thousands of extra rands into your retirement savings – in Musa’s example, an extra R250 000. That’s the joy of compound interest; your money earns returns, your returns earn returns, and the snowball builds for decades.”

SAVE. BOOST. PRESERVE. The secret to a comfortable retirement.
De Meillon-Muller emphasises that a confident retirement comes down to three behaviours:

• SAVE what you can, consistently. An RA is a superb way to do that as it carries tax benefits and creditor protection.
• BOOST your RA whenever possible. Remember to keep your contributions in step with annual inflation increases.
• PRESERVE your retirement savings for their true purpose – as much as you can for as long as you can. Withdrawing from your retirement savings is not like withdrawing from your bank account. You’ll trigger income tax which will diminish the spending value of the withdrawal. Access to your savings component in the retirement fund, is really only for a life-or-death emergency, where you need funds urgently, and have no other way to cover those expenses. Your financial adviser can help you work through a solution.

“The life you love doesn’t have to stop when your work paydays do. With a little moderation now, the paydays you give yourself after retirement can ensure that you keep feasting, travelling, and gifting without guilt,” she says.

All monetary values and assumptions in this article are for illustrative purposes only.
Glacier Financial Solutions (Pty) Ltd is a licensed financial services provider.
Sanlam Life Insurance Ltd is a licensed life insurer, financial services and registered credit provider (NCRCP43).