FOMO affecting SA's wallets

Henry van Deventer, Head of Business Development at acsis

Impulsive actions and habits ultimately can seriously affect consumers’ wallets and, according to Henry van Deventer, Head of Business Development at acsis, unfortunately the majority of South Africans are guilty of caving into this impulse without giving

Van Deventer points to a recent Pharma Dynamics survey, which revealed that a new epidemic is sweeping South Africa - “Fear of Missing Out” (FOMO). “The rise in fear of missing out on something more interesting or exciting than what an individual is currently doing, highlights how many consumers are actively guilty of impulsiveness.”

62% of the survey’s respondents said that they live in constant fear of missing out and 53% of respondents admitted to saying ‘yes’ when they would rather say ‘no’ due to their fear of missing out on something.

According to van Deventer, not only does FOMO weaken the immune system as the survey reported, but it also weakens consumers’ financial well-being. “Unintended spending can greatly affect your finances as ‘last minute’ arrangements or purchases aren’t originally planned or budgeted for.”

He adds that credit and store accounts only aid FOMO and impulsive purchases and actions. “It is easy to outspend your means and blow a budget in today’s society, with credit cards and unsecure loans readily available. Access to additional funds tempts consumers to purchase items and take part in costly activities, such as travel and socialising, while only having to worry about repayments at a later date.”

He says this type of mindset can fast lead to mounting financial problems. “Unintended charges on your credit card, with no plan in place to pay off the purchase, will only compound the financial difficulties consumers find themselves in.”

He refers to the latest TransUnion consumer credit index (CCI) that revealed a drop in loan repayments and how South African’s are increasingly revolving credit each month. The index declined to 48.6 index points in the third quarter of 2012 from 51.2 index points in the second quarter.

“The interest charged for credit card overdrafts is extremely high and if an overdraft isn’t paid off within the first money after the purchase, the interest will quickly start escalating. Soon consumers end up paying more than twice the original purchase price for the items purchased.

“This compounding negative interest can quickly lead to a slippery slope into debt. Instead of running a credit card bill into an overdraft, place the money that would have been spent on credit into a savings vehicle and reap the benefits of positive compound interest.”

In order to avoid the pitfall of credit cards, van Deventer suggests prior planning. “Most consumers are likely at some stage to suffer from FOMO, which can result in additional expenses, but the consequences of giving into this can be avoided by paying all monthly expenses and outstanding bills at the beginning of the month. This will then give a clear indication of how much money is remaining to spend on luxuries and those last minute arrangements that you can’t miss out on.”

Van Deventer however stresses that it is important to not spend all remaining money simply because it is available. “Before spending an entire paycheck, always remember to allocate funds appropriately into the correct savings in order to ensure financial wellness,” concludes van Deventer.