FOMO and upgrade mania will make wealth generation skid
Just days after major online retailers announced their mega festival sales comes news reports that average sales prices have risen and discounts have fallen as the sale days progressed.
Guess what is driving sales.
FOMO, fear of missing out, and upgrade mania.
Yes, the concern that stocks may not last and the desire to own the latest version of any product.
Both these traits are dangerous and can veer you off your investment goals.
We all like the good life, but the definition of the good life must be one’s own and not influenced by celebrity endorsements high-decibel advertising.
As more folks delve into the allure of the new and upgraded, especially on gadgets, fashion, beauty, and personal care products, the path to sustainable wealth-building is getting rocky.
The Anatomy of FOMO and Upgrade Mania
FOMO Is Real, Not Just a Buzzword
FOMO isn’t just a trendy acronym; it’s a behavioural pattern rooted in anxiety-driven spending.
The rush of bagging discounted deals during festival sales, the dread of missing out on the latest fashion trend, or the social prestige associated with owning top-tier brands—all contribute to a spending frenzy that's hard to control.
This behaviour is stoked by creating a fear that stocks won’t last. But what if you don’t really need the thing on offer. To know how to tackle FOMO, read https://www.bondbazaar.com/blogs/cricket-well-left-good-strategy-investing-too
Upgrade Mania: The New Age Conundrum
Upgrade Mania, on the other hand, is not new. It is the equivalent of ‘keeping up with the Joneses’, a term used in the Western world that refers to comparing with the neighbours regarding the accumulation of goods.
The term, synonymous with Premiumization Fever, echoes the growing penchant for luxury, denoted by the rise in the Average Selling Price of goods.
This upgrade fever is significantly triggered during seasonal shopping sprees where consumers are enticed to buy the better, the newer, and the pricier with the so-called ‘no-interest EMI’ schemes.
What drives the desire to upgrade?
A desire to emulate those we admire is one reason.
The other factor is to be ‘in with the trend’.
Report of trends by influencers who promote the “in” thing and celebrity endorsements promoting the trend, which causes the lollapalooza effect, is often cited as a factor that drives decision-making. Read https://www.bondbazaar.com/blogs/be-conscious-investor-ensuring-lollapalooza-effect-does-not-hit-you
The Economic Ripples
Inflationary Spending and Economic Trends
The behaviours mentioned above are creating a ripple in the economic pond.
The surge in spending, especially impulsive and emotional spending, is concerning, as it signifies an inflationary trend.
Consumers are now more willing to part with a larger chunk of their income to satisfy the Upgrade Mania, leaving less in the kitty for savings and investments.
Look at these numbers below. They tell a story.
|
Financial Indicator |
FY22 |
FY23 |
|
Net Financial Savings (% of GDP) |
7.2% |
5.1% |
|
Annual Financial Liabilities (% of GDP) |
3.8% |
5.8% |
Source: RBI
In short, Indians are saving less and creating more liabilities.
The Consumerism Trap
Consumerism is no longer a passing phase but a deep-seated lifestyle choice.
The modern shopper is caught in a vicious cycle of earning and spending, with little thought towards long-term financial planning.
The lure of discounts, the thrill of owning the new, and the societal pressure to upgrade— all bind consumers to a spending treadmill, which one leaves them financially exhausted.
Navigating Through The Spending Storm
Mindful Consumption and Financial Literacy
Breaking free from the chains of consumerism requires a blend of mindful consumption and financial literacy.
It’s about knowing when to say no, understanding the difference between needs and wants, and having a solid financial plan in place.
It is about knowing the difference between enough and more.
Wealth Preservation in the Face of Temptation
The road to wealth preservation and asset accumulation isn’t paved with impulsive purchases and FOMO-driven decisions.
It’s carved with the tools of budget management and a solid understanding of the financial implications of one’s spending habits.
As FOMO and Upgrade Mania continue to dictate market trends, the narrative of wealth generation could skid off track.
The antidote lies in cultivating a culture of financial literacy, mindful spending, and robust financial planning, which safeguards one’s financial future.