Social media Impulse and Your Money #200

This episode is going to hit on the impulsive buying urges of social media and how it impacts your spending, savings and financial future. 

Investment advisory services offered through Keystone Financial Services a registered investment adviser. The views expressed represent the opinion of Keystone Financial Services. Information does not constitute investment, tax, or legal advice.

Instagram: https://www.instagram.com/keystonefin/
Twitter: https://twitter.com/Keystone_Fin?advisorid=33004651
Contact Josh Nelson: https://www.keystonefinancial.com
Contact Jeremy Busch: https//www.keystonefinancial.com
Podcast Editor: Tim Leaman/info.primegen@gmail.com

Transcript

Wiser Financial Advisor – Social Media, Impulse Buying, and Your Money

Hi Everyone, and welcome to the Wiser Financial Advisor podcast, where we get real, we get honest, and we get clear about the financial world and your money. This is Josh Nelson, a Certified Financial Planner, founder and CEO of Keystone Financial Services. Let the financial fun begin!

Jen: Welcome, Everyone. We are your fabulous podcast hosts today. I am Jen Walenter.

Michael: And I'm Michael Stevenson. We are Associate Wealth Advisors here at Keystone Financial Services, and we have an interesting topic today. This is going to hit on social media and how it impacts our spending habits.

Jen: Yeah, we're talking about something that affects almost all of us, whether we realize it or not.

Michael: It's not always just what you buy or how frequently you buy things on social media, because some things can be inexpensive, and some can be the opposite—very expensive. It’s  being aware of how that's all impacting your short-term financial situation. And if it becomes a problem, asking if it’s influencing your long-term financial situation.

Jen: This isn't about blaming social media. It's about understanding how it influences us so we can make better decisions.

Michael: Right. Because social media can be helpful. It connects us in ways that our grandparents or great-grandparents couldn't have dreamed of, right? My goodness, you can talk with somebody halfway across the world. It's a great tool, but there are also ways in which it can influence a part of our lives that we didn't envision it doing, without us even knowing.  

Jen: Absolutely. So let's go ahead and dig right in, starting with a simple question. So Michael, what is the last thing you bought because of social media?

Michael: That’s a great question. Unfortunately, I can think of many examples. The one I'll bring out of my dirty closet here is that I'm often on social media scrolling. Half of it is marketing, right? So it isn’t necessarily me staying updated on my friends and family's lives, although that is mixed in. But recently I got a new bike. I wanted to start biking and do a bit of bike-to-work and stuff like that. I think we've all experienced noticing that, wow, I was talking about that with my friends, and now, how does my phone know not only that I bought a bike, but also that I was looking into bike racks? Okay, I have a backpack, but maybe I want to get these saddle bags to put on the back of my bike, to put clothes and shoes in and whatnot. So then my social media, goodness gracious, was filled with bike racks and bike accessories, saying, “Here's why you want this.” There are these amazing bags, and stands for mounting them. You can just click on it, make it super simple. All of this marketing was coming to me and, oh my gosh, I’m like, these are great.

Jen: And not only do you need the bike now, you need all the accessories and the storage and this one thing suddenly blew up.

Michael: Yeah, because what the marketing was telling me was sure, you could ride to work, but you're going to be lugging this backpack around. It's not as comfortable. You ought to just get a bike rack and get these bags to go along with it. And sure enough, it catches you quickly, and you don't necessarily realize it. All the while, in my mind I'm rationalizing this choice. I'm saying, “Well, of course, that would be a much easier route to go. it makes a lot of sense.” The bike was X dollars. A rack is this amount of money, which is a lot less than the bike. It's still a purchase that was not the cheapest option for me, but I was able to rationalize it through all this thinking about how much time I’m going to spend on the bike. How many trips a week am I going to use the bike rack and the bags? So, it isn’t necessarily self-sabotage, but a version of it. So yeah, social media is tricky and  sneaky for sure. The real cost can be a little shocking, especially when  accruing small purchases along with  large purchases. When it's occurring over time, you start to realize, oh my gosh, I'm spending a lot of money. So, breaking it down for myself, let's say if I were to spend 35 bucks a week or maybe twice a week on impulse purchases. 

Jen: That's $70 a week.

Michael: Yeah, multiply that by 4, and that’s $280 a month. 

Jen: Over a year, that’s $3,360. 

Michael: How many of us will raise our hand and admit that we’re spending $3,300 on impulse purchases a year.

Jen: Right, because no one feels like they're really spending that amount.

Michael: Right? And some of us are thinking, I spend way more than that. I'm probably several hundred dollars a month rather than $280. Wait, am I really spending five or six thousand dollars on impulse purchases? These are things that I'm not planning for, right? And I also have young kids. We recently bought a baby bottle cleaner due to social media prompting. Our kids are bottle fed pretty much up to a year and a half, so we're constantly washing baby bottles. And so when I heard about this baby bottle cleaner, I thought, should we get it? And what do you know, it’s right there on social media. So I wouldn’t necessarily consider that an impulse purchase because I thought about it beforehand and I do want it. It's something that ended up being my wife's birthday or Christmas present, I can't remember which. But with impulse purchases, I will go a step further and say, there wasn't really an original thought about it from me—I  just saw it or my phone knew to put it in front of my face. Next thing I know, I'm buying it because my goodness, it’s so easy to buy things on social media.

Jen: It is, absolutely. When you  look at social media and why it is so effective, you  think about, why is this happening? Why is social media so effective at driving spending?

Michael: Right, because Jen, if you were to go on your phone to amazon.com, or maybe Instagram or Google, TikTok, whatever social media platform it is, and  see something you want, how fast do you think you could buy it?

Jen: A couple clicks. A minute at most to look at it, make sure it's the color I want or the size I maybe need. Honestly, probably 30 seconds.

Michael: Yeah, because most of us have our credit cards or some form of payment stored on our phone, whether that's through Apple Pay or Google Pay or what’s available on an Android device, all saved on the phone. In two clicks, a face scan or other biometric ID, and then all of a sudden, I’ve made a purchase.

Jen: You scroll it, see it, buy it, versus a store, right? If you walk into a store, you make the effort to drive there, park, get out, go see it. That's a completely different buying experience.

Michael: Yeah, I'm thinking about what we did last week, going to Lowe's and Hobby Lobby to decorate our office, which was a bit bare. It needed some plants and pictures. And it took a while, right?

Jen: A couple hours.

Michael: Yeah, but that's because we got in our car, drove to Lowe's, and walked around with a shopping cart.

Jen: There's effort being made.

Michael: Go find the plants we want, and us not knowing much about it, took time, right? Because we weren’t sure what exactly we wanted. Well, can this thing survive indoors? Does it need a lot of light or a little? What type of soil do you put in? We need pots. How often do we water? All these things we're actively learning in the store while grabbing the product and putting it in our shopping cart.

Jen: It's giving us pause. It's making us consider because we see how that plant looks in real life. Oh, that doesn't quite look as green as we thought. Let's not pick that one. Let's pick this other one, right? It gives your brain that pause to say, “Is this really what I want?” It's not as instantaneous. It's not as easy as a social media ad popping up. If we saw the pictures that you and I ended up getting, we’d think they looked like a great purchase, but we would not know until they arrived if they were what we really wanted, versus being in person. In person, we absolutely know, yep, that's the right fabric. I want it. That’s the size that'll fit in the room. That plant looks fantastic.

Michael: Yep. We went out looking for pictures to hang on the wall, and we probably looked at 200 or 300 different paintings between Hobby Lobby and the office. 

Jen: Easily.

Michael: By actually being there to see them in person, I didn't pick a single one, because I didn't like what I saw. And although there's no way of really knowing, I feel like my social media experience would be vastly different.

Jen: It'd be very different.

Michael: If I were scrolling through the way things are presented on a phone, they're always shown in the perfect room with the perfect furniture coordinating together to make you think,  “That picture in my office is going to make the space feel like what I'm looking at online.”

Jen: Absolutely. Those platforms are designed to trigger you psychologically. They play on that perfection, that perfect life, and they also play on that fear of missing out with things like “we only have a few left,”  or the reviews and likes and all of it. 

Michael: I don't shop in person a ton. Last week was almost therapeutic to go to the store and think, wow, this is what it feels like. I haven't gone to peruse a store in a while, and it was different to be able to say that I didn't even buy the thing I went there to get. We bought other things we went to find, but I was almost proud that I maintained my ability to say, “Nothing here is what I was thinking I would like or want.”

Jen: It's harder to fill a cart physically than it is to fill a cart electronically. I think we're all guilty of adding and adding to the cart online. There might be a price tag that gives us pause. I would argue that once we saw our full cart at Lowe's and Hobby Lobby, there was really something physical about seeing what we were buying, how we were buying it. It was easier versus online, to ask ourselves if we really need this or not. Online, it's like, add to cart, buy 8 items, they'll be shipped to you tomorrow, right?

Michael: Absolutely. There's way more friction buying in person. You think about it 10 times more than you would online. Online is just so easy with payment methods and all.

Jen: The other part, honestly, about social media influence and our purchases is the influencers themselves.

Michael: Yes, that has got to be one of the top factors of social media spending, seeing other people, many of them influencers. That title describes itself. They're influencing us to buy something and encouraging comparisons with our friends, family, or whoever. “Okay, they got that new car,” or  for example,  I saw our friend's daughter in this cute, snuggly outfit. It was just a baggy sweatpants and sweatshirt but I thought it was so cute that  I went online and bought it for my daughter. The price was about 60 bucks. Would I ever buy that in a store? No, absolutely not.

Jen: Because it feels like the recommendation is coming from a friend. Yours actually did. But it's also a sense from advertising, that, “You could have this. You could feel this way.” And that's where on social media, you don't realize how much you're being advertised to, because the packaging it comes in doesn't quite feel like an advertisement. As you  just said, you would normally not spend 60 bucks on an outfit, but you liked the way it looked. And it feels like, this would make sense in my life. You purchased it at 60 bucks, which you were not expecting to spend.

Michael: Exactly. And  tying back to what you had mentioned, which is the fear of missing out, it's this subconscious feeling of, “Man, that's such a cute outfit. It looks great. And I'm thinking about my daughter. That would look so cute on her too. I don't want to miss out on that.” It's irrational, because there's nothing being missed out on. You know, we're blessed. We have clothes and we have water and a home to live in, cars to drive. But social media just presents a lifestyle, right?

Jen: A lifestyle you want to emulate and be a part of, right? You start seeing yourself in a light that you normally wouldn't see, as in, my daughter has cute clothes. My son, look at the shoes he's wearing. Then you start envisioning better homes, better clothes, more travel, as that illusion starts growing in your mind. I think the big key here is that it starts to shift what feels normal. Now, let's put some numbers to that, because a lot of listeners out there like seeing how the numbers add up. So, if social media influences you to spend let's say $200 more per month, that’s $2,400 a year. Over 10 years, that's $24,000. 

Michael: And that's without investing it. If we consider the time value of money over those same 10 years, that $24,000 could turn into something like $40,000. Who knows? Apply whatever rate of return you want, to the time value of the money we're spending, This isn't saying we should all live like hermits and save every dollar and be as frugal as possible, never eat out. Some people have that lifestyle and they enjoy it. Good for them. But our point is not so much about shaming social media or shaming ourselves for buying things. It's about being aware.

Jen: Yes, being aware, right? Because like what you were just saying, if that money is gone, it’s not growing, not being invested. It’s helpful to be aware that $3,000 a year invested for 10 years could become around $30,000. In 20 years, that could be $75,000. That’s the time value of growing.

Michael: That's a big number.

Jen: And that's where those small purchases aren't just costing you money today. They're costing you future wealth.

Michael: Right. Being aware of it and able to understand creating planned savings, creating a budget to allow yourself to spend something, just not too much, is valuable. We're not just going to turn it off, but doing social media spending in moderation, having an idea of what's appropriate for me on a weekly basis, on a monthly basis. Calculate out for yourself, okay, so if this is what I'm gonna stick to, what does 20 years down the road look like? What is the opportunity cost of me spending all of this? What do I get for it? Now, some of it may turn out to be your favorite accessories. Who knows? That could bring you joy. There's value to that. But just make sure we're all understanding the long-term impact of these spending habits. Customize it to yourself. We're not saying we need to rip all the spending out. We're not trying to suck all the joy out of our lives here.

Jen: Yes, we want to promote being aware of how social media could be affecting you in case you didn't give yourself pause to think about it. Because the other big thing is that social media can be like a highlight reel. The people who are pushing these products, you're not seeing their debt, you're not seeing their financial stress. You're not seeing the fact that something was sponsored. So, it's easy to feel like you want to spend on things that you see there. And like you just said, that's completely okay, but it can be helpful to be aware that your own financial situation is not the same as theirs, and they might be showing you glitter, unicorn and roses, but privately behind the scenes they might be having a harder financial time that you are not seeing.

Michael: Right. Yeah. Myself, I'm not a social media enthusiast, but the times that I do post on social media are good times. Our anniversary, our birthday, my kids doing something fun. These are highlight reels. It is not showing difficult times. It's not showing the harder conversations or trips to the hospital. So it can easily detach from reality. 

Jen: Absolutely, and so it's just that awareness of how you are potentially being influenced and how that affects your pocketbook, right? Now, to be fair, social media has a great positive side. There's some great financial education content out there, things like budgeting tools, investing tools, saving strategies, which are awesome. But here we're talking about understanding how social media does influence us and how we spend in ways maybe we just don't think about.

Michael: Yeah, and I like you bringing up that there's a lot of positive things about social media, like how well it connects us. You know, it would be much harder to stay up to date on all of my friends' lives, right? Who's had babies? Who got married? Who's moving? Who just got a new job? You know, LinkedIn does a great job of helping me know things like oh, my buddy just got a new job at XYZ company. That's great. It's helping me stay up to date and it's harmless, you know, in my opinion. So, there are a lot of positives for sure to social media, but the spending aspect is, in my opinion, one of the cons. It's one of the things that if we could make a change with how we spend or how we're interacting with social media as far as being a consumer, could be helpful. I think one of the most important things to do is assess how to make it a little bit more difficult to just spend.

Jen: Absolutely. And that's a great way to point out, now that we're  aware of how social media can influence spending, what can we do about it? So, here are a few things that we feel like could make a big difference. You hit on the first point, Michael. You said, first let's add friction. If you see something online that you like and you're thinking it would make my life easier or I could add that to my collection, maybe wait 24 hours before buying it.

Michael: Yeah, the pause is powerful, right? Saying “Ookay, I'm going to require myself to wait 24 hours. And if in 24 hours, I still feel like I want that—".

Jen: And it's within your budget.

Michael: Yep, then go ahead. That'll be incredibly helpful. I know for me, that would be helpful. 

Jen: It gives you that pause, right? The second thing is to pay attention to what triggers you. So what does that mean?

Michael: One thing that comes to mind is that usually the things that cause impulse purchases are consistent. It's that one page, that one influencer. They've got the good stuff they're always showing. if you're not getting a ton from them outside of purchases or recommendations for products, then, if you can, unfollow them.

Jen: Consider unfollowing them.

Michael: That would probably help in many ways. Test it out for a while. If you miss their content, I guess you could go back, but maybe see what  impact that has on your spending.

Jen: Absolutely. And even if it's something like 30 days, take that pause, you can always come back. And the third thing to do about impulse purchases is to track them. I think that’s the key here. Because even if you cut that $3,000 a year in half, that gives you about $1,500 back.

Michael: Yeah, it loops back to being aware and understanding what it is that you're buying. Then you’re not only tracking the expense, but also tracking how you got there. It could be as simple as a sponsored ad on Facebook or TikTok or Instagram. Just make sure you're aware of your spending and how you come about it. 

Jen: That's huge. And you might have some aha moments knowing, wow, I didn't realize I spent that much money on those impulse buys, right? So, the big takeaway is that social media doesn't just influence what you buy, it shapes what you want. Those small decisions repeated over time can impact your finances by tens of thousands of dollars.

Michael: Yep, And once again, it's not necessarily about quitting social media. To say it again, it's about being aware. It's about understanding your budget and where your expenses are coming from. I think we all have some version of this. Even if you're not on social media, it could be magazine ads. It could be driving down the highway. It could be you're a mall tripper and like going to malls. They know how to market to you there too. It's being aware of spending and understanding that impulse purchases are a part of our lives now and have been for a long time. It's being able to take a little control of it.

Jen: Absolutely. And making sure your money is going towards what actually matters to you. Well, Michael, this has been so fun having podcasts with you. And I think you listeners can expect more in the future from us. As always, feel free to reach out to us here at Keystone, at www.keystonefinancial.com . We would love to be a resource for you.

Michael: Yeah, absolutely. Thank you all for joining. We'll see you next time.

Josh: We love feedback and we'd love it if you would pass it on to me directly at josh@keystonefinancial.com . Also, please stay plugged in with us, get updates on episodes, and help us promote the podcast by rating us five stars and subscribing to us at Apple Podcasts, Spotify, or your favorite podcast service.

The opinions voiced in the Wiser Financial Advisor show with host Josh Nelson are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine what may be appropriate for you, consult with your attorney, accountant, financial or tax advisor prior to investing. Investment advisory services offered through Keystone Financial Services, an SEC registered investment advisor.