The Notebook: Doom spending, girl math, and the impact of financial social media trends
Many of us have heard the term ‘doom scrolling’ – where you feel like you’re mindlessly scrolling through social media, and I think we can all agree that you never feel better after it. But I hadn’t heard of the term ‘doom spending’ until recently.
It’s a newer trend on social media which essentially glamorises spending beyond your means, or impulsively. ‘Doom spending’ normalises spending money on short-term, instant enjoyment, rather than saving it for the future. Let me just caveat this by saying I am not suggesting sacrificing enjoyment for the sake of investing in your financial future – I believe you can have the best of both worlds.
Investing is sadly still seen as too complex, but with time on your side, even small, regular contributions over time, especially in a tax-efficient wrapper like an ISA, can reward you with some serious gains. Investing is a long-term game; a regular habit. Compound interest really is a powerful ally to investors, too – acting as a buffer against market volatility, turbocharging returns, and helping to smooth out the bumps and potentially the impact of market fluctuations on your overall returns. So, building financial resilience is about building a healthy habit with investing, not about giving up all of life’s little luxuries – so, treat yourself to that Christmas-themed latte!
Back to ‘doom-spending’ – I felt sad reading some of the captions on social media that had this hashtag. The underlying message was one of hopelessness; many young people feel they will never reach their financial goals of buying a property, for example, so the rationale becomes – well, what is the point saving? We can’t blame younger people for feeling like this, and I also sympathise with it. We’re flooded with disheartening news about the increased cost-of-living and ongoing economic uncertainty on a regular basis. The problem is this trend normalises retail therapy as a sustainable coping mechanism for us when we feel low or discouraged. Combine this with the endless amount of product pushing on social media, FOMO (fear of missing out), and the rise of the ‘buy now, pay later’ industry, and well – you have a recipe for disaster.
To simply laugh at this ‘doom scrolling’ trend is dangerous. Social media is powerful and we shouldn’t trivialise it. If these trends are sending the wrong message, this is something we should be concerned about.
We’ve seen a few of these money-related trends gain traction on social media in recent years… To be fair, it was fantastic to see the ‘loud budgeting’ trend that took off earlier this year because it encouraged openness about money, talking about affordability when making plans with friends or loved ones, being transparent about financial habits, and it also made it ‘cool’ to track spending. More of this, please!
‘Girl math’ was another one, though. And personally, I wasn’t a fan. Afterall, it is really important we empower more women with financial know-how and independence. I thought it was rather patronising and had the exact opposite effect. Women already typically face a tougher road to financial independence. As it stands, we earn, save, and invest less, and the various ‘gaps’ with our male peers widen as we get older.
So, all in all, as we come to the end of the year and into 2025, maybe we can replace some of the more negative social media messaging about money and investing with new ones. Let’s have more messages of hope and encouragement.
How much are you really paying?
The retail investment market is no stranger to a discussion about ‘fair value’, ‘value for money’ and ‘transparent charging;’ it has been a big focus of the regulator in recent years – and rightly so. At the end of the day, consumers need clarity of what they are getting for their money so they can plan properly. This is true whatever they are buying or consuming, whatever their circumstances and wealth, and whatever the economic backdrop. In the investment world, interactive investor is a proud outlier. There’s a myth that most platforms don’t charge any fees for investing, but that’s not the case, you just sometimes can’t see them clearly. A flat fee subscription model underpins our service at ii, with plans designed to meet different customer needs for a more personalised investment experience. But we are very much an exception in an industry where charging retail investors a percentage of invested assets is the norm. Does that matter? Well, we think it matters greatly. Especially as percentage-based charging can eat into investments over time.
We did some consumer research on investment fees and charges, and unsurprisingly a lot of respondents did not know how much they were paying their provider, and some didn’t think they were paying anything at all. This lack of awareness speaks of a lack of clarity in our industry. I’m sure if we’d asked how much they paid for their streaming services each month we would probably have seen very different results… so, why should investments, which can have a long-term impact on an individual’s quality of life, be different?
Interestingly however, ‘fair pricing’ was cited as the number one priority for UK investors selecting an investment provider. But how can pricing be fair if isn’t clear? Surely, clarity is the bare minimum.
The take-home message for our industry is we need greater transparency over charging, but the industry must also be more open about the impact of charges on long-term wealth. This will help investors understand what their provider is giving them in exchange for the fees they’re paying. In turn, this helps consumers determine where they can access the services they need and want at a price they are comfortable paying. It sounds straightforward… because it is, and it should be, but that’s not the current reality a lot of retail investors face.
Money and mindset: our emotions and our investments
I’m currently reading The Psychology of Money and it got me thinking about the impact of our emotions when it comes to our savings and investments. Investors in financial markets typically experience such a range of emotions during different stages of economic and market cycles. This is nothing to be ashamed of, but rather it’s important we acknowledge and understand the influence of our emotions and how these reactions manifest in our decision making. A firm grasp on this can help us navigate our investments more successfully. Too much emotion in our investment decisions, or thinking too short-term, can have a detrimental impact on how we manage our finances.
Confidence is an interesting one. I stand by the fact that a lack of confidence can be a huge barrier to getting started with investing in the first place, and we’ve done consumer research which backs this up, so we absolutely need to empower consumers to have enough confidence to get started with investing. But, over-confidence in investing could have a negative impact, too – it could encourage us to try to ‘time the market’, for example, or it could dissuade us from diversifying our investments and instead putting too many eggs in one basket. None of us have a crystal ball, so the key is staying invested and staying diversified – not dipping in and out of the market constantly.
Self-awareness is also interesting within this context. This will help us determine our appetite for risk, our safety margins, and it will help us set realistic – but suitably ambitious – financial goals.
Both resilience and discipline are also crucial for investing. Investing can be simple and straightforward, but it is often about keeping calm and carrying on. Markets fluctuate, but they can, and do, bounce back. Staying invested and not panic selling based on initial emotional responses is key.
Quote of the week
“History doesn’t repeat itself but it often rhymes”
Mark Twain
Podcast of the week
I went to see Gladiator II the other day (well worth a watch!) and felt inspired to listen to an old favourite podcast – The Rest Is History, hosted by Tom Holland and Dominic Sandbrook. Every episode is so accessible and engaging, covering such a huge range of topics and themes in global history. The latest episode was on the world’s first ever city which existed as early as 5000 BC, and is perhaps the most consequential city and the mother of modern urbanisation. Really remarkable.
A festive movie pick
If you’re looking for a suitably cheesy Christmas film, I highly recommend Our Little Secret – the new Lindsay Lohan Christmas film on Netflix. I’ll be honest, I put it on as a background watch, but I was soon hooked and ended up becoming fully invested!