Nearly 40% of millennials overspend to keep up with friends

Portrait enthusiastic young couple with summer music festival tickets outside gate Portrait enthusiastic young couple with summer music festival tickets outside gate Image:

In a Nutshell

A Credit Karma survey shows some millennials overspend and even get into debt to keep up with their friends — and are afraid to admit it.

A lot of millennials overspend to keep up with their friends.

A Credit Karma/Qualtrics study of 1,045 U.S. consumers found nearly 40% of millennials have spent money they didn’t have and gone into debt to keep up with their peers.

What’s more, they’re afraid to admit it.

When a friend suggests doing something they can’t afford, 27% of millennials feel uncomfortable saying “no.” And out of the 39% of millennials who’ve gone into debt to keep up with their friends, nearly three-quarters (73%) have kept it a secret.

What they may not realize is that some of their friends may feel the same way. Two-thirds of millennials regret spending more on social situations than they had planned, and one-third (36%) doubt they’ll be able to sustain this lifestyle for another year without going into debt.This is especially concerning given that millennial Credit Karma members in the U.S. who have debt already have $46,713 in debt on average. (Learn more about our methodology).

This fear of missing out on something special with their friends is compelling young Americans to pay for things they can’t afford.

At Credit Karma, we have some ideas to help curb fear-of-missing-out (FOMO) spending, but first, let’s take a closer look at the key findings of the survey.

Key findings

39% of respondents spent money they didn’t have to keep up with their friends.
73% of those who went into debt to keep up with their friends typically keep it a secret from their friends.
27% of respondents don’t feel comfortable saying “no” when one of their friends suggests an activity they can’t afford.
Two-thirds of respondents feel buyer’s remorse after spending more than they had planned to on a social situation that they later regret.
36% of respondents doubt they can keep up with their friends for another year without going into debt.

What is FOMO spending?

FOMO spending can happen when you give in to peer pressure to buy something you can’t afford — because you’re afraid of missing out on quality time with your friends or a once-in-a-lifetime experience.

According to Stephanie Tully, a professor of marketing at the University of Southern California, American consumers’ purchasing habits have moved toward spending — and sometimes, overspending — on experiences.

Our study found that millennials often feel pressure to spend money they don’t have on travel, music festivals, weddings, sporting events or social activities such as dinner and drinks with friends.

What do millennials spend on because they’re afraid to miss out?

Millennials are most likely to spend money they don’t have on special experiences.

  • Going out with friends and having a good time is one of the top types of FOMO spending. Of the millennials who responded said they spend money they don’t have to keep up with their friends, nearly 60% buy food, while one-third buy alcohol.
  • Twenty-one percent of millennials admit they feel pressured to spend money they don’t have for parties or nightlife.
  • Four out of 10 millennials who overspent to keep up with their friends made travel purchases. That could include a two-week vacation, a weekend trip with their significant other or a trip to attend a friend’s wedding.
  • One-quarter of millennials who have spent too much to keep up with their friends purchased tickets to a music event, while 17 percent attended a sporting event.

But it’s not all about experiences. Many millennials feel pressured to buy items such as clothes (41%), electronics (26%), jewelry (18%) and cars (16%) even when they can’t afford them.

How often do millennials overspend to keep up?

The good news: Credit Karma found that more than half of millennials who responded seem to have their FOMO spending habits under control.

  • Fifty-three percent of millennials say they make purchases they can’t afford to keep up with their friends no more than once a year, while one-quarter of respondents say they never make FOMO purchases.

But there’s room for improvement.

  • One-quarter of millennials FOMO spend several times each year, while 21% of respondents admit to making these purchases at least once a month.

How much do millennials spend?

Credit Karma also looked at how much young Americans typically spend each weekend when they’re hanging out with their friends:

Amount spent over the weekend  % of respondents
$100 or less 69%
$101 to $250 15%
More than $250 16%
More than $500 7%

 

These responses don’t account for differences in the cost of living across the country. So while $100 might be a lot to spend in some areas, it doesn’t go as far in other places.

According to Expatistan’s cost of living index, a fancy dinner for two would cost $119 in New York City compared to only $74 in St. Louis. And a cocktail out on the town would cost $16 in New York City but only $8 in St. Louis.

Why do millennials feel pressured to overspend to keep up?

Although many different people can make millennials feel pressured to spend money they don’t have — friends, significant others, family members, coworkers — the compulsion to overspend often stems from social anxiety.

  • 36% spend money they don’t have because they’re afraid they won’t be included in a future activity if they don’t.
  • 27% don’t want to feel like an outsider.
  • 26% don’t want to lose friends.
  • 23% don’t want to be judged.

Tips to avoid FOMO spending

Credit Karma found that 78% of millennials who responded have a budget, but one-fifth of them go over their budget on a monthly basis to keep up with their friends.

So here are a few ideas to help you stick to your goals.

Be honest with your friends

There’s no reason to be ashamed of being unable to afford a night out or a pricey vacation.

As we mentioned earlier, nearly three-quarters of millennials who overspend report keeping this a secret from their friends. But by being honest with your friends, you might be surprised to learn they feel the same way as you.

So if you feel as if your spending is spinning out of control, talk to your friends about it and find ways to avoid FOMO spending together.

Suggest free alternatives

Not spending money doesn’t equal being a party pooper.

If you’re afraid to kill the mood when your friend invites you to do something you can’t afford, suggest something free you could do instead.

There are tons of free and cheap activities you could suggest as alternatives, from hosting a potluck with friends (instead of eating out) to inviting them over to your place to watch Netflix instead of going to the movies. You could even plan a money-free weekend.

Limit your card use

We recommend that you leave your credit cards at home when you hang out with your friends. More than half of millennials use credit cards to pay for their FOMO spending.

But if you can’t afford to pay your credit card bill in full and on time each month, you could be hit with expensive interest charges that add up over time. Carrying a balance could also affect your credit scores.

It will be easier to stick to your budget if you only carry cash. When you run out of money, you know it’s time to go home.


Methodology

On behalf of Credit Karma, Qualtrics conducted an online survey of 1,045 U.S. consumers between the ages of 18 and 34 during February and March 2018.

To calculate the average amount of debt for millennial Credit Karma members, Credit Karma analyzed total debt across its U.S. millennial members for March 2018 and divided that amount by the total number of U.S. millennial Credit Karma members for the same month.

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