YOLO And FOMO: The Financial Impact Of Gen Z Trends

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YOLO and FOMO: Gen Z's Financial Trends in India

Did you know that more than 65% of young Indians aged 20-30 do not maintain a monthly budget?

A report by the National Foundation for Financial Education (NFFE) in 2023 states that 69% of Indians neglect this crucial discipline of money management! While there could be multiple reasons behind this, two slang terms often used by Gen Z, "YOLO" and "FOMO," might be influencing such behaviours.

But how exactly do these phrases relate to finance? Let's delve deep into the intricacies of these two slang terms in the financial landscape.

YOLO And FOMO - Gen Z's Love For Living In The Now

YOLO, an acronym for "You Only Live Once," and FOMO, short for "Fear Of Missing Out," are more than just catchy phrases. They capture a mindset especially common among the younger generation.

YOLO, which emphasises living in the moment, was popularised by the hip-hop culture and gained global traction during the early 2010s. Around the same time, FOMO grew popular because social media showed everyone else's 'perfect' moments.

These phrases aren't new. Millennials were as charmed by them as Gen Z is now. But with the increasing influence of social media, these slangs have gained a stronghold. They are pushing many to "live in the moment" without considering the long-term financial implications. And while living in the moment is essential, doing so without a financial plan can be risky.

Shift In Young India's Financial Habits

Financial discipline seems to be declining among Indian youth, and the data backs it up. Reports by RBI revealed that credit card dues grew by 30% in the last year, which is double the pace of growth of overall bank loans. Travel, e-commerce, utilities, and education were among the areas where card use increased.

India's total credit card spending witnessed a significant leap in FY 2022-23. It jumped 47% from FY 2021-22 to ₹1.4 lakh crore! The number of credit cards in circulation also increased by 15% to 8.6 crore. Whereas, the outstanding credit card debt surged by 31% to ₹1.94 lakh crore in FY 2022-23.

FY 2023-24Total Credit Card Transactions (₹ in lakh crore)Total Credit Cards in Circulation (in crore)
April  ₹1.331 8.65
May  ₹1.4108.77
June  ₹1.3758.86
July  ₹1.4508.98

Credit cards offer attractive rewards like cashback and travel miles, but it's crucial to remember they represent borrowed money. Remember, excessive spending can severely impact credit scores. A poor credit score can lead to higher interest rates, loan rejections, and even job denials in some industries.

Rise Of Buy Now Pay Later (BNPL)

According to a survey from 2022, just over three-fourths of Indian consumers aged between 25 and 44 years became aware of "Buy Now, Pay Later" (BNPL) services via social media. In fact, a report by Experian suggests that BNPL transactions in India grew by 21% in H1 2022, which is 3% more than the global growth.

There are two significant factors contributing to this growth:

1. Popularity of Online Shopping: Online platforms make shopping easy and quick. With just a few taps in an app, you can add items to your cart and buy them. And with BNPL schemes, making impulse purchases becomes even more tempting.

2. Overspending: The very essence of BNPL encourages spending money you don't necessarily have at the moment. This can lead to unexpected financial challenges in the future.

The "Buy Now, Pay Later" option can be tempting, especially during sales or special online offers. It provides the advantage and convenience of buying now and paying later. But here's the catch. BNPL can lead to impulsive spending habits. If not managed responsibly, you might find yourself in a cycle of debt.

BNPL can lead to debt traps if you don't plan your payments well. But with discipline and awareness, you can use BNPL wisely. Here's how:

1. Set a Monthly Budget: Before diving into BNPL, set a strict monthly budget and stick to it.

2. Avoid Impulse Purchases: Just because it's available doesn't mean you need it.

3. Understand the Hidden Terms: Many BNPL schemes come with hidden charges or high interest rates after a certain period. Be sure you're aware of them.

How FOMO Can Be Your Financial Friend

Yes, you read that right! While FOMO might have pushed many towards unwise financial decisions, it can be channelled positively. Imagine having the fear of missing out on a financially stable future. The freedom that comes with having savings and investments ready for retirement or unforeseen emergencies is unmatched.

To ensure you're not missing out on such a future, here are some tips:

1. SIP Over Lumpsum: Rather than investing all your savings at once, opt for Systematic Investment Plans (SIPs). This allows for disciplined, regular investments, reducing the risk associated with market volatility.

2. Avoid Peer Pressure Spending: Just because your friend has the latest gadget or went on an exotic vacation doesn't mean you need to as well. Live within your means.

3. Trade Wisely: For every success story, there are countless failures. Remember that trading is not child's play. Understand the market, do your research, and avoid impulsive trading. 

Key Takeaways

1. A significant number of young Indians don't maintain a monthly budget, potentially influenced by the YOLO and FOMO mindset.

2. "Living in the moment" is liberating. But it's essential to balance it with caution.

3. Credit card debts, especially in areas like travel, shopping, and dining, have seen a surge. It's crucial to manage these wisely to maintain a healthy credit score.

4. The BNPL market is booming, but it's essential to navigate it with caution to avoid potential debt traps.

5. Channel your FOMO positively! Fear missing out on a financially secure future, and act today to ensure you're on the right track.