With Christmas fast approaching, spending habits are under the spotlight.
New research from online bank Marcus by Goldman Sachs has found that 59% of UK adults feel pressured into overspending in social situations.
The result of this social pressure to spend money is the average cost of £270 a year.
Feeling pressure to overspend in social situations is the result of several factors.
The survey found that people found it easier to go with the flow, didn’t want to appear ‘tight’, felt it wasn’t worth causing an argument, and were too polite to say no to friends.
Marcus also identified a fear of missing out, also known as FOMO.
The impact of this FOMO on our bank balances is an average of £526 a year, the cost of not wanting to miss out on socialising with friends and family.
Men face a more significant FOMO factor than women, at £771 and £286 a year respectively.
And those in the 45-54-year-old age group spend the most due to FOMO, at an average of £910 a year.
Social spending regrets identified by the research include paying a service charge despite experiencing poor service, splitting a restaurant bill equally after deliberately choosing cheaper food or drink options, and buying a large round of drinks.
Other social pressures on spending include going on a night out, contributing to gifts for work colleagues, and not asking for petrol money when driving friends or family.
9% of respondents to the survey said that attending a wedding out of social obligation had cost them money.
This sort of social pressure hurts our personal and financial wellbeing.
37% of people said that worry about their money due to overspending in social situations. More than a quarter dipped into cash savings to cover these extra costs, and 13% went into debt to keep up with friends or family.
Behavioural psychologist Dr Thomas Webb shared some tips to help avoid overspending during the festive season.
Set your festive budget
Be sure to update your usual monthly budget to realistically reflect what you can afford to spend throughout the festive season. This may mean saving slightly less than you would usually want to, but if you have accounted for it in your budget, then you won’t get caught in the red come January.
If you’re paid monthly, don’t forget to think about your payment cycle as you may need to stretch your December paycheck a little longer than usual if it is affected by the bank holidays.
Have a contingency pot
They say that spontaneity is the spice of life – so, as part of your budget, set aside a small contingency pot should you need it. There is no harm in saying yes to an unplanned event or catch up if you want to go and can afford it.
Take initiative in planning social outings
Take control of your social calendar and suggest activities for your friends and family that centre your time together around free or cheap activities that fit within your budget. You will feel less pressured by the ‘Fear of Missing Out’ if you have taken the initiative to plan your own get togethers.
Motivation alone may not be enough
Recognise that simply wanting to do something – such as ordering a smaller item on the menu and only paying your share of the bill - may not be enough. Bitter personal experience tells us that we often struggle to translate our good intentions into action (do you even remember the resolutions you made last New Year?). Recognising that motivation alone may not be enough can be helpful though, as it tells us that we may need to prepare and make a plan – more on this below.
Make a plan in advance
To tackle awkward money moments, it can be helpful to plan in advance by thinking about a particular situation you might find yourself in and forming an ‘if-then’ plan.
For example: If I feel pressured to split a restaurant bill equally, then I will speak up, as others probably don’t want to pay for more than their share either!
Prepare to have an awkward money conversation
It’s not always easy to have a conversation about money – it can feel awkward and even highly stressful for many people. As the research shows, close to half (40%), of those surveyed said they overspent in a social situation because it was ‘easier to just go along with it’.
As well as preparing to take action when you are faced with an awkward money moment, practising a few talking points can help you to have the conversation more effectively and calmly.
Des McDaid, Managing Director of Marcus by Goldman Sachs, said:
“We all love to spend time with our family and friends, but especially at this time of year it can be easy to get caught up in situations where you end up spending more money than you wanted to, which can have a knock on effect on our finances.
“Our research shows that this pressure costs us an average of £270 a year and that more than a quarter of us are having to dip into our savings pots to cover this excess.”
Dr Thomas Webb of The University of Sheffield said:
“People are social creatures and how we appear to others matters a great deal to us. So, it is easy to feel pressured into doing things to ‘save face’ and ‘keep up appearances’. However, sometimes we need to think about the long-term implications for our finances and find ways to better manage these pressures.”