Meet my new financial advisor: Social media

Us 90s kids spent years in schools and colleges constantly pressured to build stellar careers, earn considerable incomes, and achieve enough success to enjoy a life full of comfort and luxury. Now that we’ve finally arrived, after years of toiling, many of us are dazed about what to do with the money we’re earning. Whoever taught us what to do with our earnings, anyway? Where to spend, where to save, how to invest, or even how to file taxes. Many of us had to learn the hard way. But the current generation? They have an entirely different story to tell with a whole new financial advisor!

Gen Z, the generation born with a mobile phone in hand and the Internet running through their veins, has a savvy approach. With the bounty of connectivity and information this generation has at its disposal, they’ve turned to social media and ‘finfluencers’ to learn money-saving and investment lessons. As advice is available in abundance on various platforms, Gen Z has started putting in their bit to save for their future or for things that truly matter to them.

However, we all know social media is an amazing place for trends but is it an actual knowledge pool? Can it actually replace a financial advisor? I doubt. While it’s fleeting with do’s and don’ts, there’s rarely context to the many lifestyle factors that finally impact a decision. While investing and saving requires a lot of knowledge, research, and analysis, social media should never be the holy grail for financial literacy. It may be a good starting point.

As Instagram and TikTok offer innovative approaches to saving and investing, they also come with their own set of pros and cons. Let’s explore some popular financial trends at present:

100-envelope challenge

The 100-envelope trend became a huge hit in no time. It requires you to save money for 100 days and with each passing day you save a dollar extra. For instance, on day one you set aside $1, on day two you’ll save $2, and so on till you reach the 100th day. This way you’ll have $5050 saved by the end of 100 days. This challenge picked a tremendous pace, so much so that businesses selling specifically designed kits, trackers, and binders started to pop up everywhere.

My two cents: While it’s great to set aside money like this, ensuring liquid funds for rainy days, the first issue that I see is maintaining consistency and flow for over three months. Secondly, you would need immense self-control. Having such money lying around in envelopes makes it very easy to throw the 100 day plan out the window and splurge. However, if you can tame these limitations, it’s a fun gamification to try. At the end of 100 days, you can make a more informed choice to invest the saved sum, yielding greater results at a later stage.

Cash stuffing

This trend is the Gen Z version of budgeting but with a more aesthetic sense attached to it. And, that’s okay since most money advice given by any financial advisor is cyclic. As per this trend, the day you get your paycheck, you calculate your expenses and withdraw that amount in cash. Just divide this money into envelopes that represent various heads, such as rent, groceries, fuel, shopping, etc. Over a month, you can only spend what you allocate at the beginning. Once an envelope is empty, you either stop spending under that category or you have to borrow from another category.

My two cents: It could be a good way of staying under budget. Our parents did this all the time when cards were not prevalent. The truth be told: while credit and debit cards offer convenience, you can easily exceed the budget with them. If budgeting is your way of life, to be more accountable or to execute a bigger plan later, this trend offers great help as it helps make your expenses ‘apparent’. So, if you can keep your cards aside, it’s worth a try.

Loud budgeting

This trend has more to do with your attitude towards money and spending. Loud budgeting encourages you to be very vocal and firm about the financial decisions you wish to make. If you do not want to grab take-away coffee every day and you’d rather make your own, say it out loud, without shame. If you no longer wish to buy all new, trending clothes or every new gadget launched, yes please, ‘loud budget’ it.

My two cents: I am not a financial advisor but it’s my personal favourite. I think it’s high time people stop jumping on band wagons, and spending money that can have a better use for them. Consumerism is consuming us all and the pursuit of a bright social image is pushing us into darkness. At such a time, standing up for what you believe is important in empowering and inspiring. In a world where everyone is chasing material, the ability to say “I will not spend on this” is classy and a real flex. If you can save yourself from overspending despite ads being shoved into your face every minute of every day, my friend, you’ve won at life.

No-spend challenge

The no-spend challenge requires you to mark specific days for yourself where you don’t spend on non-essentials. On your ‘no-spend days’, you cannot spend on non-essentials like clothes, coffee, eating out, entertainment, etc. You’re free to choose your non-essentials as per your lifestyle and values.

My two cents: Holding back from spending on non-essentials can free up space for more fulfilling things in life. As most purchases we make are driven by impulse rather than need, this trend can prove beneficial in controlling impulsive buying. Taking up this challenge can be instrumental in figuring out what makes your life more wholesome and what gives you joy. Other than that, it’s not a sustainable way of life. In my opinion, these trends are glamourised renditions of the plain-old ways things were done back in the day.

And, glamourising generally boring topics has its downside: the interest fades away. Social media trends anyway have a short shelf life, but that approach cannot work with your finances. While many such challenges and fads will come and go, financial literacy stays forever. As you work hard, spend wisely, and save well.

Here are some quick tips you can keep up with:

Live by the 50/30/20 rule

This is a simple financial rule that suggests that 50 per cent of your earnings should go towards your needs, such as rent, gas, groceries, etc. 30 per cent of your earnings should be saved or invested. And, the last 20 per cent should be used to afford wants and luxuries. This rule helps you maintain a balance in your financial decisions and provides a sense of control and security.

Put aside an emergency fund for rainy days

Savings and investments are all great but you need to have an emergency fund that covers three to six months of your living expenses. This need not always be in cash or lying around in your bank but you should be able to liquify it in case of an unforeseen scenario. This fund will always provide you with a sense of stability in this ever-unpredictable world.

Pay yourself first

The biggest mistake people make with money is that they wait for the month to end to allocate the leftover money to savings and investments. It’s the opposite of what you should ideally do. Every month, as you receive your paycheck, pay yourself first: save or invest an amount that’s suitable to you. The leftover amount should be your spending budget. To make it all easier and consistent, automate your savings.

Don’t put all your baskets in one basket

Always diversify your investments. Diversifying your investments is crucial for managing risk and optimising your returns. When you spread your money across various asset classes such as stocks, bonds, real estate, fixed deposits, gold, etc. you minimise the impact of poor performance in any single investment. Simply put; by diversifying, you maintain a secure and stable portfolio where one market fluctuation doesn’t hit all your savings and gains, allowing you to capitalise on various market opportunities.

Lastly, you spend a lot of time and energy earning the money that you do. It’s your prime responsibility to be vigilant with it and make it grow. Social media might be a great place for advice, but it’s not always 100 per cent reliable and it’s definitely not a financial advisor. There’s no guarantee what suits one person will also suit you. Be cautious and do your research before making investment decisions. You know your financial situation and future goals the best, so always do your homework and maybe consult a proper financial advisor to ensure that the next step aligns with your life path.