In today’s uncertain economic climate, a new trend has emerged among young people known as “doom spending.” This phenomenon involves splurging on luxuries like designer clothes, travel, and expensive gadgets as a way to cope with feelings of pessimism about the future. Popularized on social media, the term reflects a growing sense of fatalism and hopelessness, particularly among millennials and Gen Z, who feel that their economic prospects are increasingly bleak.

According to Psychology Today, doom spending is defined as the act of mindless shopping to self-soothe when someone feels distressed about the economy or their future. For many young people, the constant barrage of bad news, especially online, fosters a sense of impending doom. “It’s happening because young people are chronically online and feel like they’re constantly receiving ‘bad news,’” said Stefania Troncoso Fernández, a 28-year-old publicist from Colombia. “It makes them feel like Armageddon.”

Escaping Reality through Spending

Ylva Baeckström, a senior lecturer in finance at King’s Business School, explains that doom spending is both “unhealthy and fatalistic.” The practice translates pessimistic emotions into bad spending habits, leading to long-term financial consequences. Baeckström highlights the fact that young people, who are often already facing economic uncertainty, are particularly vulnerable to this behavior. “The generation growing up now is the first generation that’s going to be poorer than its parents for a very long time,” she noted.

In fact, a global survey conducted by CNBC in partnership with SurveyMonkey reveals that only 36.5% of adults feel they are doing better than their parents financially, while 42.8% believe they are worse off. This sense of being economically disadvantaged leads many young people to spend impulsively, creating the illusion of control in a world that feels increasingly out of control. Unfortunately, this behavior can make things worse in the long run, as it undermines future financial stability.

Fernández, who admits to being a “recovered doom spender,” recalls a time when she would carelessly splurge on clothes and vacations, despite earning less than she does now. The driving force behind her behavior was a sense of despair about her inability to afford a home. “We used to have this program by the government that would lend us money to invest in real estate at a really low rate, but with the change of government, that is not available for us anymore,” she explained. “So we will need to pay more.” Fernández’s story is not unique, as many of her peers also feel trapped by rising costs and diminishing opportunities.

A Widespread Phenomenon

Doom spending isn’t just an issue in the U.S. or Colombia—it’s a global problem. In a survey conducted by Intuit Credit Karma in November 2023, 96% of Americans expressed concern about the current state of the economy. More than a quarter of those surveyed admitted to engaging in doom spending as a way to cope with their stress.

For some, this spending is a reaction to the seemingly insurmountable challenge of saving for major life goals, like buying a home. In high-cost areas such as San Francisco, where real estate prices are some of the highest in the U.S., saving for a house can feel like an impossible dream. A 2023 analysis by real estate website Point2 found that 62% of properties listed in San Francisco were priced over $1 million. This harsh reality has led many young professionals to give up on saving altogether.

Daivik Goel, a 25-year-old startup founder living in Silicon Valley, experienced this firsthand. Before launching his fintech company Intrepid in 2023, Goel was working as a product manager at a biotech startup, where he indulged in doom spending. He spent lavishly on designer clothes, the latest tech gadgets, and frequent nights out with friends. “It’s just all the sense of trying to escape,” Goel said, adding that the practice is rampant in Silicon Valley. “People will buy two or three brand-new cars, and the reason why is because they realize that saving up for a house is going to take a very long time.”

For Goel, the solution to his doom spending problem was finding satisfaction in his work. After starting his own business, he noticed a dramatic shift in his mindset. “My whole mindset shifted,” he said. “The doom spending habit has completely gone.”

The Psychology Behind Doom Spending

The urge to spend money as a coping mechanism isn’t simply about materialism; it’s deeply rooted in psychology. Baeckström, the finance lecturer, stresses the importance of understanding one’s relationship with money in order to overcome these unhealthy habits. “Your relationship with money is like your relationship with people,” she explained. “It starts during childhood and sees people form different types of attachments.”

These attachments can vary depending on a person’s upbringing. For example, those who grew up in wealthier households may feel more secure in their spending habits, while those raised in financially insecure environments may be more likely to engage in impulse spending. Fernández attributes part of her own struggle with doom spending to a lack of financial literacy. “My dad grew up poor, and nobody had ever encouraged me to save,” she said.

Combating Doom Spending

For those looking to break free from the cycle of doom spending, financial experts offer several strategies. Samantha Rosenberg, co-founder and COO of the wealth-building platform Belong, recommends taking steps to “increase the pain of paying.” In today’s world of seamless digital transactions, the act of spending money has become almost too easy. Platforms like Apple Pay and Google Pay enable quick, nearly effortless purchases, bypassing the emotional weight of parting with hard-earned money.

Rosenberg suggests using cash as one way to curb impulse buying. “When you pay with cash, you feel the physical act of handing over money, which can make the transaction more visceral and real,” she said. Another strategy involves setting up mobile banking notifications, which can create an “extra pinch of pain” when transactions are made. These notifications serve as a visual reminder of the impact of each purchase, helping to discourage unnecessary spending.

Additionally, shopping in person instead of online can help slow down the purchasing process. The extra steps involved—choosing a store, physically traveling there, evaluating items, and waiting in line—add layers of decision-making that can help people think more critically about their purchases. “The extra decision points like choosing the store, traveling there, evaluating the item in the flesh, and then having to stand in line to buy it will help you slow down and think more critically about your purchases,” Rosenberg advised.

Moving Toward Financial Wellness

Breaking the habit of doom spending isn’t easy, especially when so many external factors contribute to financial stress and uncertainty. However, by gaining a deeper understanding of their relationship with money, young people can begin to take control of their financial futures. Whether it’s through increasing the “pain of paying” or finding fulfillment in areas outside of material goods, the path to financial wellness begins with mindfulness and intentionality.

Baeckström emphasizes that while doom spending may provide temporary relief, it ultimately creates more problems down the road. “It gives you less control in the future,” she explained. “If you save that money instead and invest it, you might actually be able to buy a house.”

As the global economy continues to face challenges, many young people are grappling with how to secure their financial future. By addressing the root causes of doom spending and adopting healthier financial habits, there’s hope that future generations can avoid the pitfalls of overspending and take back control of their financial well-being.

(Adapted from WantedOnline.co.za)

Categories: Economy & Finance, Strategy, Uncategorized