People are increasingly worried about the future of the economy, yet many are spending more money now and saving less. What could be causing these seemingly contradictory behaviors?
One explanation is “doom spending.”
Doom spending refers to the habit of spending money on immediate pleasures rather than saving for the future, like retirement or emergencies. It’s a way of coping with stress that makes sense in the short term, even if it may not be the best choice in the long run.
What Exactly Is Doom Spending?
The term “doom spending” first gained popularity on social media and became widely discussed following a November 2023 survey by Intuit’s Credit Karma. This survey highlighted new statistics about the spending habits of Americans.
Here are some key findings from the survey:
– 96% of Americans are worried about the current state of the economy.
– More than 27% of Americans “doom spend” to manage stress.
– Nearly one-third (32%) of Americans have taken on more debt in the last six months due to increased spending.
– The main reasons for financial stress among Americans include inflation (56%), rising living costs (50%), and unaffordable housing (23%).
As a result, 30% of respondents expressed fear that they might not be able to spend money on things that make them happy in the future, which could be driving them to spend more now.
“In the last six months, half of Americans say their financial situation has worsened, with 42% reportedly struggling to afford enough food for themselves or their households, and another 56% living paycheck to paycheck. Yet, more than a quarter (27%) of Americans are spending more now than they did six months ago.”
Who Is Most Likely to Engage in Doom Spending?
It may not come as a surprise that younger generations, who are less likely to have substantial savings, are more likely to be part of the doom spending trend.
According to the survey, 33% of Gen Zers and 34% of millennials report that their spending has increased over the last six months. Debt is also rising among these groups.
The reasons behind this trend are less clear. It could be related to unnecessary purchases like travel or shopping, or it might be due to rising rental costs. In the last decade, rent inflation in the U.S. has outpaced overall inflation by 40.7%, and younger people are more likely to rent.
There is plenty of evidence that Americans—especially younger ones—are saving less money. However, there is less evidence to suggest that they are making poor financial choices, as the term “doom spending” implies.
Is Doom Spending Just a Buzzword?
Doom spending is a theory that might not fully explain the statistics mentioned above. Focusing on this concept might shift the blame onto consumers for an economy that is largely beyond their control.
Take the declining savings rates, for example. According to the Credit Karma survey, 47% of Americans say their savings have decreased over the past six months, and 52% have less than $2,000 in savings (with 22% having no savings at all).
Credit Karma’s article on doom spending suggests these statistics are a result of doom spending, but they might just as easily be the reason why people start spending more to cope with stress.
If this is true, it’s not the first time a trending concept has obscured the real causes of economic problems. For example, the term “coffee badging” was created to explain employees’ reluctance to fully return to the office, but later reports revealed that a quarter of top executives admitted they hoped workers would quit as a result of being forced back. Studies have shown that corporate profits accounted for 34% of the inflation spikes in the U.S. between 2020 and 2023, indicating potential price gouging.
Then there’s “quiet quitting,” which refers to employees who do their jobs but only meet the minimum requirements. The term has a negative connotation, but it has sparked debate about whether it’s a sign of a moral failing or a push for work-life balance and fair pay.
What’s clear is that these trends reflect a work environment where people are increasingly turning to coping mechanisms like doom spending, quiet quitting, and coffee badging. These behaviors don’t just appear out of nowhere.
Moderation Is Key – Even with Doom Spending
The reality behind the doom spending trend likely lies somewhere in the middle. Spending money on something special can have value, even if it doesn’t contribute to your retirement fund. Many people are spending more to enjoy life now, which is reasonable in moderation but can become financially dangerous if taken too far.
At the same time, rising inflation, increasing interest rates, and a challenging job market are draining everyone’s savings. Just because we’re spending more doesn’t mean we’re spending on unnecessary things.
The anxiety felt by younger generations is understandable, especially considering the difficulties of buying a home in today’s economy, not to mention global political unrest and climate change.
