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Some young people are splurging on luxuries such as travel and designer clothes rather than saving, a trend described as “Doomsday Spending” on social media.
Doomsday consumption means being a human being unconscious store According to Psychology Today , they console themselves by feeling pessimistic about the economy and the future.
She said this happens because young people have been online for a long time and feel like they are constantly receiving “bad news.” “It makes them feel like it’s the end of the world.”
Ylva Baeckström, senior lecturer in finance at King’s Business School and a former banker, told CNBC Make It that this approach is “unhealthy and fatalistic”.
Backstrom added that these young people translate these bad feelings into bad spending habits.
In fact, a November 2023 Intuit Credit Karma survey of more than 1,000 Americans found that 96% of Americans are worried about the current economic situation, and more than a quarter are destined to spend money to cope with the stress.
This phenomenon is not unique to the United States.
Stefania Troncoso Fernández, a 28-year-old Colombian publicist who lives with her parents, told CNBC Make It she is a recovered doomsday spender, but high inflation and poor politics have Certainty makes saving very difficult.
“I know food (costs) are getting higher and higher every day, and in my house, we probably can’t eat like we did a year ago because things are getting more and more expensive,” Fernandez said.
Two years ago, Fernandez said that even though she was earning less than she is now, she was careless with her spending on clothes and travel. This was mainly because she felt she couldn’t afford a house.
“We used to have this program from the government that would lend us money at very low interest rates to invest in real estate, but with the change of government, we no longer have access to this program, so we need to pay more,” she said.
Fernandez says she’s not the only one spending money on bad luck. “This isn’t just me. This is what’s happening in my circle.”
“The first generation will be poorer”
Only 36.5% of adults globally believe that their economic situation is better than that of their parents, while 42.8% believe that their economic situation is actually worse than that of their parents CNBC’s International Your Money Financial Security Surveyconducted by Survey Monkey, surveyed 4,342 adults worldwide.
“The generation growing up now will be the first generation to be poorer than their parents for a long time,” Backstrom said. “There’s a sense that you may never achieve what your parents accomplished.”
As a result, doomsday spending can create an illusion of control and a sense that the world is spinning out of control, Backstrom said.
“But what really happens is it gives you less control in the future because if you save the money and invest it and do all these things, you might actually be able to buy a house,” she said.
“The feeling of trying to escape”
Daivik Goel, a 25-year-old startup founder who lives in Silicon Valley, said he was a “doomsday spender” when he was working as a product manager at a biotech startup.
He said the habit stems from job dissatisfaction and peer pressure. “It was just a feeling of trying to escape.”
Goel, who is used to spending lavishly on designer clothes, the latest tech gadgets and going out for drinks, said doom-and-gloom spending is common in Silicon Valley.
He said people would buy two of the three brand new cars “because they realize it’s going to take a long time to save for a house … so they’re going to spend it on different things.”
San Francisco has some America’s highest housing pricesAccording to a 2023 analysis by real estate website Point2. The survey found that 62% of properties listed in San Francisco were priced at more than $1 million.
Goel said that since starting his own fintech company Intrepid in 2023, his doomed spending habits have “completely disappeared” because he has found happiness in his work. “My whole mentality changed.”
Understand your relationship with money
Finance lecturer Baeckström stresses the importance of understanding your relationship with money if you want to beat doomsday spending.
She said relationships with money are like relationships with people: it begins in childhood and sees people form different types of attachments.
“If you feel you have a secure attachment to money, you can make a reasonable evaluation of something. You gather knowledge and you can evaluate (it)… But if you are insecure, Or if you have avoidant tendencies, you’re more likely to fall into this unhealthy spending behavior.
Backstrom said these attitudes stem from a person’s upbringing: whether they were rich or poor, for example, how money was managed in their family and who controlled it.
Fernandez said part of the reason she felt compelled to spend money was a lack of financial literacy. She said her father grew up poor and was never encouraged to save money.
‘Increased pain of payment’
Samantha Rosenberg, co-founder and chief operating officer of wealth accumulation platform Belong, told CNBC Make It that making transactions more instinctive and difficult may make people think twice about spending in the apocalypse.
Online shopping exacerbates the apocalyptic spending problem, but seeing items in person may prevent impulse purchases, Rosenberg explained.
“Additional decision points, such as choosing a store, going there, evaluating the item in person, and then lining up to buy, will help you slow down and think more carefully about your purchase,” she said.
Additionally, setting up mobile banking notifications is an “extra pain” when you see a transaction authorized.
Rosenberg also suggested perhaps returning to cash. Seamless payment methods like Apple Pay and Google Pay “increase the risk of mindless spending” because it’s fast and easy, she said.
“They bypass the emotion associated with the purchasing decision process. They also remove the pain of paying,” Rosenberg said. You have to “increase the pain of paying,” she added.
