People are worried about the future of the economy. Yet, many of them are failing to save, and spending more money than they did in the recent past. What explains those two seemingly opposing trends?
Doom spending.
The new term refers to those who spend more of their money on immediate gratification and good things now, rather than invest it for retirement or emergencies. It’s a stress coping mechanism, and one that’s fairly easy to understand, even if it’s not great in the long run.
What Is Doom Spending, Anyway?
The term “doom spending” first surfaced on social media, but it really took off in the wake of a November 2023 survey from Intuit’s Credit Karma, which tied the term to a series of new statistics about Americans’ spending habits.
Here are the top stats quoted in that survey:
- 96% of Americans are concerned about the current state of the economy
- More than a quarter of Americans (27%) “doom spend” to cope with stress
- Nearly one third (32%) of Americans have taken on more debt in the last six months amid increased spending (27%)
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Top reasons why Americans are so stressed about money problems right now include: inflation (56%), the cost of living increases (50%) and unaffordable housing (23%).
As a result, 30% of respondents say they fear a future in which they’re not able to spend money on things that bring them happiness — which might just be driving more spending 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 and/or their household and another 56% living paycheck to paycheck. Yet, more than a quarter (27%) of Americans say they’re spending more money now than they were six months ago.”
Who’s Doom Spending?
In what’s likely to be unsurprising to any adults who’ve been forced to move back in with their parents for any length of time within the last decade, younger generations are less likely to have money and more likely to show up in stats supporting the doom spending trend.
33% of Gen Zers and 34% of millennials say that their spending has gone up over the last six months. Debt is also on the rise.
Why? That’s less clear. It might be frivolous travel and shopping. It might also be soaring rental payments — In just the last decade, rent inflation outpaced currency inflation by 40.7% in the US, and younger generations are more likely to rent.
There’s plenty evidence that people in the US – particularly younger people – are increasingly failing to save money. But there isn’t nearly as much evidence that they’re increasingly making the poor financial choices that the term “doom spending” seems to suggest.
Is Doom Spending One of the Those Made-Up Trends?
Doom spending is just a theory, and might not completely explain all the stats we’ve listed above. In fact, focusing on doom spending might just be another way to blame the consumer for a tightening economy that’s ultimately out of their control.
Take the declining savings rates, for example: According to the Credit Karma survey, 47% of Americans say the amount of saved money they have has dropped across the last six months, while 52% say they have fewer than $2,000 in savings (a metric which includes the 22% who have no savings at all).
Credit Karma’s article explaining doom spending cites these stats as if they’re an impact of doom spending. But they might just as likely be the impetus that causes Americans to start doom spending in the first place.
If this is true, it’s far from the first time we’ve seen a trending concept obscure the real culprits behind economic instability. An increased focus on employees’ failures to full return to the office led to the creation of the term “coffee badging,” although we later found out that a quarter of C-suite execs admited that they hoped employees would quit as a result of being forced to stop working remotely. Studies have found that 34% of the spikes in US inflation between 2020-2023 were reflected in corporate profits, suggesting price gouging.
Finally, there’s “quiet quitting,” the term for employees who do their jobs but complete the minimum rather than going above and beyond. The term itself has a negative connotation, but plenty of ink has been spilled discussing whether it should be considered a moral failing on an employee’s part, or a step towards work-life balance and fair compensation.
One thing’s for sure: All these trends are highlighting a business world in which employees are increasingly pushed to find ways to cope with stress. No one just starts quiet quitting, coffee badging, and doom spending out of nowhere.
Everything in Moderation – Even Doom Spending?
The truth behind the doom spending trend is likely somewhere in the middle. spending your paycheck on a special experience has value, even if it doesn’t grow your 401K. Many people are spending more in order to enjoy their life now, and that’s reasonable in moderation but can easily become financially harmful.
At the same time, increasing inflation, rising interest, and a tough job market are whittling away at everyone’s savings. The fact that we’re spending more doesn’t mean that we’re spending it on anything frivolous.
The younger generation’s doom and gloom might be upsetting, but given the barriers to buying a house in today’s economy – to say nothing of global political upheaval and climate change – it’s definitely understandable.
