Are Gen Zers overspending? Recent insights from Bloomberg suggest that many are indeed indulging in excessive expenditure. Traditionally, when faced with financial challenges, the instinct is to tighten the belt. However, a significant number of young adults seem to be taking the opposite approach, splurging on luxury items instead of saving. This trend, dubbed “doom spending,” is fueled by a sense of hopelessness among Gen Zers, exacerbated by the soaring costs of essentials like food and rent, coupled with a challenging job market, particularly in fields like finance and technology. The burden of student loan debt further adds to their financial woes, with the average borrower graduating with nearly $29,000 in debt.
While the term “doom spending” may be recent, the underlying concept has long been recognized. It suggests that individuals who feel powerless over their financial future are less inclined to save. Yet, as financial experts emphasize, starting to save early is crucial due to the power of compound interest. Interestingly, Psychology Today suggests that “doom spending” isn't merely a response to financial hardship but also a reaction to stress, akin to binge-eating.
Addressing this phenomenon requires a multifaceted approach. Psychology Today offers several practical suggestions, including reconnecting with nature, reducing screen time and social media exposure, minimizing influence from commercial entities, prioritizing low-cost social activities, embracing exercise as a budget-friendly alternative to pricey gym memberships, honing self-control skills, and considering job satisfaction over high pay to alleviate stress-induced spending habits. Ultimately, recognizing the psychological roots of “doom spending” is key to implementing effective solutions.
Causes of Doom Spending:
Economic Despair: A sense of hopelessness among Gen Zers due to financial challenges.
Rising Costs: Soaring expenses for essentials like food and rent.
Job Market Challenges: Difficulty finding employment, particularly in lucrative fields like finance and technology.
Student Loan Debt: Graduates burdened with significant debt, averaging nearly $29,000 per borrower.
Stress Response: Doom spending isn't solely a reaction to financial hardship but also a coping mechanism for stress, similar to binge eating.
Addressing Doom Spending:
Solutions involve a combination of practical steps and psychological insights.
Reconnecting with nature, reducing screen time, minimizing commercial influence, prioritizing low-cost activities, exercising, honing self-control, and prioritizing job satisfaction over high pay.
Recognizing the psychological roots of spending behavior is crucial for effective intervention.
As mentioned, Doom spending isn't solely a reaction to financial hardship but also a coping mechanism for stress. If you're a parent considering college planning options to help your child succeed or simply require guidance to get your financial house in order, reach out to Vince and Patrick at Unifirst Financial & Tax Consultants, to learn more about tax efficient strategies to help you secure your family's financial future.
References:
Cachero, P. (2024, January 31). Gen Z Is Splurging on Luxury Goods to Soothe Their Economic Despair. Bloomberg. Retrieved February 13, 2024, from https://www.bloomberg.com/news/articles/2024-01-31/gen-z-millennials-are-doom-spending-to-cope-with-economic-uncertainty
Cachero, P., & Maglione, F. (2023, December 13). Class of 2024 Can’t Land Jobs as Hiring in Tech, Finance Wanes. Bloomberg. Retrieved February 13, 2024, from https://www.bloomberg.com/news/articles/2023-12-13/jobs-for-college-graduates-class-of-2024-struggles-to-find-tech-finance-roles?leadSource=uverify%20wall
Hahn, A. (Year, Month Day of publication). 2024 Student Loan Debt Statistics: Average Student Loan Debt. Forbes. Retrieved February 13, 2024, from https://www.forbes.com/advisor/student-loans/average-student-loan-debt-statistics/
Lee, B. Y., M.D. (Year, Month Day of publication). 27% of Americans are ‘Doom Spending’ Due to Stress. Psychology Today. Retrieved February 13, 2024, from https://www.psychologytoday.com/us/blog/a-funny-bone-to-pick/202312/27-of-americans-are-doom-spending-due-to-stress
