The Latest American Financial Disaster: Doom Spending (2024)

Doom spending. You can think of it as an urge to splurge. The younger generation sees no need to plan for long-term goals. Some 38% of Americans said they will go in debt this year just to have fun. Doom spending has the same roots as doom scrolling. Too much of these heavy topics can put you in a head space that says there's really no reason to plan for the future.

You can make it harder to mindlessly spend. Give it 24 hours, think about it overnight. You can change your social media or online habits. Did you know that if you save just $5 a day from age 20 until age 65, that will yield you about $1.3 million? Remember, it's not always about how much you make, it's more about how wisely you spend what you make.

[Music]

Have a new financial term to add to our vocabulary: doom spending. I love it, this doom spending, right? Where this is no hope about the future, so spend everything right now. Doom spending: what exactly is it, how did it skyrocket into popularity, and most importantly, what are the repercussions? Stick around to the end of our show, because I'm going to dive deep into this epidemic and going to share ways to combat it.

First, you might be asking, what is doom spending? Well, I like to call it the sequel to girl math, only a lot worse. This term was coined to describe reckless and impulsive spending habits in spite of a fear of economic doom. You can think of it as an urge to splurge in exchange for maybe a temporary high. This kind of spending is often fueled by things like stress and boredom, even peer pressure.

But how did this doom spending become so prevalent in our society? A recent survey commissioned by Credit Karma found 43% of Millennials, 35% of Gen Z adults and 27% of all Americans admitted to spending money because they have a sense of economic doom. Opting for a short-term emotional fix can quickly lead to long-term financial issues. Out-of-control splurging really is just money that could be going towards savings and investments.

This doom spending is linked to a combination of drivers. The rise of consumer culture and easy-to-access credit are significant contributors. Now, there are other things like social media influencers, targeted advertising, and no one can deny we live in an age where it is very popular to keep up with the Joneses. We fear being left behind if we don't buy the latest new thing, and advertisers are adept at making us feel that way.

73% of Gen Zers and more than half of all Americans are spending money to escape stress, and the younger generation sees no need to plan for long-term goals. Adding to this already out-of-control fire, nearly 44% of credit card holders are carrying debt on those cards month to month. Some 38% of Americans said they will go in debt this year just to have fun. 39% of Americans say they've used a buy now, pay later plan just so they could make a larger purchase. What a gimmick, yet we fall for this all the time. Putting yourself in a financial hole, it isn't smart and it's certainly not empowering.

Whether it's doom spending or something else, Americans clearly are spending more than they can afford. Sure, inflation is high, I admit that, but I think it's worth looking at some of the other reasons that might be causing this excess in spending. First, 47% of Americans say money negatively affects their mental health. 22% of Americans who carry a balance month-to-month, they say they're overwhelmed by the credit card debt, and rightfully so. Average interest rates on credit cards have gone above 21% in the last few months.

50% of Americans who applied for a loan or a financial product, they've been denied. 67% of Americans with savings are earning less than 4% interest on those savings, and 33% of Americans reported they don't have any short-term savings. More than half of aspiring homeowners say the current cost of living, it's too high. 20% of aspiring homeowners, they don't think they'll ever be able to save enough to buy that first home. And finally, nearly 38% of the Gen Z and Millennials believe they have a harder time building financial wealth than their parents did at their age due to the current state of our economy.

Superfluous spending, it has affected us all at some point. There are healthier ways to cope with stress. First, you can make it harder to mindlessly spend by thinking about those purchases before you make them. Do you really want them? Do you need them? Give it 24 hours, think about it overnight. Chances are, if you will apply this rule, you probably won't make the purchase.

Number two, you can change your social media or online habits. Doom spending has the same roots as doom scrolling. They're scrolling with bad story after bad story, and that has a great effect on you. You need to be abreast of current events, but too much of these heavy topics can put you in a head space that says there's really no reason to plan for the future. Social media is great at making you feel like you need to keep up with the Joneses. Social media might only be showing you half of the story. Your friends or those VIP influencers, they could be taking on a lot of debt to make it to that next level lifestyle. Trust me, if you reduce your time on social media, things will change for the better.

And number three, you can engage in something called self-care for your future. One of the first steps to creating that secure financial footing is saving 10 to 15% of your income. If that's not possible right now, saving any amount is a great place to start. Did you know that if you save just $5 a day from age 20 until age 65, earning around 10% annual return, that will yield you about $1.3 million? That's a significant amount of money, and it didn't take much to get you there. Just getting your head right can change the game, and taking that first step to realize it's okay to splurge here and there. $250 for a night out on the town is much better than $2500 for a Chanel bag.

Doom spending, without a doubt, can lead to a vicious cycle. It can strain relationships, hinder your long-term financial goals. If you take it far enough, it may even cost bankruptcy. The bottom line is, putting material possessions ahead of financial security and your well-being, it's just plain reckless. Just think about it like binge watching on Netflix. When you spend more than you can afford, chances are more productive activities are taking a back seat. It also means that your savings is probably not a high priority.

There's no denying that we face some pretty difficult economic circumstances, and it's natural to have some anxiety about it, but this doom spending, it is only digging a deeper hole. We must foster financial literacy and be mindful of our spending habits. It starts with something as simple as a budget, distinguishing between required and desired expenses, and setting realistic financial goals.

As we wrap up today's show, doom spending may be rampant, but it is not insurmountable. So start building financial knowledge right now on how you can make your money work for you, and stay disciplined. Remember, it's not always about how much you make, it's more about how wisely you spend what you make.

I hope this video has inspired you to look past doom spending and to realize that you can build a bright future. If you found this video helpful, don't forget to like, share and subscribe to our channel so that you can get all of the financial content that we offer every week, and it's all aimed at helping you make better financial decisions. I'll see you next time on We're Talking Money.