Jan 31, 2024
What really matters anyway?
That’s what Nia Holland, 24, thought after spending $2,500 on a vintage Chanel bag, draining her savings. Earning little money with campus research jobs during graduate school, she knew her money could be better spent, saved or invested.
But at the same time, she said it didn’t feel irresponsible. With traditional milestones — like homeownership and a life with kids — so far out of reach, denying herself “little luxuries” wasn’t going to make a difference. And if anything, the lambskin tote with a 24-carat chain made her feel better.
“The economy sucks, there’s global warming, there’s constant political and social unrest globally,” said Holland, who is getting financial support from her family as she pursues a doctorate in education and psychology at the University of Michigan. “It’s just easier to spend money on things that will bring you immediate fulfillment.”
Typically, when people are on shaky ground economically, they pull back on spending. But, increasingly, younger generations are doing the opposite, figuring their financial futures are doomed no matter what. Higher student debt loads, an increased cost of living and shifts in the labor market have made it more difficult to achieve financial goals, like buying a house or saving for retirement.
As such, about 27% of Americans admit to “doom spending” to cope with concerns about the economy and foreign affairs, according to Credit Karma, a personal finance company. And the rates are even higher among Millennials and Gen Z, at 43% and 35% respectively.
“It’s a way to cope — albeit not the healthiest one,” said Courtney Alev, a consumer financial advocate at Credit Karma.
While doom spending may capture the economic zeitgeist of the day, the habit is hardly new. Stephen Wu, an economics professor at Hamilton College in Clinton, New York, published research in 2004, writing that those who feel luck and other outside factors play a significant role in their financial success are less likely save.
He argues feelings of fatalism and counterintuitive spending habits have become more common in recent years, particularly after the pandemic and Great Recession. That’s when people began to realize that “a large part of their successes and failures were out of their control,” Wu said.
How younger generations are able to swing big-ticket purchases may also come down to increased parental support. With nearly half of young people living at home, some are using the extra disposable income to treat themselves. It can be easy to think that’s reasonable too when social media is littered with images of young people splashing out on lavish meals, glamorous vacations and designer goods.
If one isn’t careful, however, doom spending can be a self-fulfilling prophecy, where the risk of living paycheck to paycheck is much higher.
That’s the case for Adrian Siega, 26, who recently spent the last of his emergency savings to buy an imitation of a Burberry tote that was featured on the popular HBO show Succession.
Siega moved to New York from the Philippines in 2019, with the goal of getting into college, finding a job and buying a home. But as time has gone by, he’s felt his dreams of homeownership slipping out of reach. While he hopes to finally go to college this year, he’s still living with his mom and receiving financial support.
“Thirty years ago, an apartment in Elmhurst was $90,000, and now it’s $400,000 for a one bedroom; that’s insane,” said Siega, a personal care assistant. So for now, he’s focused on what’s “needed for the moment” — skin care products, a pea coat and a knockoff Hermès 35cm Birkin Gold Togo bag for $1,088.
A different path
Costly purchases can seem misguided. But if a person has given up on the dream of a suburban life with kids, that’s not necessarily the case, said Maria Melchor, a 27-year-old content creator focused on financial education for Gen Z.
In a TikTok with more than 1.8 million views, the Yale graduate says that when older people ask how young people can afford things they never buy for themselves, she says it’s because they can’t afford anything else.
“Homeownership or starting a family is so out of reach that we’re using that down payment or kid money on whatever it is we can afford that will bring us semblance of the kind of adulthood we were promised,” she says in the video.
In an interview, she said she wouldn’t classify Gen Z’s indulgence in luxury items as doom spending. Rather, it’s a glimpse into what life could look like for more people, if not all their money was spent on real estate and children. Marriage and birth rates are in decline and remote work, at least for some, opened up the possibility of not being tied down to a single zip code.
“I think the ‘dream’ is changing,” she said.