As the presidential election draws near, a new trend called "doom spending" has emerged among American consumers. This trend refers to the act of spending money despite economic worries.
According to a recent survey by Intuit Credit Karma, approximately 27% of shoppers have reported engaging in doom spending. The trend is particularly noticeable among younger generations, with 37% of Gen Z and 39% of millennials participating in this behavior. The survey, conducted in late October, reveals that 60% of respondents have heightened concerns about the state of the economy and global affairs compared to the previous year.
Doom spending is motivated by various factors, including the rising cost of living, inflation, and the upcoming presidential election. Among doom spenders, 55% are primarily concerned about the increasing cost of living, while 43% are troubled by inflation. Interestingly, 28% of these consumers specifically express anxiety about the upcoming election. This sense of uncertainty has led more than a third of respondents to view saving money as irrational, with Gen Z and millennials feeling this sentiment even more strongly at 47% and 43% respectively.
The prevalence of doom spending among younger demographics can be attributed to their extensive online presence. A significant 70% of Gen Zers and 52% of millennials identify as "chronically online," which can exacerbate feelings of anxiety and stress. As they consume news and social media content, these individuals may turn to retail therapy as a coping mechanism, leading to impulsive purchasing behaviors. This trend has its roots in the pandemic, where online shopping became a form of escapism.
The financial implications of doom spending are significant. A survey by Bankrate.com in 2023 revealed that consumers who make impulse purchases influenced by social media spend an average of $754 annually. This behavior can result in accumulating credit card debt, which has reached alarming levels. The Federal Reserve Bank of New York reported that credit card balances reached $1.14 trillion in the second quarter of 2024, with 50% of cardholders carrying a balance each month. This trend is particularly concerning among younger consumers who already face financial challenges such as student loan debt and high housing costs.
Breaking the cycle of doom spending and accumulating debt is challenging, especially with elevated interest rates. The average annual percentage rate (APR) for credit cards is around 20.50%, while retail credit cards can have an average APR of 30.45%. This financial strain is compounded by the fact that many consumers are still paying off debt from previous holiday seasons. A recent survey showed that about 20% of Americans plan to go into credit card debt this holiday season, further entrenching them in a cycle of financial instability.
Young adults are particularly vulnerable, with credit card debt increasing by 66% for Gen Z and 52% for millennials since March 2022 when the Federal Reserve began raising interest rates. This trend highlights the challenges faced by younger consumers who often feel that the economic landscape is stacked against them. As they navigate these financial hurdles, the urge to spend as a coping mechanism can lead to long-term consequences that hinder their ability to save and invest for the future.
Experts recommend that consumers regain control over their finances by implementing strategic budgeting practices. Setting aside money for discretionary spending in advance can help mitigate the impulse to overspend. Financial analysts suggest creating a separate high-yield savings account to allocate funds for planned purchases, allowing consumers to earn a better return while managing their spending habits.
By taking proactive steps to manage their finances, individuals can break the cycle of doom spending and reduce the burden of credit card debt. Establishing a clear financial plan can empower consumers to navigate the uncertainties of the current economic climate while still enjoying the occasional retail therapy. As the holiday shopping season approaches, it is crucial for consumers to remain vigilant about their spending habits and prioritize financial well-being amidst the pressures of the election and broader economic concerns.