People usually spend less and save more in times of financial crisis. Ulrike Malmendier, a professor of behavioral finance at the University of California at Berkeley, told The Washington Post that generations such as “Depression babies” and those who faced the 2008 financial crisis became more cautious about spending and saving money.

However the most recent financial crisis — the COVID-19 pandemic — has created a new type of spending that splurges more than saves: doom spending.

What is ‘doom spending’?

According to a 2023 survey by Intuit’s Credit Karma, doom spending is “spending money despite concerns about the economy and foreign affairs to cope with stress,”

According to Bloomberg, Credit Karma’s survey found that 33% of men admitted to doom spending as opposed to only 21% of women — despite 96% of respondents sharing concern about the current economic state. Additionally, it found that 32% of respondents have taken on more debt in 2023 due to increased spending, with Gen X and millennials as the most likely to report rising debt levels.

Related
America’s debt dilemma: The $34.2 trillion U.S. debt and the surge in consumer spending

The issue becomes more prevalent among younger women — both Gen Z and millennial. A 2022 report by Financial Health Network found that 44% of women between ages 18 and 29 delayed marriage, children and owning a home because of debt — compared to 34% of men. Additionally, women were more likely to say their debts were not manageable.

2024 has been no different in splurge spending. The Bureau of Economic Analysis estimated that consumers spent “$145.5 billion more in February” than in last January, while the rate of personal savings “fell to 3.6 percent, from 4.1 percent the previous month,” per The Washington Post.

It comes down to psychology

COVID-19 negatively affected tons of lives and left multiple consumers with a psychological emptiness.

“The adverse effects of covid weren’t necessarily financial; people got jobs quickly and the government stepped in with support,” Malmendier said to The Washington Post. “Instead, it’s about all of the things we were starved for: human interaction, socializing, travel. People are spending money on the things they missed most.”

Bloomberg argues that doom spending creates a sense of empowerment. Purchasing high-ticket items can be a status symbol among our family, friends and peers.

Even if we don’t need to purchase that high-ticket item, having the ability to do so — using pay-later systems or even paying with potential credit card debt — appears more psychologically beneficial in today’s society.

“Our susceptibility to status symbols comes from our deep need to be accepted, but it is also a way of protecting ourselves,” psychology professor Bruce Hood wrote in “Possessed: Why We Want More Than We Need,” per Bloomberg.

How can you avoid doom spending?

The first step to avoiding doom spending is to know its appeal.

“When we buy something, our brain releases feel-good hormones like dopamine and endorphins,” Iona Bain, founder of Young(ish) Money, told British Vogue. “Shopping has always been an easy, low effort way to self soothe.”

Bain suggested the following ideas to help refrain from doom spending:

  • Keep a spending journal.
  • Set boundaries with your phone/social media.
  • Have a list of activities that are both psychologically beneficial and free — “decoy activities.”
  • Start saving, even if it’s a little over time.
  • Engage in community-building behavior.
Related
USDA finds Americans spending more on food since 1991