Concern About Generation Z

Transcript of Podcast Episode 271

Hello this is Bill Rainaldi, with another edition of Security Mutual’s SML Planning Minute. In today’s episode, are young people spending too much money? A recent article published by Bloomberg[1] indicates that in many cases, they are.

Young people have always faced financial challenges. And typically, when you face a big financial hurdle, the first thing you do is cut back on your spending. But it turns out that many young adults are doing the opposite. Instead of saving, they’re spending a large chunk of their disposable income on luxury items. This is a phenomenon known as “doom spending.”

According to Bloomberg, a large number of Gen Zers simply feel that they’re doomed no matter what they do.[2] The high cost of food, rent, and other essentials plays a key role. And so does the labor market. In spite of low overall unemployment numbers, new graduates are having trouble finding jobs in finance and technology.[3]

Student loan debt is, of course, a big factor in their despair. The majority of students leave school with debt, the average being $28,950 per borrower.[4]

While the term “doom spending” is relatively new, the concept has been around for decades.[5]  The idea is that that those who feel they have a lack of control over their financial success are less likely to bother saving money.

The problem is that for anyone, when it comes to savings, starting as early as possible is one of the most important things you can do. If you delay, you may never catch up. It’s simply the nature of compound interest.

A recent article in Psychology Today[6] magazine argues that “doom spending” comes not as a result of financial hardship, but as a result of financial stress. It’s sort of like binge eating: More often than not, you don’t overeat because you’re hungry, you do it because you’re stressed.

So how do you deal with the issue of doom spending? Psychology Today has some suggestions.[7] Among them:

• Connect more with nature. It’s cheap.
• Take a break from your electronic devices and social media.
• Pay less attention to politicians, celebrities, and influencers. They’re usually trying to sell you something.
• Bond with friends in low-cost ways.
• Exercise either at home or in the outdoors, so you don’t have to buy a gym membership.
• Learn the art of self-control. Who’s in charge here, you or the advertisers?
• And finally, a counter-intuitive idea. Find a job you actually enjoy, even if it doesn’t pay as much. Remember, “doom spending” is a psychological phenomenon. Your job may be causing you extra stress, and you may be coping with it by overspending.

[1] Cachero, Paulina. “Gen Z Is Splurging on Luxury Goods to Soothe Their Economic Despair.” bloomberg.com. https://www.bloomberg.com/news/articles/2024-01-31/gen-z-millennials-are-doom-spending-to-cope-with-economic-uncertainty (accessed Feb. 13, 2024)

[2] Cachero, Paulina. “Gen Z Is Splurging on Luxury Goods to Soothe Their Economic Despair.” bloomberg.com. https://www.bloomberg.com/news/articles/2024-01-31/gen-z-millennials-are-doom-spending-to-cope-with-economic-uncertainty (accessed Feb. 13, 2024)

[3] Cachero, Paulina and Maglione, Francesca. “Class of 2024 Can’t Land Jobs as Hiring in Tech, Finance Wanes.” bloomberg.com. 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 (accessed Feb. 13, 2024)

[4] Hahn, Alicia. “2024 Student Loan Debt Statistics: Average Student Loan Debt.” forbes.com https://www.forbes.com/advisor/student-loans/average-student-loan-debt-statistics/ (accessed Feb. 13, 2024)

[5] Cachero, Paulina. “Gen Z Is Splurging on Luxury Goods to Soothe Their Economic Despair.” bloomberg.com. https://www.bloomberg.com/news/articles/2024-01-31/gen-z-millennials-are-doom-spending-to-cope-with-economic-uncertainty (accessed Feb. 13, 2024)

[6] Lee, Bruce Y, M.D. “27% of Americans are ‘Doom Spending’ Due to Stress.” psychologytoday.com. https://www.psychologytoday.com/us/blog/a-funny-bone-to-pick/202312/27-of-americans-are-doom-spending-due-to-stress (accessed Feb. 13, 2024)

[7] Lee, Bruce Y, M.D. “27% of Americans are ‘Doom Spending’ Due to Stress.” psychologytoday.com. https://www.psychologytoday.com/us/blog/a-funny-bone-to-pick/202312/27-of-americans-are-doom-spending-due-to-stress (accessed Feb. 13, 2024)

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