Revenge spending is not dead.
Even as Americans owe $1.13 trillion on their credit cards, consumers are still willing to splurge on impulsive purchases. It’s a phenomenon also known as “doom spending,” or spending money despite economic and geopolitical concerns.
Roughly 38% of adults plan to take on more debt to travel, dine out and see live entertainment in the year ahead, according to a recent report by Bankrate.
One quarter, or 27%, of those surveyed said they would go into debt to travel this year, while 14% would dip into the red to dine out and another 13% would lean on credit to go to the theater, see a live sporting event or attend a concert — including the European leg of Taylor Swift’s Eras Tour, Bankrate found.
“There’s still a lot of demand for out-of-home entertainment,” said Ted Rossman, senior industry analyst at Bankrate.
“Some of that reflects a ‘you only live once’ mentality that intensified during the pandemic, and some of that is because many economic indicators — including GDP growth and the unemployment rate — are in favorable shape,” Rossman said.
Younger adults, particularly Generation Z and millennials, were more likely to splurge on those discretionary purchases, Bankrate found.
Although an increased cost of living has made it particularly hard for those just starting out, young adults are taking a more relaxed approach to their long-term financial security, other studies also show.
Rather than cut expenses to boost savings, 73% of Gen Zers between the ages of 18 and 25 said they would rather have a better quality of life than extra money in the bank, a Prosperity Index report by Intuit found.
Gen Z workers are also the biggest cohort of non-savers, according to a separate Bankrate survey.
“It’s hard to overstate the impact of the pandemic, it changed the way so many people view their spending and the result is that people are more focused on the ‘right now’ than thinking about 40 years from now,” said Matt Schulz, chief credit analyst at LendingTree and author of “Ask Questions, Save Money, Make More.”
However, that will have repercussions later on, he added.
When it comes to saving for long-term goals, young adults risk forfeiting the significant advantage of time.
“Every dollar you set aside in your 20’s will compound over time,” Rossman said. The earlier you start, the more you will benefit from compound interest, whereby the money you earn gets reinvested and earns even more.
At the very least, strike a balance, Rossman advised. Automate a portion of your income toward savings and build some fun into the budget, he said. “At least then you are not paying 20 percent credit card interest.”