In the face of global uncertainties ranging from geopolitical tensions to inflation, a concerning trend is emerging among the Gen Z population in the United Arab Emirates (UAE) – ‘doom spending.’ Financial experts in the nation are raising alarms about the implications of this behaviour, which involves individuals, primarily Gen Z, resorting to maxing out credit cards and accumulating debt to fund extravagant purchases and experiences as a coping mechanism for economic uncertainty.
Understanding doom spending
Doom spending, a term recently coined by personal finance experts, refers to a reckless form of spending where individuals sacrifice long-term financial well-being for short-term pleasure and gratification. Stuart Porter, a Wealth Coach and Chartered Financial Planner, emphasises that this behaviour is not exclusive to Gen Z and has been observed for years, manifesting in purchases such as jewellery, electronic gadgets, and luxurious vacations financed through credit cards without the means to repay in full.
Mike Coady, a Financial Advisor in the UAE, attributes doom spending to a sense of pessimism, rooted in the belief that an uncertain future, whether due to global crises or personal challenges, justifies enjoying the present without much regard for future financial implications.
Why Gen Z in the UAE is doom spending
The use of the term ‘doom spending’ is particularly prevalent among Gen Z in the UAE, and Coady points to several factors contributing to this trend. Firstly, the constant exposure to social media plays a significant role. Growing up in a digital age where instant gratification and consumerism are glorified, Gen Z often seeks immediate fulfillment through spending as a response to anxiety about an unpredictable future. The unique pressures faced by expats in the UAE, coupled with a conspicuous consumption culture, further contribute to doom spending becoming a popular practice among young adults.
Consequences of doom spending
Financial analysts stress the serious consequences of doom spending, affecting both individuals and the country’s economy. Porter highlights that for individuals, doom spending can lead to debt accumulation, impaired savings, strained relationships, and adverse effects on mental health. Excessive spending on non-essential items also leaves little room for saving for important financial goals.
On a societal level, doom spending contributes to economic instability as irresponsible spending leads to increased debt levels and reduced consumer confidence. Wealth inequality may worsen, with financially vulnerable individuals disproportionately affected. Governments may need to intervene to stabilise the economy, potentially resulting in policy changes or stimulus programs with fiscal implications.
Psychological factors behind doom spending
Porter identifies psychological factors contributing to doom spending, including impulse control issues, FOMO (fear of missing out), emotional states influencing spending behaviour, social influence, and a lack of financial education. Addictive behaviours, such as compulsive buying or shopping addiction, may be fuelled by an underlying psychological need or desire.
Addressing doom spending: Strategies for individuals and companies
To address doom spending, financial experts recommend establishing realistic and disciplined budgeting processes aligned with income and financial goals. Creating short-term and long-term financial goals can help individuals focus on meaningful spending, while automating savings and investments reduces the temptation to spend impulsively.
Building an emergency fund is crucial to alleviate financial stress, and education about personal finance is emphasised to shift perspectives from short-term gratification to long-term financial health. Experts stress the importance of empathy and understanding in guiding individuals towards healthier financial behaviours, with a focus on raising awareness about the psychological aspects of spending and the long-term impact of financial choices.
As doom spending becomes a noticeable trend among UAE Gen Z, a comprehensive understanding of its causes and consequences is crucial. Addressing this behaviour requires a collective effort from individuals, companies, and financial experts to promote financial literacy, responsible spending, and a shift towards sustainable financial habits for the future.