Young Employees in the UAE Resort to 'Doom Spending' and Maxing Credit Cards Amid Economic Uncertainty, Experts Warn

"With Increasing Global Uncertainties, Individuals Turn to Short-Term Consumption Booms as Experts Warn of Potential Long-Term Financial Instability at Personal and National Levels"

In the UAE, Generation Z is reportedly engaging in a phenomenon dubbed "doom spending," a term coined by personal finance experts to describe a concerning trend among individuals in this demographic. "Doom spending" refers to the practice of using money on luxury items and experiences as a coping mechanism for the perceived inability to achieve traditional markers of adulthood, such as homeownership.

This behavior often involves maxing out credit cards or taking on additional debt to fund immediate gratification, driven by anxiety about future financial prospects. While it may provide temporary relief, financial analysts caution that such short-term solutions could have significant personal and societal repercussions if left unchecked.

By prioritizing immediate consumption over long-term financial stability, individuals risk exacerbating their financial difficulties in the future. Furthermore, this trend could have broader implications for society, including increased debt burdens and reduced savings rates among younger generations. As such, there is a growing consensus among experts that addressing the root causes of financial anxiety and promoting responsible financial habits is essential to mitigating the impact of "doom spending" in the UAE.

What is doom spending?

Stuart Porter, a Wealth Coach and Chartered Financial Planner, offered insights into the concept of "doom spending," characterizing it as a relatively recent term used to describe a form of reckless spending behavior. He noted that while the term itself may be new, the underlying phenomenon of profligate spending has existed for many years and is not exclusive to Generation Z.

According to Porter, profligate spending encompasses various indulgent purchases, such as jewelry, electronic gadgets, and luxury vacations, often financed through credit cards without adequate means for repayment. He emphasized that this behavior is not confined to specific demographics but can be observed across different age groups.

Porter highlighted industries where doom spending is prevalent, including retail, particularly luxury brands, and non-essential items. He also noted increased demand for high-end experiences in the hospitality and entertainment sectors. While financial services may see short-term gains from increased spending, there are associated risks, such as higher levels of debt. Additionally, advertising and marketing industries may benefit as companies strive to stimulate consumer demand and drive sales.

Overall, Porter's insights shed light on the broader implications of doom spending across various sectors and underscore the need for individuals to adopt prudent financial habits to safeguard their long-term financial well-being.

In a recent statement, an economic expert warned about the detrimental effects of continued excessive spending on the economy. According to the expert, persistent indulgence in lavish spending could lead to a decline in economic stability. This decline would stem from the fundamental principles of lending, which rely on a balance between lenders and creditworthy borrowers. As the risk associated with lending increases, so does the cost of borrowing, often resulting in prohibitive interest rates. Ultimately, this cycle can impede economic growth as borrowers find themselves unable to afford borrowing, thus slowing down overall economic activity.

Echoing these concerns, Mike Coady, a seasoned financial advisor based in the UAE, emphasized the psychological underpinnings of doom spending. Coady highlighted that such behavior is often driven by a pervasive sense of pessimism, leading individuals to prioritize immediate gratification over long-term financial security. This mindset, he noted, is deeply rooted in the belief that future prospects are bleak or uncertain, whether due to political instability, environmental concerns, or global crises like financial downturns or banking failures. As a result, individuals may opt to prioritize present enjoyment without adequately considering the potential repercussions on their financial well-being.

‍Why are Gen Z in the UAE doom spending?

However, Coady shed light on the broader scope of crises that can trigger such spending behaviors, noting that they extend beyond global or political challenges to include personal difficulties.

"In my experience, individuals often resort to this behavior in response to personal challenges such as career setbacks, struggles with effective saving, or mounting debt," he explained. "It serves as a coping mechanism—a means to find immediate gratification or regain a sense of control amidst personal turmoil."

Coady emphasized that this pattern is particularly prevalent in contexts like Dubai, where a culture of conspicuous consumption prevails, and expatriates face distinctive financial and social pressures. He highlighted how personal crises can significantly drive doom spending in such environments.

"In the UAE, where expatriates comprise a significant portion of the population, doom spending emerges as a noticeable trend," he added.

Ultimately, while doom spending may offer temporary relief from stress, Coady cautioned that it often comes at the expense of long-term financial stability and goals.

Coady highlighted how the transient nature of expatriate life can foster a short-term mindset, which in turn amplifies spending behaviors. In environments like the UAE, where expatriates often reside temporarily, this mindset can lead to a focus on immediate gratification rather than long-term financial planning.

"Doom spending in this context can take various forms, ranging from extravagant lifestyle choices to luxury purchases that may not align with individuals' overarching financial goals," he noted.

Regarding the popularity of doom spending among Generation Z in the UAE, Coady pointed to the pervasive influence of social media as a primary driver.

"With Gen Z growing up in a digital era where distinctions between reality and online portrayal are blurred, there's a notable inclination to seek instant gratification through spending," he explained. "This tendency is often a response to anxieties about an uncertain future, exacerbated by constant exposure to social media, where consumerism and immediate fulfillment are frequently glamorized."

Coady emphasized how the convergence of global uncertainties and the unique pressures experienced in the UAE significantly contribute to the widespread adoption of doom spending among young adults.

‍Doom spending affects both individuals and a country’s economy

Porter delved into the far-reaching consequences of indulging in excessive spending, underscoring its profound impacts on both individuals and society.

On an individual level, he elucidated how doom spending can precipitate a cascade of adverse effects, ranging from mounting debt and depleted savings to strained interpersonal relationships and compromised mental well-being. Moreover, he highlighted the potential for missed opportunities, legal entanglements, and the erosion of one's creditworthiness—a critical component of financial health.

Porter underscored that the reliance on credit cards or loans to finance luxury purchases often characterizes the accumulation of debt associated with doom spending, exacerbating financial strain over time. This perilous cycle of escalating indebtedness can ensnare individuals in a web of financial duress.

Regarding excessive spending more broadly, Porter elucidated how the penchant for splurging on non-essential items can impede progress toward crucial financial objectives, leaving scant resources for savings and investment in future financial security.

Turning to the societal repercussions, Porter illuminated how irresponsible spending practices can precipitate economic instability. Such behavior contributes to a destabilizing effect on the economy, amplifying debt levels and undermining consumer confidence. These ramifications reverberate throughout the economic landscape, exerting adverse effects on overall economic vitality.

Porter delved deeper into the societal repercussions of doom spending, highlighting its detrimental impact on consumer confidence and exacerbation of wealth inequality.

He elucidated how a society grappling with financial woes stemming from overspending may experience a palpable decline in consumer confidence. This downturn in confidence can precipitate reduced expenditures on non-essential goods and services, dealing a blow to businesses and impeding economic growth.

Moreover, Porter underscored how irresponsible spending practices can serve to widen the chasm of wealth inequality. The financially vulnerable segments of society are particularly susceptible to the adverse effects of excessive spending, perpetuating a stark dichotomy between the affluent and those facing financial hardship. In light of this disparity, governments may be compelled to intervene to stabilize the economy, potentially necessitating policy adjustments, stimulus initiatives, or other fiscal interventions.

Expounding on the multifaceted impact of doom spending, Porter emphasized its strain on social services, educational opportunities, career trajectories, and environmental sustainability. He cautioned that heightened inequality and financial desperation may drive individuals towards criminal activities as a means of grappling with mounting debts—a sobering reminder of the far-reaching consequences of fiscal imprudence.

‍Doom spending stems from psychological factors

Porter highlighted how financial stress resulting from doom spending perpetuates a cycle of financial strain, wherein individuals consistently outspend their earnings. This predicament engenders heightened stress and anxiety as they grapple with meeting financial obligations such as bill payments and debt repayments, exacerbating mental health challenges.

He pointed to various factors contributing to this phenomenon, including impulse control issues. For some individuals, the allure of immediate gratification poses a formidable challenge, making it difficult to resist the temptation to indulge in spontaneous purchases. Additionally, Porter noted the pervasive influence of FOMO (fear of missing out), which can further fuel impulsive spending behaviors.

"Impulsive spenders may act on desires without fully considering the long-term consequences," he remarked. Furthermore, he underscored how emotional states—ranging from stress and boredom to sadness or happiness—can profoundly influence spending behaviors. In times of emotional distress, some individuals may resort to retail therapy as a coping mechanism or seek solace in retail indulgence to procure a temporary mood boost, often resulting in impulsive and unnecessary purchases.

Porter delved into additional factors contributing to doom spending, including social influence and a lack of financial education, as well as easy access to credit.

He emphasized the significant role of social influence, noting how the desire to conform to societal norms and expectations can drive individuals to engage in excessive spending. Particularly, Porter highlighted the impact of social media, which often fosters a pressure to portray and maintain a certain lifestyle, compelling individuals to stretch beyond their financial means to uphold a specific image.

"Some individuals may have a present-focused orientation, prioritizing immediate gratification over long-term financial planning," Porter elucidated. "This mindset can diminish the appeal of delayed gratification—a crucial principle for effective saving and investing."

Moreover, he underscored the role of financial education—or lack thereof—in shaping spending behaviors. Individuals who lack comprehensive knowledge about budgeting, saving, and investing may find themselves making uninformed financial decisions, exacerbating their susceptibility to doom spending tendencies. Additionally, easy access to credit can further facilitate impulsive spending habits, as individuals may succumb to the allure of instant gratification without fully comprehending the long-term implications of their financial choices.

Porter further expanded on the psychological factors influencing doom spending, highlighting cognitive biases and addictive behaviors as significant contributors to poor financial decision-making.

He pointed to cognitive biases such as optimism bias, wherein individuals tend to underestimate the likelihood of negative outcomes, and hyperbolic discounting, which involves favoring immediate rewards over larger, delayed rewards. These biases can distort individuals' perceptions of risk and reward, leading to suboptimal financial choices.

Moreover, Porter underscored the role of addictive behaviors such as compulsive buying or shopping addiction in perpetuating doom spending patterns. He explained how these behaviors may be fueled by underlying psychological needs or desires, wherein individuals experience a sense of euphoria or relief during the act of purchasing. However, this temporary high is often followed by feelings of regret or remorse, known as buyer's remorse, thus initiating a cycle of addictive spending.

In essence, Porter highlighted how a confluence of cognitive biases and addictive tendencies can conspire to perpetuate the cycle of doom spending, undermining individuals' financial well-being in the process.

‍So, what measures can UAE companies and individuals to reduce or avoid doom spending?

Coady outlined several proactive strategies to mitigate or prevent doom spending tendencies.

"First and foremost," he emphasized, "establishing a realistic and disciplined budgeting regimen is crucial. This involves aligning your spending habits with your income and overarching financial objectives. A key component of this process is allocating a portion of your income for savings and investments before earmarking funds for discretionary spending."

Moreover, Coady underscored the importance of setting clear and achievable financial goals, both in the short and long term. These goals, whether saving for a home, planning for retirement, or establishing an emergency fund, serve as guiding beacons, directing spending toward endeavors that hold genuine significance. By providing a sense of purpose and direction, these goals can effectively counteract impulsive spending tendencies.

Additionally, Coady recommended automating savings and investment contributions wherever possible. By setting up automated transfers or direct deposits, individuals can ensure that a predetermined portion of their income is consistently channeled towards their financial goals without succumbing to the temptation of discretionary spending.

In essence, by adopting these proactive strategies, individuals can cultivate a more conscientious approach to financial management, thereby mitigating the allure of doom spending and fostering long-term financial stability.

Coady underscored the importance of automating savings and investments, emphasizing that direct transfers to dedicated accounts reduce the temptation to spend discretionary funds.

Furthermore, he advocated for the creation of an emergency fund as a vital component of financial resilience. "Having a safety net can alleviate the stress that often triggers doom spending," he noted. "Knowing you have a financial buffer for unexpected expenses can bring peace of mind."

In addition to practical measures, Coady stressed the significance of financial education in fostering responsible money management. He emphasized that understanding the value of money, the consequences of debt, and the benefits of investing can catalyze a shift from short-term gratification to a focus on long-term financial well-being.

When confronted with the question of whether doom spending is a passing trend or a persistent behavioral pattern, Coady suggested that it might transcend temporary fluctuations. "It could be more than just a fleeting trend," he remarked, hinting at the enduring nature of the underlying psychological and societal factors driving such behaviors.

In sum, by adopting a multifaceted approach encompassing automated savings, emergency preparedness, and financial literacy, individuals can fortify themselves against the allure of doom spending and pave the way towards sustainable financial health.

Coady offered insights into the potential for doom spending to evolve into a persistent behavioral pattern, particularly against the backdrop of enduring socio-economic uncertainties and the prevailing consumer culture centered on instant gratification. He underscored the crucial role of education and proactive financial management in addressing this trend, steering individuals towards more sustainable financial habits for the future.

However, Coady tempered this assessment with a call for empathy and understanding in approaching the issue. He emphasized the importance of financial planners guiding individuals with sensitivity, recognizing the interplay between emotional well-being and financial decision-making. Furthermore, he stressed the necessity of raising awareness about the psychological dimensions of spending and the enduring consequences of financial choices.

In essence, by fostering a compassionate and informed approach to financial guidance, coupled with ongoing efforts to promote awareness and understanding, Coady suggested that individuals can navigate towards healthier financial behaviors and cultivate resilience in the face of persistent doom spending tendencies.

Source: arabianbusiness