UAE Gen Z employees are ‘doom spending’ and maxing credit cards to cope with economic uncertainty, say experts

Doom spending involves maxing out credit cards or taking on additional debt to fund lavish experiences and material goods now due to anxiety about the future.

However, these financial analysts warn that this short-sighted response to financial anxiety could end up having serious personal and societal consequences if current trends continue.

What is doom spending?

“Doom spending is relatively new term used to define a form of profligate spending where the spender forsakes their longer-term financial well-being in favour of the short-term pleasure of the purchase,” Stuart Porter FPFS, Wealth Coach and Chartered Financial Planner told Arabian Business.

Porter, however, said that doom spending is a term used quite recently, and that profligate spending has “been around for many years and is not just limited to Gen Z,” adding that this includes “buying jewellery, electronic gadgets and exotic holidays on credit card without the means to repay the card in full at the end of the month.”

He added that doom spending is quite common in industries such as the retail industry, particularly luxury brands and non-essential items. Hospitality and entertainment sectors may also see increased demand for high-end experiences. Financial services can have a mixed impact, with potential short-term gains but also risks associated with increased debt levels. Advertising and marketing industries may benefit as companies strive to create demand and encourage consumer purchases.

“Ultimately, sustained doom spending will undermine the economy as lending relies on there being a lender and a credit worthy borrower. Where the risk of lending rises the cost (interest rate) of borrowing also rises, eventually the cost is too great for the borrower and economic activity slows,” he said.

Echoing the sentiment, Mike Coady, a financial advisor in the UAE with over 25 years’ experience in the financial industry said doom spending is often driven by a “sense of pessimism,” and this behaviour is “rooted in the belief that if the future is bleak or uncertain — be it due to political instability, environmental concerns, or other global crises such as financial or banking — then one might as well enjoy the present without much regard for future financial implications.”

Why are Gen Z in the UAE doom spending?

However, Coady explained the use of the term crises is not just limited to global or political difficulties, but also can occur due to personal problems.

“I’ve observed that individuals often resort to this behaviour in response to personal challenges like career setbacks, inability to save effectively, or mounting debt. It’s a coping mechanism, a way to find immediate gratification or a sense of control in the face of personal turmoil. Particularly in a context of Dubai, where there’s a conspicuous consumption culture and expats face unique financial and social pressures, personal crises can significantly drive doom spending. This kind of spending provides temporary relief from stress but often at the expense of long-term financial stability and goals,” he said.

In the UAE, expats form a large part of the population, hence making doom spending a noticeable trend.

“The transient nature of expat life sometimes fosters a short-term mind-set, which can further fuel such spending behaviours. Doom spending in this environment might manifest in various forms, from lavish lifestyle choices to luxury purchases that might not align with one’s long-term financial planning goals,” he said.

When asked why doom spending has become widely popular among Gen Z in the UAE, Coady attributed the constant exposure to social media, where instant gratification and consumerism are frequently glorified, is one of the key reasons.

“For Gen Z, growing up in a digital age where the lines between reality and online portrayal are blurred, there’s a tendency to seek immediate fulfilment through spending, often as a response to the anxiety about an unpredictable future. This intersection of global anxieties and the unique pressures faced in the UAE contributes significantly to why doom spending has become a popular term and practice among young adults.”

Doom spending affects both individuals and a country’s economy

Porter also extensively discussed the ramifications of excessive spending and its repercussions on both individuals and society. “For individuals, doom spending can lead to debt accumulation, impaired savings, strained relationships, and impact mental health. It can also lead to missed opportunities, legal consequences and a poor credit score,” he explained.

He also explained that the accumulation of debt by engaging in doom spending often involves relying on credit cards or loans to fund luxury purchases, making it difficult for individuals to make necessary payments. Over time, the debt can become burdensome and lead to a cycle of increasing financial pressure.

As for excessive spending, Porter explained that purchasing non-essential items leaves little room for saving money for important financial goals.

As for the impact on society, doom spending can lead to economic instability from irresponsible spending contributes to instability and has ripple effects on the overall economy, as well as increased debt levels. It could also lead to reduced consumer confidence.

“A society where individuals struggle with financial issues due to overspending may experience reduced consumer confidence. This can lead to decreased spending on non-essential goods and services, negatively affecting businesses and economic growth,” Porter explained adding that wealth inequality is another negative side effect of doom spending.

“Irresponsible spending can exacerbate wealth inequality. Those who are already financially vulnerable may be disproportionately affected, widening the gap between the affluent and those facing financial challenges. In addition, if a large portion of the population faces financial crises due to excessive spending, governments may need to intervene to stabilise the economy. This can result in policy changes, stimulus programs, or other measures that have fiscal implications.”

Porter further explained that this type of spending can cause strain on social services, cause a greater impact on education and career choices, as well as the environment.

“Where there is greater inequality, or people become more desperate, they may turn to crime in order to manage their debts,” he warned.

Doom spending stems from psychological factors

According to Porter, financial stress from doom spending creates a cycle of financial strain, as individuals consistently spend more than they earn. This leads to stress and anxiety as they struggle to meet their financial obligations, such as paying bills and debts, further impacting mental health.

Factors include impulse control issues where some individuals struggle with impulse control, finding it difficult to resist the immediate gratification that comes with making a purchase, and also FOMO (fear of missing out).

“Impulsive spenders may act on desires without fully considering the long-term consequences,” he said, adding that “emotional states such as stress, boredom, sadness, or happiness can influence spending behaviour. Some individuals may use shopping as a way to cope with emotions or seek a temporary mood boost, leading to impulsive and unnecessary purchases.”

Another factor, Porter said, is social influence, where an individual has the desire to fit in or conform to societal expectations can drive doom spending.

“Social media, in particular, can create a sense of pressure to showcase a certain lifestyle, leading individuals to spend beyond their means to maintain a specific image,” Porter explained further highlighting that “some individuals may have a present-focused orientation and prioritise immediate gratification over long-term financial planning. The concept of delayed gratification, crucial for saving and investing, may be less appealing to those who are present-focused.”

Porter also explained that the “lack of financial education,” could also be a key reason behind doom spending as well as easy access to credit.

“Individuals who are not well-informed about budgeting, saving, and investing may make uninformed financial decisions. Some individuals may have a present-focused orientation and prioritise immediate gratification over long-term financial planning. The concept of delayed gratification, crucial for saving and investing, may be less appealing to those who are present-focused,” he said.

He added: “Cognitive biases, such as optimism bias (underestimating the likelihood of negative events) and hyperbolic discounting (preferring immediate rewards over larger delayed rewards), can contribute to poor financial decision-making,” he said, adding that addictive behaviours such as compulsive buying or shopping addiction can be “fuelled by an underlying psychological need or desire.”

“Individuals may experience a sense of euphoria or relief when making purchases, and lows after the purchase in the form of buyer’s remorse, leading to a cycle of addictive spending,” Porter said.

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

According to Coady, there are several strategies to reduce or avoid doom spending.

“It’s essential to establish a realistic and disciplined budgeting process that aligns with your income and financial goals. This should include setting aside a portion of your income for savings and investments before allocating money for discretionary spending.

“Creating financial goals that are both short-term and long-term can also help in focusing spending on what truly matters. This could include saving for a house, planning for retirement, or building a safety net. These goals provide a sense of purpose and direction, which can counteract impulsive spending,” he said, adding that automating savings and investments is advised.

“This ensures that a portion of your income is directly transferred to savings or investment accounts, reducing the temptation to spend it,” he said.

Coady also recommended building an emergency fund. “Having a safety net can alleviate the stress that often triggers doom spending. Knowing you have a financial buffer for unexpected expenses can bring peace of mind.”

He also advised educating oneself about personal finance is “crucial,” as this would help the individual understand the “value of money, the impact of debt, and the importance of investing,” as it can help shift one’s perspective from short-term gratification to long-term financial health.

When asked if doom spending is more likely to be a temporary trend or a long-term behavioural pattern, Coady said that it could “be more than just a fleeting trend.”

“It seems poised to become a long-term behavioural pattern, especially if current socio-economic conditions persist. This outlook is influenced by the ongoing global uncertainties and the continuous evolution of consumer culture towards instant gratification, both of which fuel this type of spending. The key to addressing this trend lies in education and proactive financial management, guiding individuals towards more sustainable financial habits for their future.

However, Coady added, “It is essential to approach it with empathy and understanding. As financial planners, we should focus on guiding individuals towards healthier financial behaviours, emphasising the importance of emotional well-being in financial decision-making. It’s also crucial to continue raising awareness about the psychological aspects of spending and the long-term impact of financial choices.”