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After years of pandemic-era overspending and high inflation, younger consumers are trying to regain control of their finances by cutting out all nonessential spending
Courtney Hanson, a 35-year-old stay-at-home mom, was reviewing her purchases and was suddenly “disgusted” by the amount of frivolous spending she found, she said. Hanson, who lives in Jacksonville, Fla., with her husband and two children, had spent thousands of dollars on baby carriers. Some months, she and her husband spent $2,000 to $3,000 just on eating out. Like many parents, Hanson would take her kids shopping for fun.
“I noticed I am very much caught up in consumerism — what’s hot on Instagram. I have my little collection of Stanleys, all that kind of stuff,” she said, referring to the brand of insulated water bottles that achieved viral social-media fame last year. “This past year, with inflation and just some more uncertainties, I look back and think about how much of that money could have been an additional savings for our family or additional investments.”
The pandemic also took a toll on her husband’s business, she said, resulting in “months where my husband went without paying himself at all and we tapped into savings. … It’s been a roller coaster.”
In January, Hanson started a “no-spend challenge,” a personal-finance trend in which people commit to only spending money on essentials and not buying anything new for a certain period of time — a week, a month or even a year. The challenge has been a popular New Year’s commitment, and Google searches for “no spend challenge” tend to spike in January.
The particular rules of the challenge can vary depending on a person’s objectives, but the goal is to cut out unnecessary expenses and reevaluate their relationship with spending.
Hanson is one of many consumers aiming to tamp down their spending this year. In a new survey by Intuit Credit Karma, 20% of Gen Z and millennial respondents said they intend to take part in a “no-buy year” in 2024; another 56% said they plan to do a “low-buy year.” The study defined “no buy” as a consumer’s commitment to not shopping except for items that need to be replaced, and “low buy” as shopping significantly less than they did last year. Other respondents planned to attempt shorter challenges — for example, a shorter “no-buy month.”
In the two years following pandemic shutdowns, “we observed consumers spending money as a way to make up for lost time and then, later, as a way of coping with stress, leading to dwindling savings and high credit-card balances — in particular for Gen Z and millennials,” Courtney Alev, a consumer financial advocate at Intuit Credit Karma, said in a statement. Emotional spending isn’t the only problem: Many consumers also borrowed to cover basic expenses as the cost of living increased rapidly over the last two years.
The result: 32% of Gen Z-ers and 46% of millennials now have more credit-card debt than emergency savings, a Bankrate study last month found. That has been accompanied by a sharp rise in delinquencies, according to the Federal Reserve Bank of New York. “This signals increased financial stress, especially among younger and lower-income households,” Wilbert van der Klaauw, an economic research advisor at the New York Fed, said in a statement.
The personal-saving rate, which measures personal savings as a percentage of disposable personal income, was 3.8% in January, compared with 19.3% in January 2021.
The top reason adults ages 18 to 43 in the Intuit Credit Karma study said they were trying a year of no buying or low buying was to build savings. Others said they felt guilty for overspending, were tired of living outside of their means, or had been impacted by the stress of constantly spending. The top categories people planned to cut out included luxury items, items trending on social media and collectibles. Those aiming to decrease spending said they would dial back on dining out, takeout, clothes and entertainment.