Why Americans Are Choosing to Splurge Instead of Save
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Here's your Money Briefing for Friday, October 6th. I'm J.R. Whelan for The Wall Street Journal. Almost everywhere you go, it seems like things are getting more expensive. The supermarket, the gas station, even going out to dinner. And while that might make some people feel uneasy about their finances, others have no problem splurging on themselves.
They're prioritizing the experiences that make them happy now over perhaps longer-term saving goals. In some cases, they're willing to give up some degree of financial security and wealth in order to be happy in the moment.
We'll talk to Wall Street Journal reporter Rachel Wolf after the break.
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Despite an unsettled economy that in many cases has left less money in people's bank accounts, a lot of consumers are still spending at levels that have surprised economists. Wall Street Journal reporter Rachel Wolf joins me.
How does climate change influence people’s decision to splurge on travel?
So Rachel, help us understand this in terms of numbers. How does consumer spending currently compare to where inflation is?
Americans spent 5.8% more in August than a year earlier, which well outstrips less than 4% inflation.
What are people spending money on?
People are spending on once-in-a-lifetime experiences they're worried they might not be able to have in the future. Things like concerts, trips to places that are affected by climate change, though some people, of course, are also buying designer handbags. Delta Airlines reported record revenue in the second quarter, and Ticketmaster sold over 295 million event tickets in the first six months of 2023. That's up nearly 18% year over year.
You mentioned that people are spending on some of these events because of climate change. What do you mean by that?
I spoke to one couple who splurged on a last minute trip to Hawaii and they were able to visit Lahaina. And that was only a couple of months before it was destroyed by deadly wildfires. And so, you know, they didn't have any regrets about that purchase to begin with. But especially after that happened, they were like, wow, you know, if we hadn't gone when we went, we never would have been able to see this amazing place.
How does the money people allocate for fun and leisure compare with the money they've allocated for longer-term goals?
Ally Bank has a platform that allows customers to create savings buckets for different goals. They started that function in 2020, and they say that users create about 50% more experience-oriented buckets like travel and fun funds versus those associated with longer-term planning.
How are Americans reallocating money from long‑term goals to 'fun funds'?
And again, that shows the intentionality that people are putting into these decisions.
But these purchases can be expensive, and people can see the impact of the current economy firsthand. Anytime they go to the supermarket or fill up their car at the pump, why do they seem to be unfazed by that?
I don't think that they're unfazed. It's that they're prioritizing the experiences that make them happy now over perhaps longer-term saving goals. In some cases, they're willing to give up some degree of financial security and wealth in order to be happy in the moment. It's not that people are being reckless. It's that they are intentionally prioritizing the things that make them happy despite all of the potentially dissuading factors.
Any other people you spoke to give you some insights into their thinking about splurging?
So I spoke to one person who's living in New York City.
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Chapters
8 chapters
1
What is the main topic discussed in this episode?
0:01–1:13
2
Why are Americans still spending more than inflation shows in August?
1:13–1:25
3
What experiences are consumers prioritizing over saving and why?
1:25–2:02
4
How does climate change influence people’s decision to splurge on travel?
2:02–3:41
5
How are Americans reallocating money from long‑term goals to 'fun funds'?
3:41–5:00
6
What personal stories illustrate the choice between homeownership and experiences?
5:00–6:10
7
Why do economists worry (or not) about rising consumer spending and debt?
6:10–7:07
8
What risks could cause splurging to slow down in the future?
7:07–8:22
Speakers
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