Millennials and Gen Z are increasingly engaging in "doom spending." Here's what it is and how to stop it.

A trend on social media is characterized as "doom spending," where some young people are spending money on luxuries like travel and designer clothes instead of saving.

According to Psychology Today, doom spending is the act of mindlessly shopping to alleviate negative emotions about the economy and one's future.

Young people are constantly receiving "bad news" online, which makes them feel like Armageddon is imminent, according to her.

Ylva Baeckström, a senior lecturer in finance at King's Business School and a former banker, stated that the practice is both "unhealthy and fatalistic," according to CNBC Make It.

Baeckström stated that these young individuals are converting their negative emotions into poor financial behaviors.

According to a survey by Intuit Credit Karma in November 2023, over 96% of Americans are concerned about the current state of the economy and more than a quarter are doom spending to cope with the stress.

And the phenomenon is not exclusive to America.

Stefania Troncoso Fernández, a 28-year-old publicist from Colombia, shared with CNBC Make It that she has overcome her tendency to spend money on doom scenarios, but the high levels of inflation and political instability make it challenging to justify saving money.

According to Fernández, food costs are continuously increasing and are no longer affordable for her household, which has led to a change in their eating habits.

Two years ago, Fernández admitted to spending recklessly on clothing and travel, despite earning less money than she currently does, due to her inability to afford a house.

"The government program that provided low-rate loans for real estate investments is no longer available, so we will have to pay more," she stated.

It's not just me. It's something that is happening within my circle.

'First generation that's going to be poorer'

According to a survey by CNBC's International Your Money Financial Security Survey, which questioned 4,342 adults globally, only 36.5% of adults feel like they're doing better financially than their parents, while 42.8% think they're actually worse off than their parents.

"Baeckström stated that the current generation will be the first to experience a significant decline in wealth compared to their parents, leading to a sense of hopelessness about achieving the same level of success."

According to Baeckström, spending money to avoid negative outcomes creates the illusion of control in a world that feels out of control.

If you save money and invest it, you might be able to buy a house, but it gives you less control in the future.

'The sense of trying to escape'

A biotech startup's former product manager, Daivik Goel, admitted to being a doom spender at the time, despite being a 25-year-old startup founder living in Silicon Valley.

He said that the habit originated from a sense of dissatisfaction with his work as well as peer pressure, which he described as "just all the sense of trying to escape."

Silicon Valley is known for its common practice of excessive spending on designer clothes, the latest technology products, and going out for drinks, according to Goel.

Because they understand that purchasing a house will take a considerable amount of time, people will opt to buy two out of three brand-new cars and allocate their funds to other distinct items.

According to a 2023 analysis by real estate website Point2, San Francisco has some of the highest property prices in the U.S., with 62% of properties listed in the city costing over $1 million.

Since starting his fintech company Intrepid in 2023, Goel's doom spending habit has "completely vanished" because he's found joy in his work. "My whole mindset has shifted."

Get to know your relationship with money

To overcome doom spending, it is crucial to comprehend your relationship with money, as emphasized by finance lecturer Baeckström.

People form different attachments with money, just as they do with individuals, starting in childhood.

"Secure attachment with money allows for sound evaluation, but insecurity or avoidance increases the likelihood of unhealthy spending behavior."

Baeckström stated that a person's attitudes towards money are influenced by their upbringing, including their family's financial management and control.

Fernández stated that her lack of financial literacy was a significant factor in her decision to overspend. She explained that her father grew up in poverty and no one had ever encouraged her to save money.

'Increase the pain of paying'

Belong's co-founder and COO, Samantha Rosenberg, advised CNBC Make It that making transactions more difficult and visceral can encourage people to reconsider overspending.

Online shopping exacerbates the problem of overspending, but examining products in person can reduce impulsive buying.

"By considering additional factors such as selecting a store, traveling there, examining the product in person, and waiting in line to purchase it, you will be able to make more deliberate and well-thought-out decisions about your purchases," she stated.

Setting up mobile banking notifications can be a "pinch of pain" when you receive transaction authorizations.

Rosenberg suggested that maybe revert to using cash to reduce the risk of mindless spending, as seamless payment methods like Apple Pay and Google Pay make spending so quick and effortless.

Rosenberg suggested increasing the pain of paying to avoid bypassing the emotion associated with the purchasing decision process.