Is splurging in your twenties really a sign of recklessness-or a search for something more? According to Morgan Housel, best-selling author of The Psychology of Money, the drive to spend among many young adults isn’t necessarily about the chase for material possessions. “My aspiration for material stuff is the inverse of what else I have to offer the world,” he explained. In his twenties, a Ferrari and a big house were on his wish list, but only because he felt he had nothing else to offer the world. His aspirations eventually changed toward being a good husband and father, and the desire for flashy possessions lost its appeal.
For Gen Z, the context is starkly different. High living costs, stagnant wages, and a job market often likened to musical chairs have made those traditional milestones harder to reach: homeownership, marriage, and starting a family. According to Bank of America data, 73% of Gen Z say the current economy makes saving difficult, with inflation cited as a top stressor. Nearly half carry debt, and 40% say sky-high housing costs get in the way of their ability to afford basics. In this climate, small luxuries-like limited-edition coffee cups or pampering, become attainable ways to reclaim joy, even if critics label it “doom spending.”
The psychology underlying these choices goes deeper than impulse. Research into the consumption of luxury goods shows that purchasing high-end items tends to yield emotional end-benefits related to self-identity and self-esteem. As neuroscience-based findings make clear, the decision to splurge is overwhelmingly emotive, driven by how ownership reconfigures the sense of who I am and how I feel. When one is facing uncertainty, for instance, a designer item or premium experience might serve as a concrete reminder of status, belonging, or accomplishment-even if it is a stretch for the wallet.
Of course, this isn’t peculiar to those having financial struggles. Lucy Guo, the billionaire founder of Scale AI, said she once spent needlessly before reaching the top. Who you see typically wasting money on designer clothes, a nice car, et cetera. they feel a little bit insecure, so they feel the need to be flashy to show other people, ‘Look, I’m successful,’ she said. Today, Guo shops at Shein and drives a Honda Civic, embodying the frugality she learned from her immigrant parents. Her shift mirrors a broader truth: once the need to prove oneself subsides, spending patterns often change.
Purpose does seem to be one of the key drivers in this change. Longitudinal findings from the MIDUS study showed that a one standard deviation increase in life purpose was associated with an increase of $4,461 in income and $20,857 in net worth over time. People with a sense of purpose tend to make goal-directed decisions, which cuts down on impulsive purchases and helps in growing assets. Among young adults, this sense of direction can be particularly influential, increasing their chances for income and setting them up well for financial stability later in life.
But for those still seeking that anchor, spending can make up for it-at least for a while. In a world where social media magnifies comparison and performative lifestyles, buying is a means to participate in a narrative of success, even if the reality underneath is considerably more nuanced. Housel advises against letting money determine identity, and makes a critical differentiation: being rich means having the ability to buy what you want; being wealthy is the freedom to determine what you really want in the first place.
The challenge for Gen Z is in how to navigate an economy that postpones traditional milestones without getting pulled in by performative consumption. The takeaway from both Housel’s philosophy and the data is that spending isn’t inherently wrong-it’s a reflection of current priorities, emotional needs, and life stage. Over time, as purpose solidifies, the need for material validation generally gives way to investments in experiences, relationships, and goals that create lasting fulfillment.
