Consumer confidence in where the economy is headed hit a 12 year low in March 2025.

Consumer sentiment is oftentimes more predictive than people's objective financial situation.

Even though Americans are worried about the economy, they seem to be spending more.

Roughly one in five Americans are shopping out of fear of future price hikes dubbed doom spending.

Doom spending is making impulsive purchases largely driven out of fear over what the future may bring.

In some cases, it's a kind of retail therapy, but it can also be a strategy to get ahead of economic uncertainty.

People are worried for a number of really reasonable reasons.

We as humans hate uncertainty and are averse to volatility.

And so when there is whiplash happening at a national level as to what tariffs are happening with which country and how it's going to affect our domestic industries, that makes people really nervous.

People are concerned when they go to the grocery store and they continue to see rising prices.

It's not just consumers who are concerned.

Major companies, the Federal Reserve and Wall Street are all signaling uncertainty.

The S&P 500 dropped 10 percent from record highs in February, suggesting investor fears over an economic slowdown.

Here's why Americans are spending more even in tough times and what that means for the economy.

Starting in February, when people started to get nervous about tariffs and how it might impact them, and most people do expect that there will be some financial hit from some of the trade tensions that are going on right now.

So one question that often gets asked is why, when people feel economic uncertainty, why would a subset of the population go out and increase their spending?

For some, shopping can serve as a way to hedge their future spending.

I expect rising prices to happen tomorrow.

Therefore, I'm going to consume today as a way of saving money.

Economists say that Trump's tariffs on imports from Canada, China and Mexico are bound to raise prices on a wide range of consumer goods, things that we buy every day.

So most consumers are rightfully concerned about that.

People expect that these tariffs will impact them.

And in many cases, they will.

So a lot of times consumers are trying to get ahead of it by buying things now instead of waiting when the price may be higher.

For others, it may not be that clear cut.

We also have to recognize that we are beautiful humans with a beautiful, imperfect brain.

And so oftentimes when we feel a lack of control, we try to grab on to anything that we can control and increase our hedonic adaptation and increase our mood.

Consumers spent less than anticipated in February 2025, according to the latest retail sales numbers, but the overall sales still showed steady growth.

This is despite concerns over an economic slowdown and rising inflation.

Going into 2025, things were looking pretty stable, but some of the economic data recently has been a little all over the place.

And that is because there's sort of been this seesaw with trade policy and a lot of uncertainty about what's going to happen next.

Consumer spending has really been the engine that is keeping our economy on stable ground.

Even the Federal Reserve is in wait and see mode.

The FOMC was hesitant to adjust interest rates at its March 2025 meeting without clearer economic signals.

Some experts warned that the spending pattern, along with tariff uncertainty, could be setting the economy up for a downturn.

Our thoughts and expectations oftentimes become reality because we act on these thoughts and expectations.

If I think prices are going to increase tomorrow, what happens is I'm going to go out and spend today.

What does that do?

Well, sadly, it gets us into the cycle where it increases demand that suppliers can't meet, and so therefore it increased prices.

But there really is that risk that once spending starts to slow down, the economy could turn down or we could even face a possible recession.

So there is that wave of uncertainty that's taking hold.

And the consumer outlook is significantly lower than it was just a few months ago.

So there's a lot of uncertainty that's going to hit this year, and that itself can pump the brakes on the economy.

While this spending might seem to prop up the economy, it could be coming at a cost.

One of the big drawbacks about doom spending is that it can really prompt you to overspend.

So if you are making extra purchases or do spending in ways that just don't fit in the budget, it's pretty unsustainable.

In fact, if you're leaning on credit cards to make some of these purchases, then you're paying a very high interest rate.

Credit card debt has surged past $1.2 trillion, and 34 percent of borrowers are taking on even more debt this year.

Experts suggest people take a step back and reassess their finances to better prepare for what may be ahead.

I will tell people, love yourself enough to take a financial health day and tick off the things that you know you should have done yesterday, right?

Whether or not it's a cancel that delivery app that you know it's charging you higher prices on top of the delivery fees on top of X, Y, Z, or whether or not it's canceling that subscription or whatever your financial situation is, everything takes time.

So give yourself that time.

Take that financial health day.

The thing is that most Americans are doing pretty well right now.

I mean, we've had a prolonged period where most people had jobs and rising wages.

So that's put a lot of households in a pretty stable situation.

But that can change.

And the thing is, if people are increasingly stretched financially, then their situation is a little more precarious.

The thing about doom spending that is dangerous is that people should be saving now instead of spending now.

If you build up that financial cushion, it puts you in a much more protected place given the future uncertainty.

So no matter what happens, if you have that safety net, you're better off than if you buy a bunch of stuff now and don't necessarily need it or want it or use it later on.

We know that we can increase our individual happiness not when we spend on material things, but when we spend on experiences and when we spend on experiences with others, because that goes into our everlasting memory bank.

If you are going to engage in this behavior because you're just like, I just need to feel good in this moment.

Well, then let's try to maximize that feeling for the long term instead of buying some frivolous material purchase that you're going to forget about in the future.