Half Empty, Half Full
Like the proverbial glass that’s either half empty or half full, consumers appear to view the uncertain economy in two seemingly contradictory ways.
On one hand, many Americans express concerns over a potential recession and the stubbornly high rates of inflation. On the other hand, new data shows people are still willing to spend in non-essential categories, rather than saving money.
In fact, in one category in particular, sales are actually booming.
In the past month, 75% of adults admitted to splurging on purchases. At the same time, less than half said they could afford to do so. This elevated spending trends around one specific category. US consumers are four times more likely to splurge on food and beverages than on personal care — and on premium spirits in particular.
Contrast that with the so-called “Lipstick Index” coined by Estée Lauder (EL) chair Leonard Lauder to describe increased sales of lipstick in the recession of the early 2000’s. The idea is that, even in a downturn, consumers will still look to splurge on affordable luxuries. But with top-shelf liquor sales now outpacing personal care, researchers say the “Bourbon Barometer” might be a more appropriate metric.
Also, the splurge mentality is anything but exclusive to women, as Lauder’s index might suggest. In fact, when splurging, men actually tend to spend more. On average, men will dish out $32 on discretionary purchases, compared to just $10 for women.
Budgeting for Splurging
Splurging, ironically, is actually a lot like alcohol. It’s not a big deal as long as it’s done in moderation. But too much of it can quickly present a problem.
For example, a night out at a nice restaurant every once in a while may help to relieve economic anxiety. But you don’t want to be late on your rent just because you went overboard buying drinks at the bar the previous weekend.
In general, financial planners recommend only spending on luxuries like premium cocktails after you’ve put aside money for necessary bills and savings. After your necessities are accounted for, that would be the best time to celebrate with a generous pour.
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