Consumers are sending mixed signals.
Most people are concerned about inflation and the direction of the US economy. According to Morning Consult, consumer spending fell in March. The “sticker shock” has taken its toll, the report says, as consumers are more likely to refrain from making a purchase because the price is too high.
However, many are still spending – and occasionally even spending, as other reports also show.
Up to that point, 75% of adults said they had spent a lot of money in the last month, although less than half said they could afford these types of purchases, according to a recent Deloitte study based on consumers in 23 countries based.
Lipstick Index is now “Bourbon Barometer”
The “Lipstick Index” was originally coined by former Estee Lauder chairman Leonard Lauder after the bursting of the dot-com bubble in the early 2000s rocked the economy. Lauder noted that women were replacing more expensive luxuries with practical indulgences like lipstick.
The theory remains: Even in tough times, consumers may rein in their spending, but they occasionally buy small luxuries like a lipstick.
However, lipstick may not be the economic indicator it once was.
Deloitte researchers found that consumers are treating themselves, but they’re treating themselves differently now.
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“The Bourbon Barometer may more accurately reflect this wasting behavior,” the researchers wrote.
For starters, statistically, men are just as likely to splurge as women. And when they do, men shell out more. While lipsticks average around $10, adults now spend an average of $32 on their splendor, according to Deloitte.
When it comes to discretionary spending, adults are more likely to indulge in dinner or premium liquor than cosmetics.
According to Deloitte, consumers in the US were four times more likely to say their last luxury purchase was food and beverages than personal care.
In fact, sales of premium spirits are booming.
“Despite the difficult economic climate, consumers continued to enjoy premium spirits and fine cocktails,” said Chris Swonger, president and CEO of the United States Distilled Spirits Council, in a statement.
“Cocktail culture continues to thrive in the United States,” Swonger said.
How to budget for experiences
To better budget for such indulgences, “always make sure you understand what you’re spending your money on and how much goes for needs over wants,” said certified financial planner Carolyn McClanahan, founder of Life Planning Partners in Jacksonville, Fla.
Although spending on high-end cocktails should only be made after necessary expenses have been met and savings accumulated, such experiences are important, she said. Determine how much you have left at the end of the month and allocate a portion of those funds to go out.
“Buying things only brings a short-term boost of happiness, but experiences bring much more joy,” McClanahan said.
But “Always look for deals, too,” McClanahan added. “Go to happy hour.”
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