Can spending less make you feel worse?

by Jon Scaccia March 25, 2025

As we potentially sit on the edge of a recession, what happens when you can no longer afford the little joys in life—an occasional night out, a concert, or even a small luxury like a nice watch? Most of us understand the financial strain of hard times, but new research suggests that cutting back on hedonic spending—the kind of spending that brings pleasure—can take a surprising toll on mental health.

A recent study using data from the China Family Panel Studies (CFPS) reveals that reductions in hedonic consumption (spending on things like entertainment, jewelry, and travel) lead to higher levels of psychological distress. What’s more, when people perceive that their neighbors or peers continue to afford luxuries while they struggle, the mental burden intensifies. The findings underscore a growing public health concern: the link between financial hardship, social comparison, and mental well-being.

The Science of Spending and Well-Being

Economic hardship has long been associated with mental health struggles. But this study digs deeper, examining two key aspects of relative deprivation related to consumption:

1. Vertical Comparison: When a household’s own spending decreases compared to its past levels, mental health declines.
2. Horizontal Comparison: When individuals see others around them continuing to spend freely while they cut back, their sense of deprivation grows—exacerbating stress, anxiety, and even depression.

Using nearly a decade’s worth of data from 88,144 respondents, researchers found that both types of comparison negatively impact mental well-being. The most affected individuals were those who experienced sudden and involuntary cutbacks in their spending, reinforcing the idea that financial instability is not just an economic issue but a deeply personal and psychological one.

Why Does Spending Less Hurt Mental Health?

The study highlights two psychological mechanisms that explain this phenomenon:

• Trust Decline: When people experience financial hardship, their trust in others—especially strangers—diminishes. Economic insecurity can make individuals feel isolated and skeptical about social systems, worsening feelings of anxiety and distress.
• Self-Perception Damage: Consumption is often tied to identity and social status. When people feel they can’t maintain the same level of spending as their peers, they may internalize a sense of inadequacy or failure, leading to a decline in self-esteem and overall mental health.

The Role of Inequality: Feeling Poorer Than Others

Beyond personal financial struggles, the study found that consumption inequality—seeing others spend freely while one’s own budget shrinks—worsens mental health outcomes. In societies where luxury spending is highly visible, whether through social media or neighborhood comparisons, the psychological impact of financial disparities becomes even more pronounced.

Interestingly, perceptions of unfair treatment—such as discrimination based on income, gender, or regional status—can amplify this effect. When people believe they are being treated unfairly, the stress of financial deprivation deepens, compounding mental health issues.

Who is Most at Risk?

Certain groups are particularly vulnerable to the mental health effects of consumption deprivation:

• Parents of school-age children: With rising education costs, many parents reduce spending on themselves to prioritize their children’s needs. The unpredictability of these expenses heightens financial stress.
• Individuals with debt: Those who are financially constrained by debt experience more severe mental health declines when forced to cut back on hedonic spending.
• People facing sudden financial shocks: Losing a job, experiencing an unexpected expense, or facing inflation-related cost increases leads to abrupt spending cuts, triggering greater psychological distress than a gradual decline in financial stability.

Can Anything Help?

The study offers insights into protective factors that can buffer individuals from the negative effects of financial deprivation:

• Religious Beliefs: People with religious affiliations or strong spiritual beliefs tend to cope better with financial stress, likely due to the emotional and community support that religious involvement provides.
• Social Capital: Individuals with strong community ties—whether through friendships, neighborhood networks, or cultural organizations—exhibit greater resilience in the face of financial challenges.
• Government and Policy Interventions: Policies that address income inequality, increase social safety nets, and promote economic stability could help alleviate some of the mental health burdens associated with financial hardship.

What’s Next?

The study underscores the need for policymakers, mental health professionals, and social organizations to consider economic instability as a critical public health issue. As economic uncertainty continues post-pandemic, addressing the psychological effects of financial distress will be key to promoting mental well-being on a larger scale.

More research is needed to explore how different cultural and economic environments shape the impact of relative consumption deprivation. Future studies could also investigate how digital consumption patterns, particularly social media exposure to wealth displays, influence mental health outcomes.

Join the Conversation

Have you ever felt the mental strain of cutting back on discretionary spending? How do you think social media influences our perceptions of wealth and deprivation? What policies or community programs could help support those struggling with financial insecurity?

Share your thoughts in the comments or join the discussion on social media. Let’s work together to build a society where financial stability and mental well-being go hand in hand.

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