Why people buy hot tubs and new cars in financial recessions
Even when they may not have done during more stable times
Hello fellow Protagonists,
So apparently the UK is back in a recession for the first time in 11 years as GDP fell by 2.2% in the first quarter of 2020. No real surprises there as nothing was open for the majority of this period.
It can be confusing to try and understand why, in times of financial strain, people decide to make large purchases on things they have either not bought before or do not usually buy, like hot tubs and new cars... But we do.
The time where we could potentially need our money and savings more than ever is also the time we decide to splash out.
A quick look back at April 2020 will help prove this point.
In a time when people were being furloughed on lower pay, with no clear understanding of when this would end and if they would even have a job waiting for them on the other side, the sale of hot tubs increased by 1080%, comparing the weeks of 5-11 April 2020 to 2019.
Like the majority of goods there is a spectrum of the cost for a hot tub. The kind I am talking about tend to start somewhere around £300 and can easily reach £1000 or higher.
The beautiful weather at the time would of had an influence on this though it is still fascinating that we can stress about our financial futures on the left hand and pass over £1000 for a hot tub with the right hand.
The ability to hold back a purchase to a later date is also known as delayed gratification. This is also the ability to avoid accepting a decision for something now as we know that the long term benefits will eventually outweigh that decision.
Delayed gratification in this case could be holding back on making a large purchase because of being unsure if we will need that money to pay for essentials later if financial stresses were to continue for some time.
It could also be in the knowledge that most people bought these hot tubs on impulse and will be selling them shortly, after very little use. Also, as there will be loads of people selling their hot tubs then the price will be nice and low as well.
Essentially delayed gratification is us making a deal with out future self that if we leave something now, something better will be waiting for us in the future.
Like the old Stanford marshmallow experiment that tested the abilities of children to hold back from eating one marshmallow in order to get two marshmallows after a period of waiting.
The trouble is that is it is hard to make a deal with our future self if we think that the future does not look as bright.
This holds particularly true through financial recessions and health crises.
How are we meant to tell our minds that a better deal can be made in the future if we know that the economy has recently shrunk and may continue to do so?
What if it is easier to buy a hot tub now than it may be in a year's time? What if I am not even alive in a year's time to enjoy a hot tub?
This can lead to impulsive purchases prevailing over delayed gratification.
The first thing we need to remember is that most of us have already lived through a recession as a working adult or student back in 2008. Hell, it's basically what all of us Millennials have ever known. I didn't even realise we were out of the last one!
So there will be an end to it however long that takes. There will be future opportunities to use that money.
Recessions also occur more often than some people realise. The UK may not have seen a recession in 11 years but a quick look over at America and since 1900 they have averaged a recession every 4 years (not like clockwork) and are still classed as the most powerful county in the world.
A recession does not mean the end of the world but we do need to keep our decision making in check as a part of our brain does like to think this way and justify purchases using this reasoning.
I don't think we need to worry about hot tubs now as the best of the weather is behind us for the year but this will probably just be replaced with something else more fitting for the season.
My bet would be on cars as the car industry took a huge hit through lock-down and will need to offer some tantalising deals to get us buying again.
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