A small but significant change has recently been capturing attention\non social media. People are sharing stories about selling belongings,\nreducing lifestyles, or intentionally choosing lower-tier options. This\nis not necessarily due to an inability to afford them, but rather a\ngrowing realisation that not everything one can afford is necessary to\nmaintain.<\/p>\n
Cars that once felt ideal are being swapped for simpler models. The\nlatest smartphones are no longer a necessity. Premium brands are being\ncompared with more affordable alternatives. Even certain expenses\npreviously considered \u2018standard\u2019 are now being re-evaluated: is it truly\nworth it?<\/p>\n
Interestingly, these stories are no longer shared with a sense of\nshame. Instead, they emerge with sentiments such as, \u2018After downgrading,\nlife feels much lighter.\u2019<\/p>\n
This phenomenon was highly prevalent during the Covid-19 pandemic.\nNow, the conversation is resurfacing more broadly through the\n#InThisEconomy narrative: when people begin to speak openly about how\neconomic conditions affect daily decisions\u2014from careers and savings to\ninstalments and lifestyle. Indonesian media has also recently used the\nterm \u2018in this economy\u2019 to describe the pressure on household\nspending.<\/p>\n
So, what is actually happening? It does not mean everyone has\nsuddenly become unable to purchase expensive goods. Rather, what has\nchanged is how people calculate the value of an expenditure. Data from\nNielsenIQ and World Data Lab in 2026 shows this shift globally.<\/p>\n
As many as 58% of consumers stated they do not care much whether a\nproduct is a national brand or a private label; they focus more on\nbuying what is actually needed. Furthermore, 67% of Gen Z believe\nprivate labels can be just as good as national brands. Approximately\none-third of consumers facing budget constraints also choose to switch\nto cheaper products or buy during promotions.<\/p>\n
This means consumers are no longer simply asking, \u2018Which brand?\u2019 The\nquestion has shifted to: \u2018With this amount of money, what am I actually\ngetting?\u2019 In economics, this behaviour is known as \u2018down-trading\u2019:\nreplacing more expensive products or services with more affordable\nalternatives that still fulfil the primary function.<\/p>\n
Theoretically, this relates to the substitution effect. When the\nprice of one option feels increasingly expensive compared to its\nalternatives, consumers seek substitutes. However, there is another\nequally important effect: the income effect.<\/p>\n
When the prices of various necessities rise while incomes do not\nincrease proportionally, real purchasing power is pressured. Ultimately,\npeople must re-evaluate: what to maintain, what to reduce, and what has\nmerely been a habit.<\/p>\n
The condition of the middle class makes this narrative particularly\nrelevant. BPS (Statistics Indonesia) noted in 2024 that the middle class\nand those moving towards the middle class comprise 66.35% of the\nIndonesian population and contribute 81.49% of total societal\nconsumption.<\/p>\n
However, this group is also highly sensitive to changes in the cost\nof living because much of their expenditure sits between basic needs and\nthe need to maintain quality of life. Therefore, downgrading does not\nalways mean an individual\u2019s economic condition is worsening.<\/p>\n
Sometimes, it is actually a sign that their financial strategy is\nimproving. Imagine someone reducing vehicle instalments, choosing a\nphone that still meets work requirements, or cancelling rarely used\nsubscriptions. If the remaining money is then directed into emergency\nfunds or savings, what is actually happening is not merely a reduction\nin consumption.<\/p>\n
It is a reallocation of money from current consumption towards future\nfinancial resilience. This is what makes downgrading interesting when\nlinked to financial health. Financial health is not about how expensive\nthe items one can buy are.<\/p>\n
The OJK (Financial Services Authority) itself has begun promoting a\nbroader approach to financial health: how the public manages income and\nexpenditure, faces shocks, prepares emergency funds, uses credit\nappropriately, and plans for the future.<\/p>\n
From that perspective, downgrading can be a healthy decision\u2014though\nnot automatically so. If someone chooses cheaper goods but the savings\nare simply spent on other shopping, not much has changed.<\/p>\n
Conversely, if downgrading makes debt more manageable, loosens cash\nflow, increases emergency funds, and expands the room for saving or\ninvesting, the decision actually strengthens financial health.\nTherefore, the key is not just to look at \u2018whether it went down,\u2019 but\n\u2018where did the money go?\u2019<\/p>\n
This is where Islamic financial concepts feel very relevant. Islam\ndoes not teach that one must always choose cheap goods, nor does it\nforbid enjoying quality. What is emphasised is how wealth is used\nproportionally and does not turn into wastefulness. Surah Al-A\u2019raf [7]:\n31 reminds us: \u2018Eat and drink, but do not be excessive.\u2019 Meanwhile,\nSurah Al-Furqan [25]: 67 describes those who spend their wealth neither\nexcessively nor stingily.<\/p>\n
The message is simple, yet very close to today\u2019s downgrading issue:\nit is not about how cheaply we buy, but how wisely we use our wealth.\nEven from the perspective of Maqashid al-Shariah, the preservation of\nwealth (hifzh al-mal) is not merely about having as much money as\npossible. Wealth must be protected, managed, and directed to provide\nbenefit.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/the-downgrade-phenomenon-is-growing-time-to-build-financial-resilience-1790743979", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }