I agree with you that people's spending habits don't make sense. I see young people complaining about having to live with their parents when near their 30s who still think a two week vacation with a nice rental and eating out ever night is a basic human right. I'm constantly horrified how many people simply cannot cook their own food. The wouldn't know how to make a good rice and beans dish if they had to.
But the part you're missing is that our current system cannot survive without this spending. That FAANG job that paid you so well, where do you think all that cash came from? My friends making money for insta are basically making that money selling avocado toast.
If people started living like their great depression era relatives they wouldn't be able to afford houses because our entire economic system would break down.