The Way You Think About Money Can Make You Poor
The problem with consumerism
Recently, someone was telling me about one of his friends who married an attractive woman. At first, it sounded good, but he said it actually was a disaster for his friend. He said the man’s wife was obsessed with expensive purchases. You know, she needed the big house, the expensive car, Gucci, Prada, and Louis Vuitton to show everyone that she was “high status.” He said it ended up putting so much financial pressure on her husband that the marriage cracked up over it – and that isn’t the first time I’ve heard that. I immediately thought back to someone else I knew who literally told me he dumped his first wife because no matter what he did, he couldn’t get her to stop spending so much, and constantly digging the two of them out of a financial hole was making him miserable.
From there, I thought of a couple I knew that got married and as I looked through their gift registry to send them something, I was kind of stunned at how much expensive, yet mostly useless crap they wanted people to get them. Don’t get me wrong, I’ve bought people some fairly nice gifts off of marriage registries before, but these people had things on there like super expensive rags and plastic cups. Things that you could buy for two dollars at Wal-Mart, that they wanted people to drop $20 on because it was monogrammed and came from some bougie store.
In one sense, we all get it.
Wealth is synonymous with status, and we human beings gravitate toward status a lot more than we like to admit. However, the flip side of that is percentage wise, very, very few people actually have the ludicrous amounts of money that status seems to suggest that they do. If we’re talking 10 million dollars plus in net worth, which is extremely wealthy, that’s not even the top 1% of Americans. It’s about 1/3 of a percent. If we’re talking about crazy amounts of wealth, say 100 million dollars plus in net worth, there are fewer than 11,000 of them total in the United States. How about billionaires? Now, you’re talking about less than 1,000 Americans.
This might lead you to ask a lot of questions, and one of them would probably be, “Well, wait, if that’s all the really, really wealthy people in the United States, who’s making all those big purchases and buying all those luxury brands out there?”
The answer is, “Mostly, people who can’t afford them.”
There are wide variations in the estimates of people making luxury purchases, from a low of about 25% to a more common estimate in the high forties, but there are also estimates that reach this high:
New research from LoopMe, a leading technology company that uses artificial intelligence (AI) to improve brand advertising performance, reveals that the majority (70%) of US consumers will make a luxury goods or apparel purchase each year, with one-third of those spending at least $1000.
Now look at these numbers, which are a little higher than some of the others I’ve seen in recent years, and try to square that circle:
Seventy-seven percent of workers in America would experience financial difficulty if their paycheck were delayed a week, according to results from the 2024 "Getting Paid In America" survey conducted by PayrollOrg (PAYO). This is a one percent decrease over the 2023 survey, which indicated 78 percent of individuals were living paycheck to paycheck.
The annual survey asked respondents how difficult it would be to meet their financial obligations if their paychecks were delayed for a week. Of the 36,729 individuals who responded to this question, 28,375 respondents, or 77 percent, said they would find it somewhat or very difficult to meet their financial obligations.
How are 70% of Americans supposedly buying luxury goods while 78% of Americans are living paycheck-to-paycheck? Well, it’s the old line from Fight Club come to life:
That was something I thought about when I saw this video a while back on X:
The short version is that this guy accidentally dropped his $200,000 watch in the ocean. Happily, a diver managed to find it, and the man, who was thrilled to get his watch back, gave him a nice tip. Good for him.
However, it’s worth asking, “What is the point of owning a $200,000 watch?” Functionally (and I would even say in looks), it’s not really any better than this watch you can buy at Walmart for $28:
So, why pay that much for a watch? People will give you BS answers like, “That watch is a better investment than the cheap one,” but nobody is buying a watch they’re wearing around as an investment. The only real reason you buy a $200,000 watch is so people will know you can afford a $200,000 watch. However, given that most people aren’t watch experts and there’s nothing about that watch that makes it stand out, ALMOST NOBODY IS EVEN GOING TO KNOW you have on a $200,000 watch unless you tell them.
There are a lot of things like that in life.
So many of us buy all these things to impress people, and most of them don’t even notice or care.
For example, I’m not a car guy, but let’s say I went out and bought this Lambo:
Would you be impressed? Would you write to me and tell me you want to be my friend now? Would any of the women reading this want to reach out to throw themselves at me because I have an expensive, cool car?
No.
This is the same kind of mistake that so many people make with houses. “I can get a loan on a 3,000 square foot house! Awesome! Everyone will envy us!” Then, like most people, you, your wife, and your kid end up living in about 1,200 square feet of the house, and the rest only gets used for storage or when you have guests.
Don’t get me wrong; I’m not saying, “Don’t ever spend money on nice things.” I love to travel, and I drop some significant money each year on vacations. But that’s my thing. I’m not getting “bottle service” at the club, driving around in an expensive car, or wearing $1,000 suits. I don’t aspire to “have the best of everything,” because I don’t care about everything. I really enjoy traveling, so I spend money on it.
Maybe you’ve always wanted to buy a classic car and rebuild it, go to the World Series, or spend a month driving coast-to-coast. If that’s something you’ve dreamed about, always wanted to do, and it inspires you to get out of bed in the morning and work, it makes sense to pursue it.
Where people get in trouble is that they stop thinking in terms like, “Is this good value for my money?” “Will this improve my life?” or “Is this one of the very few things worth spending extra on?” and they start asking questions like, “What are people going to say when they see I bought this?” or “I work hard, so why shouldn’t I treat myself by buying this?”
Over time, those decisions add up and instead of having a nest egg that makes you feel secure, gives you a cushion if something happens and puts you in a position to invest, people end up struggling, in debt, but with a lot of aging “things” they feel pressure to replace with newer versions. One way of thinking ultimately leads to financial security, and the other? Poverty.
Choose wisely.
I think that there are two drivers.
One, and I think is the most prevalent, is the hierarchical status pursuit. Jordan Peterson does well to explain this from a human psychology and behavior perspective. It is biological as higher status people tend to survive longer... primarily because higher status people tend to kill lower status people to prevent them from competing for higher status. This biological evolutionary behavior is both rational and corruptive. However, given the alternative of other methods to achieve and convey status, I am not sure it is the worst. If you consider the behavior of people today - especially the left - due to China and other countries destroying the luxury goods market with cheap knockoffs - and the fact that we have stuffed so many people through the high-learning meat factory - there are not enough high-status virtue signaling opportunities in luxury goods and thus people have adopted a sort of modern version of blue-blood ranking where people of certain group identities would be given higher social and economic status. That is the basis for why so many seemingly normal Democrats are attracted to the woke movement.
But people still want that $4,000 purse and $20,000 watch to show the world how special they are.
The other driver is simply that luxury goods are higher quality.
My dear wife is a country bumpkin. When were first married I had to ignore her telling me that we did not need to replace our 12" black and white TV with a 19" color set. One day I heard her crying in our walk-in closet... when I asked what was wrong, she said "I don't have anything to wear to work tomorrow". We both worked and had good enough jobs at the time. I had to take her shopping the next day and force her to purchase a new wardrobe. Recently her 10-year-old Ford with only 70k miles blew a head gasket and would have cost more than the car was worth to replace the engine. I am now a high-income CEO after 40+ years climbing the corporate ladder and picked out a mid-level luxury SUV I wanted to buy for her. She is still complaining that it cost too much. But I did the research, and it is a car with top-level reliability, and since we tend to keep our cars for over 10 years, I wanted one that would last.
Yes, I am lucky in marriage.
This last point about people with money buying more expensive goods is that it also serves to help producers to supplement their production of cheaper goods. For example, the new device would cost more but eventually the cost would fall so more could afford it. The early adopters would be providing a service to the market to lower the cost for all. This process has been effectively destroyed by China over-producing. Today everyone pays the same for the newest iPhone. And everyone thinks they need it. And because the devices are leased and not purchased in general, the incremental increase in monthly cost causes people that really cannot afford it and that do not need it, go buy it.
I own a business that makes distilled spirits products. Several years ago, Japanese whisky makers decided to push a fake news meme of lack of supply for high-end Japanese whiskey. That created a run on products and drove the costs higher and higher. The whisky did not taste any different, but consumers had to have it. Today that meme is still effective... there is a market narrative that Japanese whisky is better, rarer and more worth more. Much of that is just market myth.
The worst thing for all the corporations is that a new high-status meme develops for low consumption. However, I am all for turning back the clock on what I see as the "new feature" obsession that feeds the landfills and causes people to purchase the newest and greatest with the existing product is perfectly fine. My 2015 Ford F150 with 80k miles is wonderful. I will drive it until it dies. I think product companies should make more reliable and long-lasting products that cost more. And frankly... fuck China.
This is a profound and very useful essay.
I have worked hard, saved and invested carefully over my life as a Scottish Presbyterian, belonging to the only mainline denomination that considers financial solvency to tbe a positive thing, should do.
As a result I would be considered "rich" by most standards.
But I still buy my clothes at thrift shops* and only 1 time (and then because of necessity) have I ever bought a new car.
Being concerned about the opinions of others is one of the worst personality traits one can have.
It means you are no longer yourself, you are not free, you have voluntarily made youself into their slave.
This is true not only of important issues like race, immigration, national subservience to Israel, etc.
It's true on the most personal level.
Thank you, John Hawkins, for writing this.
*The inventory of clothing in thrift shops is quite good. Only upper middle class and upper class people care about things like giving clothes to thrift shops and the people who buy their clothes at such shops tend to be non-white immigrants who want to buy the gaudy, garish stuff.
I've bought many Brooks Brothers pants and shirts at such shops for $2.00 apiece. Lots of them clearly were brand new and probably started out as birthday and Christmas gifts that didn't fit the recipients.
Give thrift shops a try.