spending habits – luxury spending
Zoom in and take a look at the names if you can. Hilarious! The perfumes probably come from the same factory as the real thing!
Welcome to the third part in our mini series “the four spending habits of the financial apocalypse”, and we are talking about luxury spending today. Luxury spending is a very loose term that could define a heck of a lot of our spending in the first world, for example you could argue that anything that isn’t spent on basic food, water and shelter is a luxury.
Luxury spending is clearly linked closely to the other two spending habits we have already discussed, most of the time the things we buy when engaging in spending wars will also fall into the luxury spending habit category, and likewise when signalling to our social circles.
However there are so many aspects to luxury spending it definitely deserves a post of it’s own.
Let’s dig in and have a look at what different aspects of luxury spending there are and what you most probably want to avoid!
designer goods vs high quality goods
It is important to make a clear distinction between something that is highly priced because it simply has certain type of label on it, and something that is expensive because it is of higher quality than cheaper goods and will therefore exhibit a vast improvement in performance and durability. From this observation it is clear that we should avoid the former but not necessarily avoid that latter.
People will often justify buying some overpriced, brand labelled piece of shit and say, nay delude themselves that it is of better quality than something 1/5th of the price but the clued up amongst us know that they all come from the same sweatshops nowadays anyway!
the automatic luxury option
I have often seen people automatically choose the highest priced item when shopping for something. The implication in their thinking is obviously along the lines of “It’s the most expensive therefore it must be the best” or maybe even “I can afford 1 this therefore I clearly deserve to be buying the best”
This puzzles me greatly! My theory is the complete opposite, start at the bottom and if that doesn’t suit the task, slowly work your way up through the options until you find something suitable for the job at hand.
An area I think this happens in repeatedly is when grocery shopping and this is where the ridiculous £500+ per month food bills we sometimes hear about, as all of those expensive options add up very fast 2. If I had a pound for every consumer magazine article or tv show where they blind test the a range of differently priced products and the cheapest or very low priced options come out ahead of the luxury option, I would have at least £25 by now. I refuse to exaggerate just to make a point 🙂 but nowadays there is no excuse for not picking up on this fact, there are plenty of people in the mainstream bleating about how brands are just that and the cheaper products often taste the same (or better) subjectively when you do not have the packaging in front of you.
(I have to admit though that I love these type of programmes. It gives me great pleasure to see someone so adamantly declare that they can taste the difference between, say, Heinz beans and supermarket brand ones and then completely fail in the blind test 🙂 )
most of the time “you’re not worth it”
No offence or anything 🙂
Actually I apologise, a more fitting headline would have been “most of the time, it’s just not worth it”. We’ve splashed out a few times in our lives on what I would call extreme luxury and most of the time I have just found myself a bit pissed off that I’d just blown a hell of lot of money on something that was not magnitudes better than the normal option, despite the price being so.
One excellent example that springs to mind is when we finish up travelling round South America in 2008 in Rio. We’d stayed in a brilliant hostel for around £20 per night for a whole week, made loads of friends, and more importantly the bar had a happy hour that lasted from 6-8pm. We drunk a lot of caipirinhas between 6-8pm that week 🙂
Having spent 3 months in perfectly lovely but basic and cheap hostels, we decided to live the high life for the final night of our travelling and booked up one night at the Copacabana Palace which cost £500 for one night. This was back in ’08 as mentioned so god knows what it costs nowadays! I think this included breakfast but did not include dinner, and we ate in, so stumped up another >£100 for that as well.
Whilst being as nice as you’d probably expect it just wasn’t so amazing it was worth 25 times more than the hostel we stayed in!
It did not escape me that we could have spent another week in Rio and partied at the hostel every night, for the cost of one night at “the palace”.
Another negative with this sort of thing is being outside of your comfort zone. Now I am all for getting outside of my comfort zone when it means pushing myself harder with physical or mental goals and developing myself, but not when it means I am paying through my nose to feel like an outsider. This was noted by a few people (including myself obviously) in the comments on Cerridwen’s recent post on wealth and glamour. Going back to the Rio example, we both had to buy new clothes just actually be allowed in there because our shoddy old travelling clothes wouldn’t have cut the mustard and we may have been refused entry! I absolutely detest the exclusive nature of places like this 3
Another great example of this was our honeymoon to Thailand, which although it was amazing I am sure we’d have had just as much fun staying in cheaper hotels or hostels again. Mrs TFS may disagree with me on that one though 🙂
your luxury experiences
Well that was a nice brief dip into my thoughts on luxury spending, hope you enjoyed it!
As always I like to hear other’s opinions so I will finish up with a question:
What is the most luxurious and over the top thing you have ever spent on and was it worth the extra money?
Cheers!
TFS
Notes:
- As in “I have enough in my bank account or worse, credit card limit, to afford this”. MMM might have a few words to say about what they really can “afford”! ↩
- A friend confessed recently that they were spending £1000 a month on their groceries for 2 adults and small child. Gobsmacked was not the word! 🙂 ↩
- Regular readers may note that I like my golf… Yes golf clubs are very similar in this regard and yes I do detest that aspect about the game. Things are changing however and many clubs do allow more casual dress nowadays. I obviously try to avoid the ones that are too poncy. ↩
Discussion (21) ¬
Great post as usual TFS.
This reminds me very much of the “Economy” chapter of Thoreau’s “Walden”. I will have to read that again. I enjoyed it immensely once you get accustomed to his slightly opaque Victorian writing style!
Your point about starting at the bottom and working your way up is good. I have to admit to succumbing to a little bit of the automatic luxury thinking now and then. I tend to, for example, buy pasta sauces which are probably just a small jump above normal pasta sauce/tinned tomatoes. Although, we do only buy then when they are on a deal. I have not taken the time to taste test them with one another. I sense a domestic experiment on Miss DD coming on…
I am not really sure what the most luxurious thing is that I have spent money on. The only thing approaching this which I consciously thought about was when I bought my folding Brompton bicycle. It was very expensive—even though I got it about £200 cheaper than most people—when I was used to spending less on bicycles throughout my life. However, it was worth it for me. It’s smaller and more versatile than any bike I have had before. As a result, I suspect it is less a luxurious good than the high-quality ones you mention earlier.
What an oddly unluxurious life I have led!
I so need to read that book! It’s free on amazon kindle so I have no excuses really.
Buying the better brands while on a deal is a good way to try them out to see if you do like them, but then I guess that is their trick to hook you in! 🙂
On a side note I much prefer to make my own sauces although as you say tinned tomatoes are normally necessary for that. I’m not sure how much different value tinned toms are compared to the £1 per tin variety but the expensive ones definitely look nicer. If they are on offer at least you can bulk buy tins though!
I would love to read an experiment about it though!
The brompton is a good peice of kit from what I’ve seen… definitely worth spending an extra bit of money on. As you say that is a rational purchase on a well made product rather than silly spending on luxury.
Cheers!
I go with the general theme here, particularly designer whatnots. A couple of exceptions – if it’s something you’ll use every day don’t be cheap, though of course don’t automatically go for the top of the line.
Cheap tools, particularly anything with a blade are maddening at best and dangerous at worst.
And on a topic close to your heart at times, life’s too short to drink really cheap booze 😉
Agree with you on tools. I’ve bought mainly cheap tools in the past and have had to buy again on many occasions after they haven’t been fit for the job. I find it’s a bit of a minefield so maybe the default option would just be to go for a middle of the road tool and hope for the best?
Haha! I dunno about that, I’ve found plenty of cheap booze that ain’t so bad.
At one time we had something to celebrate and my wife and i went to a restaurant of a famous tv cook, just for the experience. We returned a second time for another celebration. The first time is acceptable i think, the second time i now consider a splurge.
For that money, we could have eaten in a decent restaurant and take out the kids to a brasserie and go do a fun activity.
I will think better the next time.
I guess you need to at least try it once (or twice) to work out that is not really worth the money and you may as well make your money go much further with the more than adequate cheaper options!
Thanks for the comment! 🙂
The one I am struggling to understand is the difference between value chicken eggs and the fancier packaged ones… aren’t they just eggs? Not necessarily free range or not…
Do they taste different? The eggs from our chickens are all sizes, but they taste and look different, with a more intnse yolk colour to yer average shop eggs because the chicken forage on a wider variety of real stuff compared to chicken pellets.
If there’s no difference run with the cheaper ones!
I’ve had eggs from my friends home kept chooks and they are so much nicer than the store bought ones!
The plan was to put some in the garden once we’d moved house but space is very limited and we get a lot of foxes round here so we are having second thoughts. Maybe something for a year or two’s time!
I personally think there is a massive different in taste between value eggs & organic (by their nature all free range) ones. You need to cook them well still of course though! I wouldn’t say that was always the case with food stuffs, but eggs are one area i think it is worth the extra pennies being spent on my weekly shop. There is also a moral argument for the husbandry standards of course, but that’s for another time.
I agree with you there LCIL and it’s one thing I have fairly recently not been a tightwad with. Also the free range eggs tend to come in cardboard packaging so try to avoid the plastic packaging where I can. Lidl free range eggs are still ridic cheap anyway so seems silly not to go for that option.
Spending on food seems to generate a wide range of figures depending on which blogs and forums you read.
Despite tracking our spending at a very detailed level I’ve never been able to separate the actual food spend from the general household items spend (cleaning products, shampoo etc.) Do people dissect their shopping receipt to that level? I don’t think I have the time, or energy.
Our food (and household items) spend is around £500 / month for 2 adults and a 2yro. This seems about right, but pretty high if everyone’s ‘food’ figure includes household items.
Hi Nibbler.
You make a good point and no I do not do this apart from if something is blatant like stuff bought in Boots then I will not tag that as Food, it goes in personal care or something like that.
It just backs up the obvious point that personal finance is PERSONAL!!! So comparing one persons to anothers is mostly pointless IMO.
(which is why I was always reluctant to put up my expenses etc… but people seem to enjoy those posts so why the hell not I guess, plus it does keep me more focused).
Also what happens when friends and family come round for meals? We hosted a BBQ for 13 people the other week and that comes out of our groceries budget. I wonder if people rocking the bare minimum budgets are doing stuff like that. I would hazard a guess at “no, they are not”. Obviously you can host a frugal dinner party but I think this is one area where spending more is really worth it because you can serve a slap up meal for 10 people on what you might spend going out for just 2 people, and it fosters reciprocation and is obviously really quite fun.
We are averaging around £250 per month for 2 adults and that includes most household stuff and 3-4 dinner gatherings of various size per month which I think is pretty damn good, but others may scoff at yet still!
Cheers!
Sporting equipment is my luxury spending weakness. I go for shiny over function every day of the week, and twice on Sundays. I am trying hard to overcome this through research, but of course, I can’t always be wise.
Ahhh! I never get the urge on that one Hannah.
I play squash, do running and play golf and all my gear is middle of the ground stuff (or slightly better but 2nd hand) and kept to the bare minimum to participate in the sport.
I like the minimalist approach to such things, I think if I’m honest it’s partially because if I then end up beating people with “all the gear” it makes it even sweeter 🙂
What sort of sports do you splurge on?
Thanks for the comment!
Well, snowboard gear comes to mind immediately, but I also drop good coin on general athletic shoes and swimwear. When I played tennis, I had four rackets and two pairs of shoes at all times (this did come in handy because I was very competitive and hit with a lot of topspin, so string breaks were I guess common).
Sounds like you are quite the sportswoman!
I guess if you become very good at a sport it becomes more acceptable to spend on quality gear as those marginal gains will actually make a difference. I’m an stark amateur at everything I do so I know that (for example) £4 per golf ball that most of my friends pay is just a waste of money. I need to concentrate on the swing!
I do have 2 squash rackets which is a tad unnecessary, one for home and one at work, just to save me carrying it in and back on the train everytime I play! They’re both very well used though 🙂
I will really appreciate if you take a look at my plan
So i start planning, and i got to this monthly expenses:
Rent 350
Bills 165
Food 120
Transport 0 ( i moved 2 miles from my new work place)
Total basic expenses £635
Clothes 25
Luxury 122
Total actual lifestyle £772
Rate of savings 45%
Savings at end of July ’15 £5200
Time until retirement 12.5 years
My investing strategy will be something like:
1. £2000 cash on TSB account with 5% interest as a buffer
2. £10000 on online p2p lending with an average 6% interest
3. £ 195000 on a mix of mutual funds and tracker equity funds from UK, Europe, World equity and corporate and government UK bonds. Dividents percentage 3-7%
4. £75000 on real estate crowdfunding with average 8% interest
I am open to suggestions if i can improve in any area.
Hi George,
To be honest that sounds like a pretty tight plan you have there!
The spending seems to be a very low level with not much room to cut down on and likewise the investments look like a sound mix (I am no investing expert though so maybe worth reading around and getting some other views on that). The only thing I’d say is that £75K in real estate crowd funding looks like a lot but again that is only my personal view. I have no stats or sources to back up why you shouldn’t have that amount of property in your portfolio and I suppose with crowd funding you are relatively diversified across properties so it’s probably better than sticking that all into one BTL.
Cheers and good luck, let us know how you are getting on from time to time?