spending habits – peer pressure and social spending
I want one, I want one, I want one, I want one!!!
Welcome to part two of our “four spending habits of the financial apocalypse” mini series of posts! Today we are talking about spending habits that are largely influenced by our social circles, which can seriously mess up our finances if we’re not careful!
i want one of those
This is basically what it boils down to for me. It harks back to when you were 3 years old and despite there being 20 perfectly decent toys laying around the room, once your playmate picked one, it became the most desirable toy you’d ever seen in your short life. I am guessing this mechanism has some basis in evolutionary psychology, back in the days of hunter gatherers it might be a lot easier to just go and take some tool or foodstuff from another rather than make or acquire it from source yourself.
However as we grow into adults in our non-caveman society we realise that it is not socially acceptable to just go and grab stuff out of other peoples hands, and on top of that we now have another means of getting the stuff anyway… Money! The urge to want what we see other people have is still strong, and this little equation all adds up to you buying what your mates have.
This is clearly how “fashion”, trends, fads and crazes work so well. I have seen it many times throughout my life and I guess I still partake in it occasionally, although I certainly can’t remember the last time I bought something literally just because one of my mates had it.
are you one of us?
A recent example is that, having met up with an old group of friends I haven’t seen for a while, I noticed that they were pretty much all wearing the same trainers. This intrigued me and to be honest, I thought it looked pretty stupid, however I remember going back about 7 years I indulged in exactly the same behaviour when we went on a lads holiday and everyone bought a pair of “flossies” (basically a brand of deck shoes) – luckily they were pretty cheap at about 10 Euros! 🙂
I think this is a sign of tribal behaviour and our strong desire to fit in showing up once again; if you aren’t conforming you aren’t part of the group.
This not only how we act but what we wear, the products we buy and use, how we style our hair, what football team we support, and so on.
tipping points
Once something reaches a tipping point either within a group or indeed even in society at large, the “thing” becomes a runaway trend and network effects make it even more popular, fuelled by word of mouth and our desire to want what others have.
“It must be good if it’s that popular” is the general implied line of thinking here
A great example of a tipping point in society at large is the 50 shades of grey book (and subsequent film). Now I have heard 1 many terrible reviews of both yet it was probably the most read book of the year FFS! A classic example of people wanting to read something just because so many other people have already done so.
My advice here is try to almost always take the complete opposite view until you have done enough research to suggest that the masses were, in fact, correct after all.
not the bloody joneses again
I think “keeping up with the joneses” has to rate as the most overused phrase / concept on personal finance blogs I have ever seen, but it is with good reason because it is so true! A lot of our spending in areas outside of our needs is merely social signalling. When we buy “luxury goods” we are often just attempting to say to our peers… “look at me, I got dollar bills bulgin’ outta my underpants 2“.
When someone in your social group engages in these sorts of purchases, you may then have an urge to do the same lest you be shown up as the pauper that you will ironically end up being if you take out 15 credit cards to fund the purchases you are about to make!
If you do end copying your friends initial mistake you are just stoking the fire for a relentless tit-for-tat spending war that were talking about yesterday. Everyone’s a loser in this situation!
The advice here is obvious. Silently mock those colleagues that feel they have to show their status via spending money. Once you get into that mindset you see it as a weakness and not something to be emulated!
under pressure
The final point is probably the most subtle and I bet is one that many do not realise is even happening. It is when you are out and about with friends and someone suggests going to the slightly more expensive restaurant, having the more expensive wine from the menu, and the classic splitting of the bill (a lot of people who suggest this are the ones who have clearly had more than everyone else!). There are obviously many other examples but this one serves to make the point very well, you are now under immense peer pressure to just go along with these suggestions, lest you be outed as a tightwad. It takes a strong and resolute person in my experience to stand up in front of a large group and say “Hey guys, come on, this is just too expensive, can we try to find a cheaper restaurant”. I have done it on occasion 3 but it always causes a bit of agro and so I generally just go with the flow.
The experienced FI’er solution to this would of course be…: “Why the hell are you eating out in the first place?” 🙂
Have you ever felt under pressure to spend when out with friends? How do you deal with this situation! Let us know down below! 🙂
Notes:
- I honestly haven’t read it just in case you were wondering! 🙂 ↩
- UK readers: Sorry for the Americanisms there. I thought the translation “look at me, I have one pound coins falling out of my arse-crack” was a bit too abstract to make the desired point though 🙂 ↩
- I will also admit that on occasion I am the one suggesting the more expensive option. Bad TFS!!! ↩
Speaking of the masses, I think that “Take the complete opposite view” is good advice most of the time. It goes for most music and movies, and probably all books. It works for investing. It works for choosing when and where to shop and what to buy. Rarely have I been pleased with the outcome after doing something just because it was popular.
Yep totally agreed Norm. Being a contrarian normally pays dividends in all walks of life. Cheers!
There was a time when I was part of the herd that did stuff (and bought stuff) because everyone else was doing it. Doing so left me badly in debt for a long time.
Now, I’m following a different herd, the PF/FI herd and that’s no bad thing (although, see below)
As for Fifty Shades of Grey – I have far better things in my life to do than to read the book (or watch the film), no matter how popular. My friends are split 50/50 here, in ‘hate’ and ‘love’ camps haha!
With regards to the bloody Joneses again, I came across a blog post recently (can’t find it to link) whereby people in the PF/FI community could now be trying to keep up with the “Frugal Joneses” – maybe they could be called the Smiths? They live frugally, have huge savings rates, bit pots of investments and savings, always finding money from lots of side hustles, find bargains in the supermarket, get cashback on lots of things and on the verge of being FI at very young ages….sound familiar? 🙂
This too can cause a bit of pressure for certain people to want to be like the Smiths and they may end up living rather miserably while they save and scrimp every penny to keep up.
I have to say that some of my goals have partially been influenced by what I’ve seen other people achieve and in particular, my savings rate can be a bit of a downer for me.
Anyway, I’m out on the razz with friends this weekend – we’ve chosen a particular restaurant because there was an offer on. When they want to move on to cocktails, I’ll be mentioning my budget haha!
Hi weenie.
Very insightful comment there on the keeping up with Smiths!
I agree with you on the savings rate being a bit of a downer, I have felt the same. However as long as we are spending our money rationally and with purpose there is no need to feel down about it. Other people just have other priorities. No biggie! Some people would look at both of us and think we are living like paupers yet I fully acknowledge that my life is still an exploding volcano of wastefulness and I could cut lot’s more corners and money of my budget if I had to or decided that earlier FI was a priority, and probably still lead a very happy life, same as what I am doing now!
It’s good to have what you think is possible challenged by others, but still to tread your own path and all that.
All the best and hope you enjoyed your night out on the razz! 🙂
To quote The Firestarter: “When we buy “luxury goods” we are often just attempting to say to our peers… “look at me, I got dollar bills bulgin’ outta my underpants …” Conspicuous Consumption, and I see a lot of that in my workplace. The bloke at work that bought the Porche (which he parks right outside the door) paid 60k for it, and just sold it for 40k. All he’s telling me is he’s got a lot less money than he would have had, but that’s ok as he must really love his job, rather than a few more years freedom. All the cool kidz are riding bikes these days anyway 🙂
Unless I was a multi millionaire I wouldn’t even think about dropping 60K on a motor. Even then I might think twice about it!
Yea I have friends that have done/are doing similar sorts of things. You pays your money you makes your choice (to work till you’re 70)
I completely agree with the above. I sheepishly admit I read the 50 Shades trilogy, but it appears I was in the initial wave and have no interest whatsoever to watch the movie (which happens with a lot of books I read).
I second Weenie’s excellent point with the flip side of keeping up with the Joneses. The race to pad net worth/have zero debt can be just as debilitating, because we’re now measuring our individual worth based on yet another single external measure. He who has the most gold coins doesn’t win any more than he who has the most toys.
What did you think of it? Must have been fairly good to keep up with the trilogy then? 🙂
I agree on books/films. I am almost always very dissapointed with films I have watched having read the book. One exception was the Life of Pi, I thought the film was very true to the book and seeing what was in my imagination brought to life on the big screen was really impressive. There was a big gap between reading and watching so maybe that helped.
I read Jurassic Park the book AFTER having watched the film and the book was fantastic (as a 14 year old anyway. Not sure how scientifically believable it would seem now 🙂 )
Yep totes agreed on that last point! It’s not a competition, as MMM would say.
Cheers!