Why Do Poor People Buy Expensive Things?
Consumption of expensive goods is something that happens among any income group, but lower-income individuals seem to be more inclined to purchase goods and services above their income levels. This post will take a look at why lower-income earners tend to buy expensive things. There are many factors that influence a person’s willingness to spend money on particular goods:
- Low Self-Esteem
- Rich People Buy Expensive Things Too
- Lack of Self-Discipline
- Need to Impress Others
- Lack of Vision
A lack of self-esteem may encourage an individual to purchase goods and services above their income level to try to feel better about themselves. An example would be someone having the least expensive phone among their friends even though they were the most popular person in their class. To increase their self-esteem, they may buy what everyone else is buying in order to stay relevant.
Low self-esteem therefore leads to people buying things they cannot afford simply to keep up with the crowd. Those that do practice this form of expensive consumption are encouraged to look inwards and work on themselves, knowing and understanding that their lives are not measured by these external factors. There are many other ways to improve one’s self esteem that are much more long-lasting (and cost-effective).
Rich People Buy Expensive Things Too
Lower-income earners purchase lavish goods in an attempt to imitate or replicate the wealth and success of the higher income population. Seeing how the rich pull off extravagant weddings, buy luxurious cars and wristwatches, people in the middle or lower classes may find themselves wishing to do the same.
There are two issues about this: the rich buy these luxuries not necessarily from their own direct income. Through investing their money, they generate passive income, which means they basically lose nothing. They simply buy their luxuries from the returns on their investments, and the original money remains intact. However, when the poor and middle-class see how the rich spend money, they feel like looking rich as well, so they buy these luxuries with their direct income.
The second problem is that luxuries you see the rich buying could be as small as 0.0001% of their annual income. In the example provided above, the entrepreneur who spent $100,000 in one night at a party actually made over 43 million dollars last year. When they spend $100,000, that’s basically like throwing away $50. Again, you will do well in life to stop comparing yourself with other people. Materialism does not give lasting joy, and going into debt because you want to look rich is not worth it.
Lack of Self-Discipline
Self-discipline is the ability to say no. The more you are able to say no, the better your life will be. It’s tough to say no to the shiny objects all around us, and that is why self-discipline is extremely important. If you are not disciplined, you live your life simply following the crowd each time. For example, if you know there is a new iPhone on the market, you might want to be the first among your friends to buy it. Whenever there are new training clothes or shoes, you just must get them because you are living with the self-imposed pressure and that you are not disciplined enough to say no.
Need to Impress Others
Lower-income earners often buy what they cannot afford because of their need to impress others. This ties back to low self-esteem, and it is also human nature to want to impress others, but people with healthy self-esteem levels do not judge or envy people based on the house, cars or phones they use. They also simply assume that nobody else will envy them for such things. However, those who envy others for their luxuries think other people will hold them in high esteem for using expensive phones or cars.
When none of your friends cares about what each other wears or uses and only cares about the time spent together and the unique qualities that people bring to a friendship, the need to impress others becomes irrelevant. If you have low self-esteem and are impressed by other people’s phones, you will seek to impress others with your own phone. If you envy people based on their cars, you seek to be envied for your car. However, if you have a healthy self-esteem, you really don’t care what other people use, so you won’t imagine that anyone would care about your cheap phones, cars or house.
Lack of Vision
The final reason why poor people buy what they cannot afford is because of a lack of vision. When people start making money, most buy new clothes, shoes, wristwatches or expensive phones, but those with vision will save and invest their money. Sacrificing a bit of luxury will prove worthwhile, as the time will come when you will be able to afford anything with ease.
Most people are not visionary: they are not able to see beyond today. If you cannot see beyond today, you may as well be destroying your tomorrow by spending everything you have received today. With a vision of a better tomorrow, it’s easy to sacrifice today. Save money, invest, and use simple and ordinary things, and this frugality will prove to be fruitful for the future.
In summary this post was not intended to discourage you from buying new iPhones, just to remind you that you cannot eat your cake and still have it. If you cannot say no to things you cannot afford today, you won’t to be able to say yes to the things you need tomorrow.