One of the biggest traps people get into when they start making a little money is buying into the idea of luxury. “Hey, I work hard for my money, I deserve nice things.” We’re surrounded by advertising, co-workers, entertainment, etc.. that tells us we should aspire to own luxury goods. Here’s the problem, luxury goods have a snowball effect.
What do I mean by that? Well, not only do luxury goods cost more to begin with, they cost more to own! For example, an economical car is a Honda Civic. It gets decent gas mileage (~35 mpg), takes cheap (87 Octane) fuel, and can use regular oil. A similarly sized BMW 3-Series costs almost twice as much when new, but even worse, the gas requires premium fuel, the oil requires synthetic oil, and the parts all cost considerably more! The privilege of owning a luxury car comes with a much higher cost of ownership.
But what about other luxury goods, like fine clothing or high-end appliances? Isn’t paying for quality worth it? As much as I am loathe to say it, usually the answer is no. High quality goods require high quality care, which costs more money! Expensive dresses and suits need to be dry cleaned, not just thrown in the washer. Expensive appliances have to maintained and cost more to repair then a disposable cheap ones. Granite countertops require special care and cleaning, large houses require more repair, etc.. Even though on principal I’m against goods being disposable, it’s hard to argue with the economics that you can buy 10 pairs of jeans at Target for the same amount as one pair of Prada jeans.
It’s tempting to keep up with the Joneses’ but one of the biggest ways to get rich is ironically not to live like a rich person appears. I highly recommend the book “The Millionaire Next Door“, which talks about how often the people who we think are rich, are actually loaded in debt, while those who live modestly are sometimes millionaires. The reason for that is partly what I discussed above.
There’s also more stress in owning nice things. One of the primary reasons people own guns is a fear of being robbed. The more nice things you have, the more you will stress about them being stolen or destroyed. Try to own what you need, not what others tell you that you should have, and you’ll not only save more money, but also have less stress.
