Status derived from lavish spending makes little personal or financial sense

IMET a well-known doctor the other day at a mobile phone shop. After browsing several models, he finally zeroed in on a handset he liked. When the salesman told him it cost Rs 9,900, the doctor’s expression changed: his chosen handset had turned out to be beneath his status. I had a similar experience when ran into an old school friend. I always knew her as a simple person with a frugal lifestyle. But here she was, stepping out of a chauffeur-driven car. While talking to her, I concluded that was perfectly convenient for her to use public transport. She didn’t really need the car and chauffeur at all; she only had them because her colleagues came to work in chauffeur-driven cars. She felt that she would be looked down on by her colleagues if she used public transport. These are not stray cases. I know of parents who spend obscene amounts on theme parties for their infant kids. They think they need to do this because “everybody these days has such parties—we don’t want our child to grow up feeling we did not celebrate his birthday properly.” Not only are such birthday parties more focused on the parents’ status in society than the needs of the child, but they also sow the seed of lavish spending in his impressionable young mind. Similarly, people wear feel they must wear only branded clothes and accessories, or stay in expensive hotels, because anything else would lower their status. People often justify this by making the excuse of quality, service, and security, but that’s usually not true; cheaper products and services can also be of good quality and safe. Psychologist Abraham Maslow said that the fourth stage in the hierarchy of human needs was “Esteem Needs”. By this, he meant that individuals strive for achievement, status, responsibility, and reputation. This is related to recognition amongst peers and in society. There are two ways to achieve recognition in society. The first is through your character, the work you do, knowledge, and values. The second is through material possessions. There is no evidence to show that only people without character, knowledge or values rely on material possessions for status—brilliant people, too, fall for the seduction of material things. And, of course, there are also ordinary individuals who receive social recognition for their values, knowledge, and excellent work. Of course, there’s no harm in using a fancy mobile phone if it enhances your efficiency. Similarly, if your work involves constant travelling, or if driving your own car hurts your health, by all means hire a chauffeur. But buying goods and services purely to enhance your status is detrimental to your well-being and your finances. If you need material goods for recognition in society, you are dependent on external sources for security. It’s a vicious circle that is best avoided. It may take a little longer to establish yourself on the basis of your belief in yourself, your character, and your knowledge and skills. But those are also things that are impossible to lose. The author is a certified financial planner