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‘TIS THE SEASON WHEN many of us open our wallets and spend with reckless abandon. Along the way, we often end up buying a gift or two for that special person in our life—ourselves.
I don’t put too much stock in the accuracy of quick consumer surveys, but it seems the percentage of folks who self-gift might be 22% or 57% or even 77%. Whatever the right number is, I’m not inclined to be too judgmental, provided a reasonable amount of thought goes into the purchase. What do I mean by that? Here are six bad reasons to buy something:
To send a message. With our spending, we’re often purchasing a vision of ourselves that we want the rest of the world to buy into. The Honda Fit says we’re thrifty, the Jeep says we’re fun-loving, the Prius says we’re concerned about the environment and the Mercedes says we’re well-heeled.
While I find such signaling silly, I also realize it’s hard to separate signaling from carefully considered desire. Perhaps you really do love German engineering and you don’t give a hoot what the neighbors think of your BMW. But probably not.
To imitate others. There’s a reason marketers hire celebrities to endorse products. Clearly, it works. But to state the obvious, if you buy a celebrity-endorsed product, you don’t achieve celebrity status and, in fact, the celebrity may not even use the product. Meanwhile, who’s paying for that celebrity endorsement? If you buy the product or service, you’re footing part of the bill.
Because it’s on sale. This is a weakness of mine. I’m always drawn to products that are deeply discounted. Exhibit A: More than a decade ago, at an outlet shopping mall in Flemington, New Jersey, I bought a pair of black leather Cole Haan shoes that were on sale for $75, down from $300. Every time I wore the darn things, my feet would scream. Years later, after the pain of the foolish purchase had finally eased, I stuck the shoes in one of those charity bins at the local supermarket and bid them good riddance.
Because it’s supposedly in short supply. Remember March 2020, when panicked shoppers emptied grocery store shelves and created unnecessary shortages in key products, notably toilet paper? A few months later, I overheard a neighbor discussing the $1,000 of meat that she’d rushed to buy in the early days of the pandemic—and which she was now throwing out because her family hadn’t eaten it.
Retailers know that limited supply—real or not—can create a sense of urgency and get shoppers to pull the trigger. “Going out of business sale,” proclaims the sign in the window of a store that never seems to go out of business. “Only 2 left in stock—order soon,” announces the Amazon listing for a mug I was looking at, and which perhaps explains why I bought it.
To boost our spirits. After a rough day at the office, folks might seek solace at the mall on their commute home or do a little online shopping, sometimes spending money they can’t afford. Partly, it’s because a rough day can leave our willpower at a low ebb. But partly, it’s an attempt to cheer ourselves up. I have, alas, witnessed this phenomenon among people I’ve known. Trust me: Spending won’t cure unhappiness.
Because we think it’ll appreciate. Of course, some possessions do appreciate in value—classic cars, rare stamps, art—but the vast majority of our purchases will end up all but worthless.
So, why do folks persist in seeing more than fleeting value in the possessions they buy? I think it’s a holdover from the past, when families measured their wealth not just in land, but also in fine china, silverware and antique furniture.
If the six reasons above make for bad spending decisions, what makes a purchase a good one? Obviously, it should be something we can afford. Many of the best possessions, I believe, are those that turn into experiences and that are potentially shared with others—the supplies needed for our favorite hobby, the car for the cross-country trip, the tennis racquets for you and your spouse.
But much of the time, we won’t know whether we’ve made a good purchase until later, when we realize we have—or have not—received great pleasure for the dollars we spent. How can we tilt the odds in our favor? We’ll likely fare better if we avoid the mistakes listed above. We might also favor many small purchases over a few large ones, so an occasional bum expenditure isn’t so devastating. But as always with financial matters, perhaps the best strategy is to inject a healthy pause between when the desire to act hits us—and when we fork over our hard-earned dollars.
Jonathan Clements is the founder and editor of HumbleDollar. Follow him on Twitter @ClementsMoney and on Facebook, and check out his earlier articles.
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Great article, Jonathan! You touched on at least two of Dr. Robert Cialdini’s “Six Principles of Influence”, which advertisers / marketers / sales reps have deftly employed for ages to drive up sales: Scarcity (e.g. the fear of missing out) and Authority (e.g. celebrity endorsements).
Ciadini’s 50+ years of empirical research around the science of influence has always fascinated to me. His best-selling book “Influence:The Psychology of Persuasion” is a solid read, even for non-academic types like me. I’ve included a link to Bob Cialdini’s published work below:
https://www.influenceatwork.com/store-new/
I’m glad you used the Honda Fit representing thrifty minded people. Given the gas prices of 2022, it was a great choice. I’m getting 30 mpg in city and close to 40 mph on highway, and yet it’s full of pep because of its design and weight.
Great article Jonathan. I can relate to al the shoe comments.When I was still in college, the uncle of a good friend told my group of buddies this bit of wisdom. “Two things in life you buy quality – shoes and a bed – cause if you ain’t in one you’re in the other”. I have 13 4E, with a badly arthritic big toe joint on my left foot. It means my left shoe needs to be wider than the right. When I find a pair that fits well i watch for sales and buy several pairs and rotate them. A co-worker who was a marathon runner taught me that technique. It has worked fairly well. As I’ve aged quality shoes really help.
Hanging on to bedding long past its useable life is another mistake. Good sleep is key to health and daily performance. Waking up each day with a sore back is no way to live.
Another excellent article, chock full of wisdom. I will disagree on point one. At age 69, with no debt, still working because I enjoy it, I finally went out two years ago and purchased my dream car, a 2021 Lexus RX450h. I’ve been admiring this vehicle since the RX made its’ debut in 1999. I really didn’t care what anyone thought of my choice though I’ve found most think I’m wealthy which I don’t think I am. I purchased it because it’s one of the most comfortable, reliable, smooth riding, luxurious vehicles 30 mpg. It’s turned out to be everything I thought it would be. I love just looking at it and every minute riding in it all over the country. Yes, I’ve loved cars/trucks, etc since before I could drive and this has to be the best vehicle experience! (Of course, my eight years with a Mazda Miata was the most fun, this is overall is the most joyous. Your other five points are spot on! I love your writing and insights since I first started following you during your WSJ days! Happy Holiday!
I got my dream car when I was 17. I wanted a motorcycle, but my father always believed 4 wheels were safer than 2, so he helped me purchase a dune buggy – with a minor caveat. I had to build it myself. We ordered the body from Sears and got a wrecked VW from the junkyard. It was like assembling a giant model car kit. The memories from that experience are priceless to me. If you enjoy your Lexus half as much as I did my dune buggy it will be well worth it.
This summer, after 20 years taking up a large footprint in our backyard, I disassembled the trampoline and got $11 back for the metal at a local scrapper. At the time we bought it, it seemed expensive at about $1600. But as for spending money on something that resulted in experiences, this was it. My kids loved it, neighborhood kids loved it, and visitors loved it. Moderately inebriated adults loved it too. It became a favorite outdoor sleepover party location as well as a place for serious gymnastics practice and games of bouncy tag. A great purchase of an object.
Because it’s on sale.
I was checking out at Uniqlo earlier this week and the clerk kept saying, “Sir, these are on sale. If you buy one more you get 20% off.” To which I replied, “I could buy one more and spent 80% on something I don’t want.”
As for sending a message, I wear different clothing to work than on weekends precisely to send messages about status and authority for colleagues. I am in academia, so I can project status relatively inexpensively, but I do have to spend more than a t-shirt and chinos that aren’t completely worn transparent yet. Suits, ties, fancy shoes are a money suck. I’ve always.considered these a waste of money, a tax on income. But sometimes we have to send messages.
Number 7 – Do not become curious about Internet shopping sites. 🙂
Is the author of these recent articles really “Jonathan Clements” ? (or a ghost writer / robo writer) ?
The style, topic themes and wording syntax do not seem like “Jonathan Clements”.
I know Jonathan Clements very well — in fact, I’ve known him my entire life. Trust me, he is indeed the author.
I’ve never understood people who bought things for any of those six reasons, although having ample supplies of staple goods is always a good idea since supply chain disruptions are real events. Pretty much all we buy, besides food, are supplies for our hobbies. Hiking boots, tennis shoes, running shoes, fishing tackle, running and tennis clothes, tennis strings, tennis balls, pickleballs. All things that wear out pretty quickly and need to be replaced. But I never buy things because of their brand name or who their paid celebrities might be. That’s just silly.
My wife occasionally swears by ‘retail therapy’. The attached says it can work.
https://www.webmd.com/balance/features/is-retail-therapy-real
To send a message – I like your example of the Mercedes. Something like that brand is a matter of perception. While there are indeed Mercedes that go for near $200,000, most are way less.
What message does a pickup truck send I wonder, working American, blue collar? They are Americas largest selling vehicle and most cost more than the typical Mercedes. The Jeep Grand Cherokee is also more expensive.
If I mention I drive a Mercedes – eight years old at this point, the perception is as you say, but not truly reality. My wife drives a Jaguar – but that too cost considerably less than the average pick-up truck or many SUVs.m
It may be the well-heeled Americans are those driving $50,000 to $80,000 trucks, why I have no idea.
CBS Sunday Morning featured a segment called: Pickup Trucks: America’s favorite wheels.
https://www.cbsnews.com/video/pickup-trucks-americas-favorite-wheels/
My former neighbor had an old Mercedes parked in their back yard that eventually got used as a flower planter, so I’ve never really thought of a Mercedes as a status symbol, lol. I guess how a purchase is perceived really is in the eye of the beholder–and can be somewhat dependent on their previous experiences, at that.
Dick, trucks and SUVs have not had to meet the same emissions standards as cars. The proliferation of those vehicles satisfies buyers wanting a larger vehicle. I currently would like to buy a larger sedan, but the choices are slim.
I’m not sure I’d compare a truck with a sedan for space in the passenger compartment, but you are right about sedans. My car a 2014 has a trunk that can hold two full size suitcases plus. Today I doubt you can find one that size.
Jonathan, you did the right thing by tossing those ill fitting shoes. A few years ago I purchased a pair of sneakers at an outlet shoe store in New York that was closing. I looked at the sneakers on the shelf and knew that the pair was too narrow for for my size 15 extra wide feet. But for $22 I bought them anyway.
I walked with them daily during my regular morning strolls for a few months. As a result, I developed Morton’s Neuroma in my left foot. Usually a medical condition that affects women more than men. Two of three Morton Neuroma sufferers are women because of tight fitting high heels. In the end, that was a most expensive bargain for which I must now pay for in the form of a nuisance medical condition.
By the way, I enjoyed your stock market discussion on Wealthtrack, October 21, 2023. You offered excellent insight.
https://wealthtrack.com/portfolio-financial-planning-adjustments-for-rising-interest-rates-inflation/
I also enjoyed Jonathan’s interview on weathtrack. In case anyone has missed his other interviews and podcasts Jonathan has them listed under the HD About tab. I often go to the Creative Planning podcast at the end of the month, sometimes before they are referenced on HD, to hear him and Peter discuss a current financial topic and their monthly tip .
Good advise on the shoes. I also have wide feet and in my opinion any extra cost for the appropriate shoes is well worth the cost. The supply chain disruption seemed over to me when I was able to buy a new pair of my favorite walking shoes of the appropriate width.
Best, Bill
Cody, about 25 years ago I developed a Morton’s neuroma. A metatarsal support from a podiatrist did nothing for it. Then I discovered that any shoes or sandals with a toe bar gave immediate, complete relief. I wore Birkenstocks (or used Birks insoles) exclusively. In recent years I’ve noticed I no longer need them.
Thank you for the tip. I will look for shoes with a toe bar. By the way, my podiatrist was not too helpful either. His advice was extra padding or an operation. This is after a few expensive tests and 3/4 office visits.