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Fashion, Function, and Frugality

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Yesterday I wrote "it's not about big wins vs. small wins" and in that cited an article from Ramit Sethi about someone buying a $2,000 hand bag. Specifically:

"A friend of mine is brutally honest about being materialistic. She loves bags and shoes -- expensive ones. She does online sales, and she made a rule for herself that each time she does a monthly webinar, she takes 5% of sales and spends them, guilt-free, on anything she wants.

I love this!

A $2,000 bag? Get it."

I made the point that she'd need to make $40,000 a month or $480,000 a year in those webinars to buy that bag guilt-free (without saving up for it).

I thought after making that point, I could simply just brush it off and move on, but something about it nagged me for a few more hours.

I'm usually not one to tell people how to spend their money (other than to warn people to avoid MonaVie or Vemma MLM scams), but I'm going to make an exception this time.

I can't figure out why anyone would buy a $2,000 bag.

I'm not against paying for luxury. Just a few months ago, I wrote about how we bought an Acura MDX, a luxury SUV.

So am I'm the world's biggest hypocrite for pitting my luxury purchase and this person's? Maybe, but I'll let you decide.

When I look to make a purchase, especially a large one, I evaluate the functionality of the item. I then try to figure out if I'm getting a good value for that functionality.

We own a budget SUV, the Subaru Forester, which is great for the beach and the dog park. We own a luxury SUV, the Acura MDX, which is better for long road trips or when we have to bring the whole family. While both vehicles will get us from point A to point B, the difference in functionality is amazing. I could go with all features, but it similar to comparing a first generation iPhone and current one. They will both make calls, surf the web, and play music but there are a lot of improvements in the last 6-7 years.

This is where I don't understand the premium on the handbag. I've seen $2,000 bags and they don't seem to have exceptional stitching, super-amazing comfort, or the capacity to hold a lot more than less expensive bags. I don't see any functionality that would justify it having a 20x mark-up. What they seem to have is a label that tells other people, "I am mega-rich and can afford this bag." Maybe there's something else to it, but I've been racking my brain and that's all I come up with. It is paying for a brand that conveys status.

That philosophy runs in direct opposition to everything personal finance, that it doesn't make sense to find it on a personal finance blog. And yet there it is.

I know that I'm wired differently than most people. (Aren't we all wired a little differently?) However, I can't wrap my head around how someone would value that feeling more than the feeling of feeding the hungry, helping disaster victims, helping our soldiers, or saving some animals.

I'm probably preaching to the choir here, but I get the feeling that some of my readers might have a different view. I'd love to read it in the comments.

Last updated on October 13, 2015.

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13 Responses to “Fashion, Function, and Frugality”

  1. phr3dly says:

    This is a complex topic.

    First, I agree with you. While I might not personally have bought an Acura MDX, I think that there /is/ a more noticeable value proposition that justifies the premium of an Acura MDX over a Subaru Forester.

    Now, that said. I just bought a $2,000 camera lens to put on my $3,000 camera body. That is $5,000 for a camera. You can buy cameras for $200 at Amazon that, in some cases, will work just as well. Is there a value proposition there?

    Each person has their own value system. I can’t justify buying a $2,000 purse or a $50,000 SUV. But I can justify $5,000 for a camera + lens, even though I’m not a pro photographer. You might find the camera to be an excessive expense, and clearly feel the same about the purse, but you are OK with the SUV expense. I’m sure $2000 purse gal is perfectly happy taking pictures with her iPhone and maybe takes public transportation. So if a $2,000 purse makes her happy, more power to her.

    Now to your next point:
    “However, I can’t wrap my head around how someone would value that feeling more than the feeling of feeding the hungry, helping disaster victims, helping our soldiers, or saving some animals.”

    NO NO NO NO NO

    Let’s say I’m rich and I choose to buy a $1000 dollar purse. Presumably I derive $1000 worth of satisfaction! Yay! Now that $1000 has not disappeared, it is in someone else’s pocket. He probably paid $2 for the raw materials, so he has a $998 surplus, which he can use to feed his hungry family.

    Now let’s say that instead I buy a $2 purse and give $998 to feed the hungry. Unless I derive $998 worth of satisfaction from feeding the hungry, I’m $998 poorer. Meanwhile the purse maker who didn’t make any profit on his purse has a hungry family. So my $998 goes to a charity which gives his hungry family food.

    In the first example, I get a purse that I value at $1000 and the hungry family gets fed. In the second example, I lose $998 and the hungry family gets fed.

    Now obviously that is a simplification. But the point is, it is absolutely wrong to assume that money spent on “over-priced” luxury goods somehow goes down a drain. It *does* go to feed starving people, and save animals, and stuff. But it also produces value for the person spending the money. You may disagree with the value they placed on the item. But that’s fine.

  2. LisaRob says:

    Well, I can guarantee that the majority of the money spent on the purse did NOT go to some poor pursemaker who paid $2 for the raw materials. The pursemaker probably got paid very little, and the most the money went to someone who is already wealthy. True, the money didn’t disappear, but very little trickled down.

  3. Steve says:

    I can’t disagree with you. I can understand people who like fancy cars, but like you I can’t wrap my head around people who like fancy purses . Same with designer shoes, designer jeans, and any number of other luxury goods.

    That said… I don’t have to understand. It’s their money if that’s what they want to spend it on, it’s no skin off my nose. Even if they can’t afford it (but I admit to sometimes feeling superior and judgmental when people buy things they seemingly can’t afford).

  4. I can’t wrap my head around spending $2k on a purse, but I also would never buy a luxury SUV (or any SUV for that matter). I think both of these items have premium prices because they’re status symbols. I’m going to guess that a minivan would be even more practical than your suv, but I’m guessing someone.e said, “I would NEVER drive a minivan!” Or something along those lines. :)

  5. Matt says:

    I agree with you in that I can’t wrap my head around the hyper expensive purse, but when it comes to a luxury item especially one that was purchased guilt free it doesn’t matter. If she wanted to buy a $2,000 bath robe it still wouldn’t matter.

    But with that said some people don`t understand expensive cars the same way you don`t understand the purse pruchase. It really comes down to what you define as a luxury item and what is important to you.

    Could this money have been better spent, of course and there will be people who think it should have. But we all spend some money that others would consider wasted money.

  6. LisaRob says:

    I’ve seen USED purses sell for 15 to 20k…..that’s right…$20,000 on the website Zulily.

    Trying to make sense out of the choices people make in the name of fashion and vanity is interesting, but futile. Logic just isn’t applicable.

  7. Vogel says:

    The 2K handbag stumps me too…makes me sad actually, after having seen low wage secretaries at my old company buying them when they could barely afford to pay the rent.

    The 2K purse is a membership fee to belong to a semi-exclusive club — it buys bragging rights and status; nothing more. Unlike the expensive car, which offers performance and comfort that is measurable against lower cost models, the 2K handbag does nothing that a $100 handbag wouldn’t do. Arguably, it might last a bit longer if it’s well made, but the difference in longevity would be trivial compared with the price differential.

    This particular type of irresponsible purchasing arises through marketing, insecurity, and peer pressure.

    It’s a different story for those that can afford such items without blinking, but for everyone else, it’s just a sad waste of money.

  8. Michele says:

    I would never spend 2k on a purse, but I have spent 300 on one before. I like coach purses, not becuase of some style thing, but because they are built like a brick you know what. I used the last one I had for more than 10 years, and its still in decent shape. The leather is still good, the zipper still works, just the fabric is worn.

    I have friends who buy 2 or 3 purses a year for $20 a piece or so, I figure Im still ahead with my ten year old purse.

  9. robyn weinbaum says:

    and maybe it just makes her happy.
    can anyone ‘justify’ art, literature, culture as a cost/benefit factor?
    no.
    but it is what makes us human.
    if she can afford it and it makes her happy, GOOD FOR HER!
    her morality and standards are hers and yours are yours.
    this reminds me of all the businesses a few years ago that eliminated their year end parties as a cost saving measure-not executive bonuses but year end party for staffers.
    it put a LOT of caterers/restuarants out of business. it put a LOT of waitstaff at the foodbanks.
    would i buy a $2000 bag? no but i WOULD buy a $4000 bicycle!

    • Lazy Man says:

      I would agree that I have trouble justifying expensive art purchases as well. It would be the aspects that Vogel mentioned, being able to say that I belonged in the exclusive club of people who own a Picasso (for example). I don’t see any premium on literature, unless you mean rare original copies. A copy of Romeo and Juliet isn’t that different than 50 Shades of Grey.

      It is true that her morality and standards are hers and mine is mine. That’s why I have trouble wrapping my head around hers. I wonder if she’d have trouble recognizing someone valuing things based on function like I do.

      As for spending $4,000 on a bicycle, I’m going to presume that has some pretty great functionality justifying its price, right?

  10. kosmo says:

    “I don’t see any premium on literature, unless you mean rare original copies. A copy of Romeo and Juliet isn’t that different than 50 Shades of Grey.”

    Strange, isn’t it? You pay the exact same amount for a good movie as you do a bad movie and very nearly the same for a bad book as a good book. It seems fair that you’d pay quite a bit more for quality.

    Of course, the marginal cost is minimal and the studios/publishers make their money by selling more units. However, I wouldn’t be at all surprised to see some cost differentiation. If nothing else, some sort of gold/silver/bronze pricing structure.

    (Although, for the record, Romeo and Juliet is in the public domain and thus has no royalty costs for the publisher).

  11. Vogel says:

    Expensive art is an interesting comparison. Again, it’s a case partly of status seeking (the bragging rights of having a Picasso on the wall for example) but the price of an expensive artwork is also determined largely by demand (i.e., the price at auction), and art can also be a tangible investment (e.g., it can generate a profit at resale or by charging people to view it at an art museum). The price of a 2K+ handbag is not a reflection of production cost or demand but rather is determined arbitrarily; i.e., the manufacturer assigns a blue chip price, knowing that their handbag will be perceived as a prestige/luxury item (they might sell fewer units but at a much higher profit margin per unit). The 2K handbag also makes a poor financial investment.

    As for the psychological aspect that Mary referred to -— i.e., “maybe it just makes her happy” — the main reason it just makes her happy is because of the prestige factor, bragging rights, social symbolism, fashionability, etc. If the rest of the world wasn’t conditioned to perceive a 2K handbag as an impressive status symbol, then I doubt that many women would feel much satisfaction over their purchase. The thrill of the handbag comes, perhaps subconsciously (or not) from knowing how it will be perceived by others.

    The 2K purse really seems to have caught on as a must-have item for the average woman during the stock market/real estate bubbles, when money was flowing fast and free and everyone was caught up in a wave of conspicuous consumption and excess (e.g., Crystal champagne, BMWs, and expensive purses for everyone! Buy a new wardrobe for your Chihuahua!) and luxury retailers thrived. I kind of thought (and maybe hoped a little) that after the real estate market collapse and near meltdown of the economy, people would re-evaluate their shallow materialistic ways, that the 2K purse would become a badge of shame rather than upward mobility, and that those remaining one-percenters who could still afford such times would be less inclined to brandish them as a status symbol (knowing that the average onlooker, who would formerly have admired such an item, is now broke, out of work, and scared for the future). However, alas, that didn’t happen. The urge for status climbing is just too strong, and the marketing campaigns of luxury purse manufacturers are just too darn effective.

    Like I said before, buying a status item like a 2K handbag isn’t really an issue for those who can afford to toss away 2K on a frivolous purchase. The people I feel bad for are those who can’t afford it but feel immense pressure to buy one anyway.

    The $300 Coach bag seems like a more reasonable purchase; right around the price point where it can be argued that the quality of construction and materials, and hence the durability of the handbag, represents a reasonable or even better value compared with buying a cheaply constructed handbag at a lower price.

  12. […] fashionable items. Fashion changes every year, which would lead to new recommendations. I'm not big on fashion. There's a lot of financial freedom to be gained by freeing your mind from the expense of keeping […]

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