Conspicuous consumption – do you count other people’s money?
These days we get a lot of insight into other people’s lives through social media. Facebook and Instagram is flooded with posts of friends’ exotic holidays, fabulous parties, new cars and new homes.
Everyone always seems happier, younger, skinnier and wealthier than you do, right? Don’t be fooled, it’s just the Facebook filter! We don’t mean the filters that physically change the exposure to posted images, we mean that people post photos of their lives to deliberately create and manage how people perceive them. In other words, you see what others want you to see and this is true outside of social media as well.
It is particularly important to remember this if you’re stewing about someone else’s spending. Economists and psychologists say we care about our status, especially relative to our peers, and what we consume can be a way of keeping track. We may lose self-esteem if we fear our consumption is below the average of our group and gain self-esteem if we think our spending is above average.
That dynamic helps lead to the phenomenon of “conspicuous consumption,” first identified by economist Thorstein Veblen in his 1899 book “The Theory of the Leisure Class.” Veblen coined the term to describe how newly wealthy people bought luxury goods to display their economic power and boost their social status.
Economists have since confirmed that conspicuous consumption, peer pressure about spending and concerns about “keeping up with the Joneses” aren’t limited to the wealthy.
Measuring ourselves against others can spur some people to economic success. Having a competitive “how can I do better?” impulse drives them to work harder, invest more and persevere through difficulties.
However, it also can lead people to waste money on things that aren’t really important and miss out on the things that are.
The new car, that house and that exotic trip are the shiny end results of a series of decisions hidden below the surface. What we don’t see, typically, are the trade-offs — or their consequences.
Mindless spending can create anxiety at best, and living well beyond our means at worst.
Work out what is important to you, and ignore the other noise
Defining life goals and identifying core values can help you change behaviour and feel better about yourself. If you want early retirement, for example, you may discover high levels of spending and low savings make that impossible. However, if you are very clear on that goal, you are more likely to be willing to cut spending on stuff you care less about. Ultimately, people need to decide for themselves what’s essential and what’s not.
Being more mindful about spending returns our focus to where it should be: our own decisions and our own lives, rather than others’.