Why do we always want luxuries?

For some people, only the best will do – and that often means luxuries, which come with a premium price tag. But why do we buy luxuries, and is it worth the difference between brands? Let’s take a look at the psychology of luxuries.
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Reading time: 4 mins

Bentley, Gucci, Tiffany & Co, Prada, all these brands have something in common, and it’s not what they sell, but rather how they sell it. Every designer brand has worked hard to position themselves as a luxury item, giving credibility to anyone who purchases from them and making others lust after their products. And it’s easy to see the appeal, plush and flashy cars, beautiful designs, colours and materials, and of course, the logos.

But then you see the price tag. Luxury items typically come with a hefty price tag, which means many of these brands are the preserve of those with high paying jobs or brilliant savings habits. They’re not a regular purchase for the majority of the population, and even one-off purchases can be a financial burden.

 

So, why do we buy luxury brands?
The most obvious reason is human emotions. Many of these brands create hugely intense appeal for their products, making the impulse to own it so great that it can often outweigh rational thought. For example, imagine you’re browsing the web for a new handbag. Maybe you saw one you kind of liked in H&M for £24.99, you’ve added it to your basket but you’re not sold, so you keep browsing. Then from across the crowded internet your eyes fall onto a gorgeous Gucci bag with an eye-catching design, supple Italian leather finish, an attachable keyring, and of course that infamous GG logo. Then your eyes drift to the price tag, £750. You pause and ponder for a minute, weighing the appeal of owning a new Gucci bag against your inclination to stick to your budget, and before you know it, your new Gucci handbag is the envy of all your friends.

But this doesn’t just relate to wanting a Gucci bag. It could be the difference between buying a suit from Topman vs Ted Baker, or instead of settling for Fiat Panda striving towards a Ferrari 458. The thing about luxury items is that they’re often aspirational, which in the short term may also mean unaffordable (without going into debt) but it could provide you with a savings goal for the future.

 

Are luxury purchases worth it?
Worth it is a very subject term, and it completely depends on you, your budget, and your emotions. After all, it was your desire that drove your decision to accept the larger price tag for a bit of luxury. So, if you believe that was the right decision, then there are emotional benefits to be had – including improvements to your self-esteem.

To quote, philosopher Alain de Botton, “Good materialism is when you locate objects that seem to capture your identity at its best and finest point.”[1] So, if you’ve ever seen a luxury item and thought, “oh, that’s a bit of me!” this is what he means. And if that luxury product helps to define you as a person, then it could well be worth it.

But unfortunately, this can be a double-edged sword. Luxury items often bring with them a sense of status, but it could also make people feel less self-assured, inauthentic, and even bring on feels of imposter syndrome.[2]

 

Is luxury better than normal?
Something my dad once told me was, “buy cheap, buy twice.” At the time he was talking about tools, specifically a bike work stand. There were a couple of options that 15-year-old me was weighing up, one was an own-brand £20 stand, and the other was from Park Tools and cost £80. After some back and forth, I took my dad’s advice and bought the more expensive option. And 15 years later that work stand is still being regularly used and abused.

Sometimes more expensive also means better. You may have higher quality materials, more research and development, better customer support, the list goes on.

This may not always be the case, but it is often perceived to be.

Wine is another great example of this, and there’s even a study on how the price of wine impacts people’s enjoyment of it. People were given wines at different prices to try, and interestingly, the researchers found that the more expensive the wine was considered to be, the better the samplers thought it tasted.[3]

It makes me think, would the £20 stand have lasted as long? Maybe, but would it be blue and look awesome in my workshop? No. In the end, I bought what I wanted because of desire and marketing.

Emotionally, the price can matter a lot. It can make you think that if it’s twice as expensive, then it’ll be twice as good.

 

Luxury as an experience
Luxury doesn’t just relate to items, but also activities. There’s an idea of building an ‘experiential CV’, of unique experiences for luxury memories and stories to tell.[4] Whether that’s driving a lap around Silverstone, parachuting off a hot air balloon, or staying at an ice hotel.

None of these things come cheap, and although you don’t physically own anything afterwards, you take away the emotional benefits of your experience. These activities could add to your self-worth, provide a sense of accomplishment, and even provide a tick-list of things you want to do.

But again, this goes back to being aspirational. For many people, these activities are once in a lifetime, which means that they could become your new savings goals.

 

Saving for one in a lifetime luxuries
Getting past the desire to have luxury items immediately could open up a world of possibilities and make some luxuries more achievable than you may think. For example, if you wanted to try and beat inflation through investing, and do it tax-free, then by putting just £25 away each month, you could have £3,517 after ten years. [5] While you’d still be a way off that Ferrari, it makes a new Gucci bag or a Ted Baker suit a possibility. But, what about that Ferrari? Well, with a list price of £200,000 you’d need to look at increasing how much or how long you’re saying for, but it’s not impossible. For example, say you tucked away £250 a month towards your dream car – after 34 years you might have £208,408 invested[6], giving you a lovely retirement gift to yourself!

The luxury business is centred around emotions, a bit like investing, but if you can hold onto your desire and turn impulse into planning, or swap instant gratification for goals, then you might just be pleasantly surprised at what you could achieve.

 

References:

1: https://youtu.be/wLt24P8-cCs

2: https://www.hbs.edu/faculty/Pages/item.aspx?num=56683  

3: https://www.pnas.org/content/105/3/1050.abstract

4: https://www.acrwebsite.org/volumes/13286/volumes/v35/NA-35

5: This is the projected value for a Confident Plan (Medium Risk Plan). This is only a forecast and is not a reliable indicator of future performance. If markets perform worse, your return could be £2,933. If markets perform better, your return could be £4,205. Values correct as of 27/10/2020.

6: This is the projected value for a Confident Plan (Medium Risk Plan). This is only a forecast and is not a reliable indicator of future performance. If markets perform worse, your return could be £138,766. If markets perform better, your return could be £333,083. Values correct as of 27/10/2020.

 

Please remember the value of your investments can go down as well as up, and you could get back less than invested.

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