How high-priced status symbols lost their snob value

There was a time not so long ago when luxury handbags made the loudest status statement. If you wanted to claim that you have arrived, without really using words to that effect, you just bought a luxury handbag, the cost of which onlookers could only guess would go into a few lakhs.

Things have evolved now and the status statement that a luxury brand represents is not just a logo on a handbag, but it can be on a belt, a cap, or even sunglasses.

When you cover yourself in brands, it costs a lot of money. The default statement you are making is, ‘I have a lot of money.’ But intuitively we also know that owning luxury brands has zero economic value; recently there was much media uproar over Christian Dior bags, which cost just $57 to make but were sold for $2800 (roughly ₹2.3 lakh.)

What can you do with a bag worth more than ₹2 lakh, that you can’t with a bag worth ₹5000? Some will pull out the quality card, but if you consider that ₹2 lakh can educate at least 10 children in a government school for an entire year, the bag’s quality would have to be at least bulletproof kind.

It's so commonplace to see young and old carrying Louis Vuitton handbags and wearing Gucci belts that one has to question whether the premium you pay to display status is buying you the exclusivity you desire.

Middle-class disposable incomes

India’s middle-class population is on every brand’s radar – luxury or otherwise. Our aggregate disposable income has grown roughly 2.5 times in the decade to 2022 to reach ₹27 lakh. At the same time, according to SBI Research, the household savings to GDP ratio has declined from around 24% in FY12 to 19.7% in FY22.

The government is not happy with consumption in the economy, which was apparent once again in the Union Budget speech on July 23; at the same time, sales of luxury handbags are increasing at roughly 7% a year.

Effects of endlessly social media scrolling, the perception of being part of the affluent society that’s constantly moving up, and double-income families with no kids, are all contributors to this kind of luxury spending that goes way beyond the basics; alluding here to personalized handbags with initials and people fitting in three different luxury brands into one attire.

Luxury has no economic value

Buying apartments at ₹50,000-70,000 per square ft in Mumbai, sending your child for a ₹2 crore plus undergraduate programme in the US, or wearing a Burberry plain black, round neck t-shirt worth ₹45,000 – these are all examples of spending choices that have little or no economic value. Yet these are choices that we are increasingly being nudged to make.

In personal finance, spending and saving are two opposite ends, and yet large spending is more about emotion, sometimes completely lacking practical use. Think about it, when we talk about budgeting or saving, it’s usually the groceries and movie outings that get axed rather than the large-sized, high-cost home loan or premium car.

Luxury brands also have a similar special appeal mostly thanks to the invisible vanity that they come with. Owning them makes you feel like you belong and you aren’t getting left behind in society. It’s the quintessential connection between money and self-worth. Spending on all the luxury has the power to make you feel good about yourself too, not just as a show to others but it can be a deeply satisfying experience for you personally too. You feel good, you feel rich and you feel elevated. One no longer has to buy a big car or a big house to display one’s earning capability; Armani jeans and Gucci bags will do just fine.

Not to burst your bubble, but cars and houses are assets that can be sold, the former even at a profit. Luxury apparel is perishable (who knows how many washes or outings it lasts?) and seconds don’t fetch high prices. In trying to create our social and financial status in society, we drastically overestimate the impact of instant gratification thanks to an outright display of status and underestimate the capacity of our savings to compound into lasting wealth over time. Spending always happens at the cost of saving and like it or not, saving is essential for investing and compounding wealth.

Strike a balance

Unless you have an unlimited pot of money, what you spend today, takes away from your tomorrow. Hence, most of us must spend wisely. You will feel a lot more elevated and confident in life, when your savings are enough to fund that venture you always wanted to start or when you can afford a suitably sized apartment at a minimum or no loan with the help of your own savings.

The key is to strike a balance between luxury today, sustained comfort over many tomorrows, your future financial well-being, your self-worth, and your display of status. It will be great to have it all, but in the real world, one will come at the cost of the other.

Before you spend on the next luxury bag or belt, ask yourself what is the real cost of luxury and what balance are you breaking when you swipe that card? Plus, if everyone has one, is it luxury enough to add to your self-worth?

                                                           (By arrangement livemint.com)