Tuesday 2 December 2008

Luxury vs essentials

Heard an interesting comment on the radio today regarding luxury items versus essentials.

The old codger was saying that back in his day (last century), the only way people bought luxury items was to save for them. Now, every luxury item has become an essential item, and that mentally justifies whacking it on the credit card.

Think of the items that used to be considered luxuries, which people now routinely purchase, even if they can't afford them:

  • overseas holidays
  • fancy laptops
  • home entertainment systems
  • boats
  • game systems (x-box etc)
  • fancy clothes, shoes, sunglasses, accessories etc
  • fancy mobile phones
  • nice furniture
  • art work
  • nice restaurants
  • a new car
  • a bigger, fancier fridge or oven than you actually need
Now this struck a chord. I've never been much of a saver - up until I had kids, I managed to drink, party or otherwise blow 99% of my income. But I never went into hock for anything. I had a good enough income as a single guy to support the purchase of many luxuries - which to me, mainly meant eating at every fine dining restaurant on the east coast. I was happy to sit on a 3rd hand sofa that was handed over by an old flatmate, but boy, did I eat well.

But I never owed the bank any money. My credit card balance at the end of the month was zero. I blew a lot of money, but it was all mine - not the bank's.

How many people today view a luxury good as a $10,000 Gucci handbag? A luxury item is now something that is utterly outrageously expensive and possibly useless. The "special" factor on so many purchases has now gone. When you can walk into Harvey Norman and buy something with no downpayments for 4 years, why save for something and force yourself to wait?

If anyone with an unsustainable level of debt wants to blame the banks or the finance companies or Harvey Norman for our economic problems, I say this: go boil your head in a pig.

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