Signalling Wealth

Because it's impolite to broadly share what one earns, people find other ways to signal wealth and elevate status within their community. Nicer cars, nicer houses, nicer clothing etc. are just some of the ways one can signal wealth to one's peers. However when overdone, wealth signalling can lead to unnecessary and excessive spending, even to the point causing significant debt and significant loss of wealth.

Since it is part of human nature to seek status in one's community, I am not immune to participating. However, I realized long ago that I wasn't going to be able to win in every front. For most things, we choose to buy only what we need. So signalling wealth happens for only a few things. Here are some areas where I think we spent more than "need" required:

Our house. We typically have paid more for our house in order to live in neighborhoods with better environments, schools and services. We recognize that the "same" house is often less expensive in a different neighborhood. However, in my experience, the higher value is often returned when the house is sold.

The frugal decision we did make was to buy a relatively lower cost house, that meets our needs, in our chosen neighborhood. Since we are already in a lower value house, we don't have as much pressure to keep up with our neighbors :-)

My higher education. I attended one of the Ivy League schools to which I was accepted. Although the costs were higher than alternatives, I believe it provided a great education and excellent employment options when I graduated.

One nice thing about college or graduate school is the cost is paid once and doesn't need to be renewed periodically. One's alma mater seems to be part of one's credentials throughout life.

My cocktails. Two drinks that I like are a gin martini and a single malt scotch. When dining out, I like to have a Bombay Sapphire martini before dinner. At home, I like to enjoy a Lagavulin or Macallan single malt scotch occasionally in the evening.

I guess this is similar to drinking a Starbucks' latte, but I don't have one every day:-)

To note, I am not trying to justify our spending choices. I just wanted to acknowledge that even though I try to buy only what I need, I have spent some of our money to "elevate status," which is part of human nature. Some wealth signalling is probably normal. However, signaling wealth with every purchase or at the expense of important needs can lead to financial disaster.

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This is not financial advice. Please consult a professional advisor

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