Conspicuous consumption: I don't get it

[brewer12345]

I am not inetersted in conspicuous consumption (CC) and never have been. Lately, I have been exposed to some really world-class levels of CC. I guess Wall St. had a good year and will be distributing obscenely large bonuses soon. I am hearing news reports of luxury goods retailers already ramping up their business, and no doubt things will start going into overdrive. My colleagues are infected with all this nonsense as well. One of the junior partners has purchased the following since I joined up in April: 2005 Mustang convetible; a 4BR house in a nice NYC suburban neighborhood (which has been completely gutted since the purchase), and most recently a Luxus RX330. A senior analyst mentioned yesterday that his wife is starting to talk about buying an Escalade (despite the fact that her Durango is 3, maybe 4 years old).

I don't get it. These guys work hideously long hours for the comp they get, and then they apparently piss a lot of it away on luxury junk. I guess I am a bad Merkin or something, but I find it strange and off-putting.

 

[SteveR]

Some people believe that they "deserve" these high priced toys because they work all the crazy hours.  Some people need to see some visible outcome from all the work and sacrifices they give for the job.  Others, like yourself, don't need that and can stuff away your compensation into investments with FIRE in mind.  It is like with kids.  Sometimes you have to wait for something good to come your way.  Others want it now.  Some save their allowance for a rainy day while others spend it as fast as they get it. 
Edited to add:
This is called either Immediate or Delayed Gratification. Some people "need" to have a tangible item as a "reward" for their work. Others can delay this until later. The ER crowd is certainly in the delayed gratification group.

My brother was a spender and I was a saver.  I will ER in 20 months and 27 days.  He will need to work until he is at least 62. 

 

[Outtahere]

I'm looking at a serious bonus plus a sizable distribution from my investment this year. My partners already have it spent or are "shopping" for what they will get. I, on the other hand, will be thrilled to make that deposit. Nothing warms my heart more than seeing that number grow and knowing that long after I've retired they will still be slaving away.

I don't get it either brewer.. I just don't understand why "things" have so much value to people.

Cj

 

[Andre1969]

For some twisted reason, Conspicuous Consumption has always fascinated me. Not in the sense that I want to partake in that activity, but it just fascinates me seeing other people do it, and wonder what, exactly, makes them tick.

I've actually been tempted a few times. For instance, back in 1991 when I was in college, I got a part-time job at the local Hecht's Department store (I think they're all Macy's now, or soon will be). Well, over in the furniture department was this beautiful teal-colored leather sofa. I think the name on it was "Natuzzi" or something like that. I WANTED that sucker! I think the price tag was close to $2000! Helluva thing for a 21 year old in college, making $6.50 per hour at a part time job to want. : Well, I never got that couch, and honestly, have no desire to.

About two years ago, when I was about to start getting my condo ready to put on the market, I thought I would clear around $40,000. For a brief moment, I thought about going out and getting a new Chrysler 300C, which would've eaten up over $30,000 of that, but would be paid for and have some left over. Well, the guy doing my work fell through, and left the place a mess. I tried to do some of it myself over the summer, unaware that delaying putting it on the market was actually working out to my benefit. Finally, I found someone to finish it off, and by the time it went on the market and sold, I walked out of closing with a check for around $94,000. Still haven't bought that 300C, and even though I could now buy several of them, I just have no desire to. Not one of them, nor any other new car.

 

[soupcxan]

There was a great article in the Times a few weeks ago based on a economics study that showed how using funds to purchase luxury items didn't do anything to improve someone's happiness, but using funds to purchase intangible things like a shorter commute or more time at home did have a material difference in peoples' happiness.

So brewer, how do I get a job at your company? I'll sign a no-conspicuous-consumption contract.

 

[Nords]

I'm looking at a serious bonus plus a sizable distribution from my investment this year.  My partners already have it spent or are "shopping" for what they will get.  I, on the other hand, will be thrilled to make that deposit.  Nothing warms my heart more than seeing that number grow and knowing that long after I've retired they will still be slaving away.

Same here.  Nuke submariners used to get a $7200 annual bonus in the early '90s.  After tax witholding I'd blow that $5200 in a hedonistic spending spree-- on mutual funds! 

It really hit home when our retirement portfolio started going up that much every couple months, not annually.

 

[saluki9]

I get to see a lot of this because a lot of the comp around here is in the form of bonuses. We get a lot of people here getting the fever for their "January Paycheck" and planning major purchases.

I'm not as perfect as some are around here. I have to work some pretty serious hours for my annual bonus. I tend to save about 85% of it (after tax) for my ER portfolio, but I do spend a little just in case I drop dead before ER.

This year I'm sticking to the 85% plan, but I have to say I'm looking forward to Hawaii in a few weeks and my new plasma when I get back

 

[TromboneAl]

I used to have my computer remind me to send in monthly investment amounts.  Then I realized there's no need.  I really enjoy sending that money in, and I do it as soon as I get a check.  There's no chance I'd forget.  I think the CC'ers just don't feel that enjoyment when they save.

 

[TromboneAl]

This year I'm sticking to the 85% plan, but I have to say I'm looking forward to Hawaii in a few weeks and my new plasma when I get back

You must party hard if you need plasma when you return.

 

[brewer12345]

I get to see a lot of this because a lot of the comp around here is in the form of bonuses.  We get a lot of people here getting the fever for their  "January Paycheck" and planning major purchases. 

I'm not as perfect as some are around here.  I have to work some pretty serious hours for my annual bonus.  I tend to save about 85% of it (after tax) for my ER portfolio, but I do spend a little just in case I drop dead before ER. 

This year I'm sticking to the 85% plan, but I have to say I'm looking forward to Hawaii in a few weeks and my new plasma when I get back    

I can't claim I won't spend any of the filthy lucre.  I've no clue what the size of the payout is.  I expect I will spend a few thousand on some house stuff that needs to be done (kitchen countertops, dealing with some wallpaper and drywall issues, etc.).  Other than that, DW and I might blow a few hundred bucks each on something frivolous and the rest will go either to debt reduction or get added to the portfolio.

 

[saluki9]

You must party hard if you need plasma when you return.

You know, if you're going to make a typo, you might as well set somebody up for a funny joke.

 

[justin]

I think my company is smart. They are big into encouraging saving money for retirement. We get small cash bonuses (got mine last month, spent it all on PAcific index fund!). The big bonus is our tax-deferred profit sharing contribution that is usually 10+ times as big as our cash bonus. No one can spend the big bonus!

 

[SteveR]

I think my company is smart.  They are big into encouraging saving money for retirement.  We get small cash bonuses (got mine last month, spent it all on PAcific index fund!).  The big bonus is our tax-deferred profit sharing contribution that is usually 10+ times as big as our cash bonus.  No one can spend the big bonus! 

DW's company gives out their bonus (all after tax) in company stock or 1/2 stock and 1/2 cash. We go with the 100% stock because the shares spin off dividends which are at a higher return than most CDs and are taxed at a lower rate than cash.

My bonus is all cash and taxed out the @ss.

 

[JPatrick]

I am not inetersted in conspicuous consumption (CC) and never have been.  Lately, I have been exposed to some really world-class levels of CC.   2005 Mustang convetible

I don't get it.  These guys work hideously long hours for the comp they get, and then they apparently piss a lot of it away on luxury junk.  I guess I am a bad Merkin or something, but I find it strange and off-putting.

Back off of that Mustang talk there Brew Man.. About 15 more market days like yesterday and I'll be one of those conspicitors myself.

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[brewer12345]

Hey, whatever makes you happy. I generally have found that relatively few large purchases have made me happy, at least for more than a few days. After that, a lot of stuff is more trouble than it is worth.

 

[wabmester]

Back off of that Mustang talk there Brew Man.. About 15 more market days like yesterday and I'll be one of those conspicitors myself.

Real investors don't actually buy the 'stang.   They reserve a dozen of them from the dealer before any cars are delivered, and then they sell those reservations to conspicuous consumers and collect part of the markup for themselves.  

 

[Outtahere]

All of my bonus and distribution is cash too, I get wacked pretty bad.

 

[cube_rat]

My bonus and stock options are taxed at roughly 45% Plus this year, we may hit AMT land because of an unexpected windfall. I have no idea what AMT is going to do to us.

 

[laurence]

I fight CC every day! I love all things lux. I want a lexus, I want a Porsche, I want a Rolex, I want a 3000 sq. foot house overlooking the ocean, I want a plasma and a klipsch sound system. It only became harder when I started having the actual cash to buy some of these things. Heck, I could upgrade on the house and just do a 30 year loan instead of a 20 and have about the same payment (probably could only afford a "peek -a boo view, but 3000 sq. feet no problem). I love my HDTV to this day, and I've had it nearly two years. This LBYM thing is a struggle for me, big time. DW has no problem with it, that's our saving grace. That's also why she manages the finances.

 

[LOL!]

Since when is a Lexus RX330 part of conspicous consumption? It's a pretty inexpensive small SUV. There are 4 of them on our cul-de-sac. They are so prevalent in the community that they are considered just another ol' beater car.

Hummers are conspicious consumption though. You drive one when you want to declare to the world that you are an idiot and you just don't care.

 

[Outtahere]

Lexus a beater car? guess I live in the wrong neighborhood. I look at all SUVs as CC and even more so now with the price of gas it takes to get those monsters down the road a few miles.

 

[bow-tie]

I don't understand people's drive for have "bigger and better".  I struggled with it mightily when I first got out of college and was trying to figure out what I was doing and where I was going.  I made some poor choices, but it has improved over time.

Now I spend way too much time asking aloud "Why the hell does someone want a house that big!?!?!  They have to clean it AND pay for it!"

 

[SteveR]

I have no idea what AMT is going to do to us.

It will hurt.

 

[brewer12345]

Since when is a Lexus RX330 part of conspicous consumption?  It's a pretty inexpensive small SUV.  There are 4 of them on our cul-de-sac.  They are so prevalent in the community that they are considered just another ol' beater car.

Hummers are conspicious consumption though.   You drive one when you want to declare to the world that you are an idiot and you just don't care.

I guess everything is relative.  I look at the thing and I see a fancy Toyota Highlander that costs more up front, has higher maintenance and insurance costs, and in general doesn't actually functionally do much more than the highlander.  Bear in mind also that these are folks who trade in for new every 2 or 3 years.  When asked why, I get answers like "it's got, like, 50,000 miles on it!"

 

[Andre1969]

I have a feeling that "conspicuous consuption" really doesn't have a hard-set definition. It's going to mean different things to different people. Now just by themselves, an '05 Mustang, an RX330, and an Escalade aren't necessarily signs of cc. Well, okay, maybe the Escalade is. But buying all three of them in rapid succession, especially when you have a Durango that's only a couple years old, screams cc to me. Now if these people make so much money that an Escalade to them is like a '76 Delta 88 with rusted out quarter panels to me, then maybe it's not really cc.

But, if they owe more on the Durango than it's worth, and are financing out the wazoo to buy these new cars, with the bonus only counting for the down payment, that would be cc to me.