Are you shocked to know that Americans of all income levels spend big chunks of their incomes on luxuries? Probably not when you see that even those who say they have no money seem to have the latest iPhones and other luxuries. In this article at Market Watch, even the lowest income families spend 40% of their income on luxuries:
It turns out that all Americans, regardless of income, spend a large percentage of their income on luxuries.
People who make the most money spend the biggest chunk of their incomes on luxury goods, but even the poorest households spend a significant amount for luxuries, according to an analysis released this week by Deutsche Bank Research.
The wealthiest families (the top fifth of earners) spend around 65% of their incomes on luxury goods and 35% on necessities, according to the study, which looked at spending habits between 1984 and 2014. Middle-income households weren’t far behind: They spend 50% on luxuries and 50% on necessities.
Even the lowest income families (the bottom fifth of earners) spend 40% on luxuries and 60% on necessities, according to the study’s author, Torsten Slok, chief international economist for Deutsche Bank Securities.
I thought this was interesting:
While we tend to think of spending on luxuries as an indulgence driven by emotions, recent research suggests consumers’ feelings play a key role in spending on necessities as well. “Consumers who experience a loss of control are more likely to buy products that are more functional in nature, such as screwdrivers and dish detergent, because these are typically associated with problem solving, which may enhance people’s sense of control,” the authors of an April 2017 study in the Journal of Consumer Research wrote.
The article states that the poorer households buy more out of stress, particularly women. Maybe they feel stress because they need to spend more time on problem solving and feeling in control but do the opposite: they buy things that are not functional and feel less in control leading to more stress. It seems that our society does not emphasize discipline and competency and places more value on the appearance of things and incompetence. If discipline and competency were taught more in the culture and at school, my guess is that more people would live within their means.