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Saving for a luxury good: Outlandish or necessary

November 28, 2023
Lifestyle
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More people are falling in love with luxury and would go to any length to acquire a luxury item. Why is this so? These are some of my informed guesses that could explain this new trend.
Ownership of a luxury item differentiates us from other people. Call it a class identity thing! Secondly, people are becoming more conscious of the fact that buying a luxury/quality item is more beneficial in the long run than buying cheap items. Some luxury items may even have a resell value. Another valid reason might even be because of peer pressure. Whichever reason it may be, choices of owning a luxury item or cheap item is up to you – all things are purchased with money! The real debate is how to accumulate the money to pay for them.

Why luxury?

Growing up, we were thought by our parents or guardians that part of any money we receive or earn should be kept aside for a rainy day – times when things are tough or when an unexpected need arises. That money is called ‘savings’. From what our parents thought us, savings is not supposed to be used to purchase a luxury item. Right now, things have changed and people have adopted the ‘save to buy luxury’ mindset. The big question is, should saving for a luxury good be the new and acceptable norm? or is it mundane? and if it is not mundane, what makes buying a luxury item worth thousands of dollars acceptable?

In 2021, a Twitter influencer tweeted that she was happy to have acquired a designer handbag worth 7,000 USD after nine months of saving for it. This revelation was met with mixed reviews with the most being negative and the recurring question being “Did you need to save for it? Or, since you couldn’t afford it once “why are you living above your means and saving to buy a designer bag?”, “who saves for six months to buy a bag that offers no real value?” But she thought differently and to her, the value was in the versatility, type of leather used – which could last for years and handed down including its resale value. Also, considered was the space advantage in the bag which was a good fit for her profession – a lawyer.

What is luxury?

Below, we will examine four definitions of the term ‘luxury good’.

According to Wikipedia, a luxury good is an item which its demand increases more than what is proportional as income rises, so that expenditure on the good becomes a greater proportion of overall spending.

IGI Global, the World’s Largest Database of Information Science & Technology defines luxury as products which are not necessary but tend to make life more pleasant for the consumer. In contrast, with necessity goods, luxury goods are typically more costly and are often bought by individuals that have a higher disposable income or greater accumulated wealth than the average.

According to SmartCapitalMind, a good is considered a luxury when a person must have a certain income or wealth level in order to feasibly purchase it. Additionally, items that see an increased demand based solely on increasing income are also economically considered luxury goods.

WallStreetMojo defines luxury items as high-priced products that solely serve as a status symbol. It contradicts a necessity item that is vital to satisfy basic human needs.

An important point from all definitions above on luxury goods, is that they are products mostly used by the upper class and are not a necessity. If this is so, would it make sense for aspirational people not in the upper class to save up to acquire them?

READ ALSO: Oh yes! you need retail therapy. Yes! you must plan for it too

The real answer

And so, to answer the question of whether saving to buy a luxury good is outlandish or necessary, we must first look at the advantages and disadvantages of buying or not buying luxury. It has been established that luxury brands make products that last longer, compared to fast fashion brands. In other words, when people who spend a significant amount of money on luxury brands, they do so in exchange for quality.

Again, if we are to be honest, a boost to confidence and a more stylish look are positive factors that encourage people to shop for luxury items: you either take it or leave it. So, the next time you see a lady walk into a room with that magnetic aura, and a feeling like she has conquered the world, know that she has adorned herself with one of the latest designer outfits or a great quality item.

To have or not to have a luxury good

Most luxury goods like bags, watches, etc., can actually be regarded as “investment” items for their owners because they could be sold later at a higher price than the purchase price. At times some designer brands deliberately release limited quantity of goods, so as the years go by, their prices appreciate. These goods later go on to be sold at auctions as vintage goods costing thousands of dollars and exceeding their purchase or asking prices. In other words, luxury goods can be classified as a good store of value. In an article published by Elite Traveler, a Paul Newman’s ‘Exotic’ Rolex Daytona watch sold in New York in 2017 for a record-breaking $17.75m.

However, a major concern for most people is affordability. Since luxury goods are priced high, many people are not able to purchase them at one go, while some people can’t even afford them at all.

The key disadvantage to examine would be the issue of luxury brands having to deal with counterfeit or replica products in circulation. In an article published by The Cut, it was raised that among a certain set of rich women from New York, counterfeit bags were more popular than the real bags. This means that regular folks can purchase the counterfeits and pose them as real.

From the same article, it was reported that some women who have risen above the idea of buying replicas also deal with the hassle of joining a waitlist for the products. “They’ve literally told me, ‘I’m too good to buy reps.’” Instead, “they’re out here buying authentic Hermès, and they are stressing out every single day. ‘Will I get the bag?’ ‘What if it runs out?’ I’m just like, you literally don’t need this stress in your life; you can just be happy.”

There’s hope for more people

With the emergence of several new luxury fashion houses which have scored points for being reliable and delivering quality too, these items are now becoming affordable for the middle to high end income earner. Some career professionals or business owners now find investing in one quality piece more preferable than buying multiple items. To achieve this, they can save to make purchases. In that case, saving for a luxury item may not be outlandish after all, given the benefits that come with it.

While considering savings for luxury goods, we suggest you contact Coronation Merchant Bank. Coronation Merchant Bank is a one-stop financial centre that provides you with the necessary guidance. To learn more about our services, please click the link here

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