Keeping up with appearances - the wealth drain

In a world saturated with social media and curated lifestyles, the pressure to live up to an image of success can be overwhelming.

We often equate this image with designer clothing, a luxury car, and an upgraded home. These are known as "show of wealth" expenses and can silently erode long-term financial stability.

Let's break down the common culprits and explore strategies for a more sustainable approach.

The culprits

• Clothes: Fast fashion and designer labels can quickly drain your wallet. While looking your best is important, constantly chasing trends or purchasing expensive items for fleeting satisfaction is a dangerous habit. This is usually the first expense where people overextend themselves.
  
  
• Cars: For many, the allure of a new, high-end vehicle is strong. However, cars depreciate quickly, and the associated costs (interest, insurance, maintenance, fuel) can significantly impact your cash flow.
  
  
• Homes: The desire for a larger, more luxurious home is understandable. However, a mortgage that stretches your finances can limit your ability to save and invest. Unfortunately, you can’t invite friends over to have a braai next to your retirement portfolio so spending on the house becomes easily justifiable.

The long-term impact

Overspending on “show of wealth” items can:

• Reduce savings: Money spent on unnecessary luxuries is money that could be invested for your future.
  
  
• Increase debt: Financing these purchases can lead to high interest rates and a debt cycle that's difficult to get out of.
  
  
• Delay meeting financial goals: Whether your plan is early retirement, starting a business, or providing for your children's education, overspending can push these goals further out of reach.
  
  
• Stress and anxiety: Constantly worrying about finances due to excessive spending can negatively impact your mental and emotional well-being.

A sustainable wealth mindset

Here are some strategies to help curb "show of wealth" expenses and build a more secure financial future:

• Define your values
  • Ask what truly matters to you. Is it financial freedom, experience, or material possessions? Align your spending with your values.
  • Ask yourself if the purchase is for you, or to impress others.
    
    
• Create a budget
  • Track your income and expenses to identify areas where you can cut back.
  • Allocate a specific amount for discretionary spending and stick to it.
    
    
• Practice mindful consumption
  • Before making a purchase, ask yourself: "Do I really need this?" or “Am I trying to justify this?”
  • Avoid impulse purchases by implementing a "wait period" before buying non-essential items.
    
    
• Embrace minimalism
  • Focus on quality over quantity.
  • Declutter your home and wardrobe to appreciate what you already have.
    
    
• Prioritise financial education
  • Learn about investing, budgeting, and debt management.
  • Consult with a financial planner to create a personalised and sustainable financial plan.
    
    
• Buy used where possible
  • Buying a car is a great example of where buying used can save large amounts of money, provided the vehicle comes with a history of being serviced and looked after. Read more: What should I think about when buying a car?
    
    
• Build your wealth in private

• True wealth is often not visible. Focus on building assets that increase over time.
  
  

• Differentiate between needs and wants
  • For many, a reliable car is a need, a luxury sports car is a want. A comfortable home is a need; a flashy property is a want.

True wealth is not about what you show to the world, but what you are building. A comfortable retirement should always outweigh flashy possessions that lose their appeal over time.

By shifting your focus from external validation to internal satisfaction and long-term financial security, you can build a more fulfilling and prosperous life.