Stop spending your money to impress others

High-end brands often just ways to show off and unlikely to rise in value

Having some female friends means that even a fashion ignoramus like me has learnt a thing or two about ladies' luxury brands.

Several of them can't stop talking about the topic, which unfortunately means that I can't stop listening to their chatter.

I've learnt to identify the distinctive gold logo of a Prada bag and the chequered design of a Burberry - which, by the way, is different from the chequered design of a Louis Vuitton.

Of course, it's not restricted to the fairer gender. I know of several males who also take care to wear brand-name watches or use top-end wallets.

"Fancy cars are to men what fancy bags are to women," one friend observed, meaning that high-earning males often use their cars to show off.

Indeed, it is impossible to ignore the rise of flashy sports cars on our roads. You might be looking in the other direction, but these vehicles make such a loud screeching noise that you will surely notice their presence.

Other than burning up their tyres and destroying the peace, sports cars are also a good way to burn money for the well-heeled.

A Ferrari costs from $800,000 to well over $1 million, compared with a Toyota at $100,000 to $160,000.

But with strict speed limits on Singapore's roads, there is no way a Ferrari driver will be able to utilise the dazzling horsepower that his engine can generate.

The last time I checked, a Toyota can get you from Point A to Point B in exactly the same way that a Ferrari does.

Likewise, a brand-name bag at about $5,000 costs about 50 times a very decent mid-tier bag at $100.

I always remind my friends that for the price of a luxury bag, they can actually buy 50 other bags, in 50 different colours and 50 different designs.

I think that a lot of this boils down to showing off.

Economists call it "conspicuous consumption" - the purchase of very expensive luxury goods just to tell the whole, wide world how rich you are.

And, indeed, there are plenty of rich people in Singapore with spare cash to show off.

The number of high net worth individuals here - those with investable assets of at least US$1 million (S$1.24 million), excluding homes - rose from 100,500 in 2012 to 105,100 last year, according to a report released last month.

This increase works out to about 4.5 per cent, while the combined wealth held by this group jumped 7 per cent, from US$489 billion to US$522.5 billion.

If not for Singapore's lacklustre stock and real estate markets last year, those numbers would have been higher, said the report from consultants Capgemini and Royal Bank of Canada.

We are worlds apart, with my coffeeshop meals and MRT rides, but I'm content with my life as it is and I don't see a need to buy things just to show off to everyone.

And that's one key to building the foundations for future financial success - not to spend too much on unnecessary items, especially if you cannot really afford them.

Before buying that expensive item, remember that there is almost always a cheaper alternative that can serve the same purpose.

I personally don't know anyone in debt from having over-indulged in luxury goods, but surely some people in Singapore have this problem, going by the still-high levels of household borrowings.

Surely not every borrower takes out only "good" debt such as study loans - which will improve your earning ability in future - or mortgage loans, spent on a home that may appreciate in value.

I suspect there are plenty of people who have taken on too much credit and spent that on items such as brand-name goods - unlikely to rise in value over time.

To cut to the heart of the matter, we need self-confidence to accept ourselves in the knowledge that the people who matter will appreciate us regardless of whether we carry a Prada bag or one from the pasar malam, or night market.

As American financial adviser and television host Suze Orman once said: "You spend more when you feel less."

Reassuringly, I've found many people of my generation who have realised that it is pointless to spend money to gain the approval of others.

Increasingly, more people are rejecting the so-called five Cs, that quaint 1990s phrase referring to Singaporeans' typical material desires of cash, car, credit card, condominium and country club membership.

Sure, while items like cash are the foundation of financial success, the five Cs refer primarily to obtaining material items just to flaunt your wealth.

So, rather than showing off, I'd rather focus on other things that will make the world a better place, secure my financial future, and bring happiness to myself, my friends and my family.

Charity is one way, although my donation amounts are still very small.

And while some others may dread the tax season, I actually pay my income tax bill with a smile on my face as I realise that personal income tax is one way to reduce the wealth disparity.

In fact, I would happily pay more taxes if those richer than me paid more as well, as some of it will go towards helping the poor.

Another way to treat your savings is to invest them in assets for your financial future.

And on that subject, since we are talking about high-end brands, this may be a good time for me to start studying the finances of foreign-listed luxury companies such as Prada, Burberry and LVMH Moet Hennessy Louis Vuitton.

I may have to wait for the share prices to drop first, but hey, if people are going to waste money to impress others, I might as well try to profit from it.

Join ST's Telegram channel and get the latest breaking news delivered to you.