Tuesday, July 12, 2011

Personal Finance Part 23 – Functional Versus Status Items

Looking around me daily at Singaporeans around me on buses and the MRT, I have come to realize that possessions do indeed constitute a form of “signalling” to tell others more about yourself. Whether it be branded goods, an iPod or a luxury car, all these material possessions are a way of declaring your financial status, or in some cases, showing off how indebted you really are! I was mulling over this over the last few weeks, and decided to write something on it which is appropriately titled “Functional Versus Status Items”. I will seek to explore items which many possess which can be classified as just being functional, as compared to having some sort of status attached to it. For each category, I will state the functional items within and the approximate cost, then compare this to a similar “status” item and state its cost as well.

Clothing

Clothing is arguably one of the true bare necessities of life, other than food, water and air. For to be clothed is to be protected from the elements and their harsh effects, and to prevent our skin from the harmful effects of radiation from the sun. But for some, clothes are also used as a means of expression of taste, style and individuality. For myself, I usually dress in a simple T-Shirt with Bermudas or for working sake, long-sleeve shirt and long pants. These are usually not branded and the long pants are from G-2000. Functionality would be simply to make one look presentable and to ensure one gets protection from the elements, but for people going after status, they could spend in excess of $150 for a shirt and probably $200 for a pair of “branded” pants. For my shirts, they are mostly in the $30 to $500 category and for pants, they range from $49 to $69 at G-2000 sales (GSS is still on as I type this). Thus, one could conceivably spend 2 to 2.5 times more buying branded clothing as compared to non-branded ones.

For casual wear, bermudas for me usually cost $30 to $40 a piece while T-Shirts can be from various tourist destinations like Redang, Phuket or Cambodia and cost less than S$5 a piece. I am not aware of the cost of a similar “status” T-Shirt and Bermuda but I am sure it could be more than twice or thrice the amount.

Spectacles (and LASIK)

The basic aim of spectacles is to improve your eyesight, but there are those who would make a fashion statement out of it nonetheless, which truly baffles me. Most of the time, I would visit my nearby neighbourhood spectacle shop to have a pair of lens and frame made for about $200/-, but moving around the MRT I have seen young adults wearing a particular brand of Emporio Armani spectacles which I guess could cost in excess of $500? The frame is thicker closer to the lens and has the symbol of the black eagle on white, and it looks more sturdy than normal frames, but otherwise still manages to sit on the bridge of the nose and enables the eyes to focus through the lens. So functional versus status implies a cost saving of about 50-60% in this instance.

And for those who do not wear glasses, ask if they have gone for expensive LASIK treatment to permanently correct their eyesight. The treatment is much cheaper (and safer) now (compared to 5 years ago) and costs probably around $999 per eye, for a total of about $2,000+ (including eye-drops and follow-up clinical sessions). The reason I avoid it is not because of the cost (pretty expensive in my opinion and no guarantee of permanent freedom from short-sightedness as it can still relapse), but also due to safety issues such as blurred vision and complications. Call me risk-averse but I’d rather save my money and my potential anguish and stick to my tried and tested spectacles.

Bags/Wallet/Shoes

I lumped these three items together because they usually come together when one shops, especially for men. I tend to buy a new bag cum wallet and shoes at the same time if I need a change, but I know women probably have very different shopping habits. For functionality, a wallet is simple a place to store your cash, credit cards and coins; while shoes are to protect your feet. Yet many also choose to indulge in the status aspect of wallets and shoes. For ladies, the most obvious would be the purchase of a branded handbag, be it Coach, Prada, Miu Miu or the ever-famous LV. This aspect differs from that of men as women usually tote their bags around and having a beautiful label usually boasts of spending power and wealth. Such bags can cost in excess of a few thousand dollars, compared to the around $100 discount handbag (which may be a remnant of last season’s fashion statement, perhaps) which my wife purchases at Robinsons or Isetan. So that is a premium of almost 30-40 times just to “look good”. Wallet-wise, I stick to Braun Buffel around $98 as it is made of good leather and has enough compartments + an easy to access coin pouch. I’ve seen more branded wallets such as LV going for a few hundred, so I figure I’ve saved about 50-60% by sticking to functionality over status.

As for shoes, my belief is that they should look decent for work, and for leisure they should have the effect of protecting you from many hours of walking (yes, I am a walking freak). Thus, a decent $49 to $69 pair of black working shoes will suffice from OG or Robinsons (during a sale). The more expensive working shoes can cost up to $89 to $149. For casual shoes, I buy those costing at most $89 for decent comfort and soft material, and I guess in this area I don’t save that much; but brand wise it is not anything status-related like Hush Puppies.

Mobile Phone

Oh, now we have come to the mother of all status items – the mobile phone. This probably constitutes the most pervasive and conspicuous status item which everyone on the street is carrying but which not everyone is aware of. Most of the newer models of smartphones (including Blackberry, iPhone 4 and Android-based phones) are considered status items as they include functions like surfing the net, taking photos, downloading music and other nifty programs. To me, a phone is basically a tool for communication; thus the basic functions would be to call and SMS. Hence, I have retained my 5.5 year Nokia model from the dinosaur era and it still works very well, has a decent battery life of 2-3 days without recharging, and can withstanding quite a few occasional knocks without complaints. My phone came FOC (of course) with a new contract donkey years ago, while the new smartphones like iPhone 4 usually come bundled with data plans and cost $400-$500 upfront with a $49 monthly subscription before GST. I think I probably saved about 60-70% in the long run in terms of total costs by avoiding functions which I can live without (like MSN on the go and updating Facebook with every single morsel you chew on).

This also happens to be (unsurprisingly) the item which everyone else seems to badger me about. In order to keep up with the crowd and the so-called “status” of being a manager, I am constantly asked to upgrade to a snazzy-looking smartphone by concerned colleagues and close friends who hand me that “oh you are so pathetic” look. Trying to manage the handful of them has kept me busy enough without even considering the upgrade to a “better” phone (no, this is NOT a joke). After some moments of reflection and intense contemplation I concluded that I did not need those functions anyway and I was very contented with my Nokia phone, and I remain happy and satisfied to this day. The “harassment” continues unabated, however, but this is part and parcel of living in a society which places “status” over “functions”.

Watch

The basic function of a watch is to tell the time, but as usual there are many functional watches and there are also many status watches. There are some who argue that watches like Rolexes constitute a viable investment, as their value will not depreciate and it can be handed down to the next generation. But for myself, I used to own a watch which told the time but ever since that broke down, I relied on my (old but trusty) mobile phone to remind me of the time; and those who see me in real life will not that I do not wear a watch, and have not been wearing one for more than a year. I still am punctual for all my appointments and am hardly, if ever, late for work; so it’s a matter of discipline and having that innate sense of time and how long it takes to engage in certain activities.

Status watches can range from anything around a few thousand to hundreds of thousands of dollars, so I will decline to speculate on how much I saved by not owning a watch; but you get the idea.

Summary

Well, I could go on, but I think the above is a simple laundry list of items which one can choose to be purely functional, or having some sort of status element attached to it. Some may even argue that a hybrid exists – functional items with a hint of status (mid-range watches and wallets), and I do not deny this. For myself though, I am a bare necessities guy and I hardly spend on anything deemed status-worthy, thus this post is just to share how much one could save if one drastically cut down on his status “wants” and lived a simple yet fulfilling life based on family, friends and relationships. Possessions may fade but the joy of experience persists – clichéd but very true in my opinion!

14 comments:

Singapore Man Of Leisure said...

Hello MW,

A refeshing post outside of your usual stock analysis!

It allows me to get to know you better.

Like you've said in your opening paragraph, what we wear and use tells us something about how we see ourselves; and/or how we want others to perceive us.

Gan Bei!

Temperament said...

Hi Musicwhiz,
Glad to meet you, here.
I say:
If you continue living this way, in no time you will be the next "The Millionaire Next Door". Where all your neighbours are only rich with whatever material goods they can show off. And they all think you must be only doing so, so.
Ha! Ha!
And one day out of fancy, you decide to buy a "Big Mouth woman" for indulgence, i wonder what will your neighbours's reaction? Some of them, their jaws may have open so wide like crocodiles that may take them some time to shut again.
Please remember in life "truth is always stranger than fiction".
So anything is possible.
Ha! Ha!
Shalom.

la papillion said...

Hi,

How about your, erm, gold watch? :) haha :)

Just wanted to say something regarding shoes. In my line of duty, I've to walk many km more than the average worker. In the past, I used to go after cheaper shoes like Bata, which costs around 30-40 dollars. But they are not well made and as a result, I've to change every 2-3 months because they either catastrophically broke down or the soles got worn off and they suck in water when raining.

I think I've spend a lot of energy and time, not to mention money, constantly searching for another pair of shoes. That's when I bought a pair of Clarkes for 160+ dollars. It was bought in Robinson during a sales so the original pair should be near 180 dollars. It was very well made and I wore it and walk with it almost everyday for 2.5 yrs.

The pt is that even though it might be more expensive investment in a good pair of shoes, it's can also last longer. In my case, my pair of 'expensive' Clarks is actually cheaper than my cheap bata, if I factor in the sheer amt of walking time, even without factoring in the amt of energy/time needed to search for a pair of new shoes every few months.

So, like investment, the price is seldom important - it's the quality that I'm paying for. Generally, a good brand gives a better quality than the generic ones, and so I'm more than willing to spend a one time cost on it. The best would be to buy a branded and well made item at a discount...would that be too much to ask for? haha :)

Createwealth8888 said...

Never save on your pair of foot wears (shoes, scandal, slippers) or you may regret one day when you become Humpty Dumpty due to lousy or worn-out foot wears. Think again. Invest in good quality shoes.

qeysersoze said...

Hi Musicwhiz,

Absolutely agree with your post, and in particular the last point on relationships/experience being paramount, except for:

1. Shoes. As the guys above said, shoes can be critical, and often higher initial capex pay off. Unless you are very fortunate to have perfectly formed bones, the difference between a crappy pair of shoes and a good one in terms of fit is very large. Unfortunately, most shoes with good fit tend to cost more. Sigh.

2. Smartphones. Sometimes not a choice, but an occupational hazard. Some have to mail and surf net on the go.

3. Branded goods. Again, another occupational hazard. I have clients who will not sign with non mont blanc (at least). In my case I have to have some Prada etc.

mm said...

MW,

Hope that all is well with you and your girl (and wife :).

Its been a while since I posted on your website. Been busy since I got back to work managing the Asian operations.

I guess from my point of view(s), two things stand out.
1. The ability to differentiate needs vs wants
2. The understanding of what is "value for money".

Even though my peers and company colleagues go around in their Volvos and Audis, I am still happily car-less... reason is because I travel 30-40% of the time and I work from home... y the need for a car?

I do buy good quality goods that can last a long time. A pair of comfortable Rockport will last a long time... so is a well made watch (not the swiss type) but like Seiko brand.

My company wanted to give me a Blackberry but I declined.. just a normal phone but with 2000mins plan as I need to be in meetings alot of time..

The bottom line is, those who choose to look good before they can afford it will have to work their whole life time looking good but with little in the bank to show for it.. they cannot quit their jobs if they want to...

It's better to learn to accumulate wealth so that if you want to splurge on the occasional Coach/LV bag for your wife, you can do it without battling an eyelid.

Few ppe. understand the freedom to work when you want to and with no debt to worry about (no housing debt, credit card debt etc...)... its totally liberating... my boss has not hang over me cos' he knows I can walk away anytime I want.

Cheers,
mm

John Koh said...

Hi MW,

Good post. Just wanna let u know i posted something similar to your blog a few months ago. Hope u enjoy it.

http://seen-heard-sg.blogspot.com/2010/06/is-it-overpriced.html

Musicwhiz said...

Hi SMOL,

Haha well I do blog about other stuff aside from my analysis, but with so many results in the last few months, it's inevitable that I do a lot of analysis for my companies.

I've seen many people who buy nice stuff just to impress other people. My question would be - is it worth it?

Gan Bei too!

Musicwhiz

Musicwhiz said...

Hi Temperament,

Haha, but I didn't understand the Big Mouth Woman part. Maybe I am just too blur!

I don't really think it's easy to become a "Millionaire Next Door", though I've read the book (seems more applicable to USA than Singapore, sadly). People around me are taking leaps and bounds and shortcuts to get richer while I do it the slow, steady and boring way. I guess on this aspect, I am just a non risk-taker haha.

Cheers!
Musicwhiz

Musicwhiz said...

Hi LP,

FYI, I don't use that gold watch anymore as it has stopped and I didn't want to spend money repairing it. Incidentally, it was a gift from my uncle and I wore it as a token of appreciation to him.

I agree with yours points on shoes, actually. I spend a lot of time walking too, especially during lunch time where I would explore the area near my office for food, and also take strolls to stretch. So I don't mind spending on slightly better shoes for this purpose. But so far my $69 shoes have lasted >6 months, which is quite a surprise to me too.

That said, I have splurged on shoes >$100 before for casual wear, and they do last longer and feel more comfy, so I do agree that for shoes one should not try to scrimp too much.

Cheers,
Musicwhiz

Musicwhiz said...

Hi Createwealth8888,

Yep agree. My point to LP addresses the same concerns which you have brought up!

Regards,
Musicwhiz

Musicwhiz said...

Hi qeysersoze,

Yes on the shoes, and also for the smartphones. I do have colleagues who can check mail on the go and it does help with the job; so far my boss has not asked me to upgrade even though he as a BB; but for work purposes I am keeping my options open. Otherwise, I really would not like to be viewed as ostentatious!

As for branded goods, well if your profession requires it then I guess no choice. But if one splurges on such items for personal image, then I think one needs to have really, really deep pockets! Haha...

Musicwhiz

Musicwhiz said...

Hi MM,

Sorry for the late reply. Yes that is what I am working towards as well - financial freedom and debt-free so that I can live the life I choose and not having to worry that I NEED a job. As you said, I am sure the feeling will be totally liberating and I am waiting abother 5 years to find it out!

Thanks too for your encouragement and narration of what's important. This means a lot to me.

Regards,
Musicwhiz

Musicwhiz said...

Hi John Koh,

Yes thanks I enjoyed your post!

Cheers,
Musicwhiz