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Man in convertible, living the rich wealthy high life.

It used to be that spending money on status symbols for the sake of flaunting your wealth was an activity reserved for celebrities and millionaires. That has all changed. Conspicuous consumption, what was once referred to as "keeping up with the Joneses", has brought the lifestyles of the rich and famous to suburbia.

Just as most people consider themselves to be above-average drivers, most people assume they aren't the ones doing all this needless spending. They aren't wearing ten pounds of gold chains, or gowns created by famous designers. Four-hundred-dollar haircuts, sprawling mansions, Rolls Royces and private planes aren't in their budget, so they assume their spending is reasonable. However, a closer look at what you're spending might put your own lifestyle in a different light .

The Trappings Of Success
The competition is on. Everyone is looking for the smallest phone, the cable provider with the most channels and the television with the biggest screen. Add in desktop computers and high-speed internet access and you've created a list of America's growing "necessities." According to a 2006 survey entitled "Necessity or Luxury" by the PewResearchCenter, 33 per cent of Americans now view cable or satellite TV as a necessity. In 1996 that number was 17 per cent. Also, 51 per cent now can't live without a home computer, up from 26 per cent in 1996.

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Some items that were seen as fads or didn't exist in 1996 have also jumped onto the necessity list:

  • Cell Phone: 49 per cent
  • High-speed internet: 29 per cent
  • Flat-screen TV: 5 per cent
  • iPod: 3 per cent

Even huge sport utility vehicles are now being justified under the guise of safety. There are now so many of the behemoths on the road, it feels like the only way to be safe in a crash is to make sure you're driving one too.

Weekly maid services, private contractors and landscapers are clearly not necessities, yet they have become quite common. In all of these instances a little elbow grease could lead to huge savings. Cosmetic surgery, pleasure boats, McMansions, restaurant quality kitchen appliances, professional quality home gym equipment, and second homes are a few items that still qualify as luxuries in most people's minds, but that hasn't hurt their popularity. How long will it be before these items make the jump to the necessity category, too?

A Global Phenomenon
The western countries are well known for their excessive consumption, but the emerging middle classes in China and India are working hard to join the crowd too. While these major players gain the bulk of the attention, they are far from alone. From blue jeans in Russia to satellite dishes in Iraq, people around the world are coveting their neighbours' lifestyles.

Why We Do It
There are a variety of factors driving consumption:

  • The desire to show off our success
  • The need to have what other people have
  • Prolific advertising and product placements
  • Easy credit
  • A society that favours instant gratification over hard work

The Joneses Are Broke
Many of the people driving around the suburbs in their giant SUVs while talking on their new cell phones are deeply in debt. If you ask them how they are doing, they will tell you that they are just barely getting by. According to a Federal Reserve Board study, 43 per cent of American families spend more than they earn. Statistics from the Federal Reserve Board also show that, in 2005, household debt was at a record high when compared to household income. Not surprisingly there was also a record number (2,039,214) of consumer bankruptcies filed in 2005 according to the American Bankruptcy Institute .

As mentioned earlier, the grim outlook isn't limited to America either. A survey conducted by Newspoll Market Research indicated that nearly two-thirds of Australians say they cannot afford to buy everything they need. Yet, the World Bank cites Australia as having the twentieth highest per capita income in the world according to the publication "World Bank Development Indicators 2006". Luxembourg, Norway and Switzerland took first, second and third places. The U.S. came in at No.6 and Canada at No. 19. Why so much debt and such a grim outlook from areas of obvious affluence? It's simply a matter of people spending far more money than they should. If you can "afford" life's luxuries but aren't funding your 401(k) and maximizing your retirement savings , you need to reevaluate your financial situation.

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Trim Your Needs
Most people don't use all of the features on their cell phones. Nobody watches all of the stations that they pay for. You may need a car to get to work, but you don't need a luxury vehicle, and you certainly don't need a gas-guzzling sport utility vehicle. Remember, one person simply can't drive two cars at the same time, so there's no reason to own more than one.

The big homes, expensive toys and other goodies seem nice, but in reality they are unnecessary from a practical perspective, and will only make you happy for a very short period of time before the next "must-have" item rolls around.

Set Your Priorities
Remember when you were little and mom told you, "Don't worry about others; mind your own business and worry about yourself"? It's one of those lessons we all seem to forget as we get older. If you've got a healthy nest egg stashed away or an endless supply of cash, by all means spend. However, if you're concerned about the future, you need to curb your spending today.

Take a page from low-income America, and limit your "needs". The same survey that found iPods were a necessity for 3 per cent of people, found that the less you earned the fewer items you listed as necessities – items you could not live without. The lesson is, you shouldn't worry about what other people have; it's your money, so spend it wisely.

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