How People Around Us Make Us Overspend
Every day, we’re bombarded by marketing that tells us that we deserve an overpriced product or service, and that successful people buy them (implying that if we can’t, are we really successful?)
Marketing has an effect, but worse is the influence people we know have on us. It’s easy to dismiss an ad showing Shah Rukh Khan, since we can’t relate to him. He’s nothing like us, so if he drives a certain car, it has nothing to do with us. But we can’t dismiss people who are like us — friends, relatives, neighbours and colleagues. Most of us consider whatever people around us are doing to be reasonable; we don’t think from first principles what we need when buying a product.
Nowadays, we’re seeing more and more once-unaffordable products around us: my apartment has at least one BMW, Mercedes, Audi, Jaguar and Volvo.
There are two ways we’re influenced to overspend:
First, if many people we know own a 30 lakh rupee car, we think it’s reasonable to buy one, so we do. 30 lakh rupee cars were available earlier, too, but the difference was that our friends didn’t own them, so it would have felt unreasonable to buy one, just as it would if you were to buy a helicopter. Seeing other people buy 30 lakh rupee cars removes this mental restraint. In earlier times, like the 80s and 90s, before India became prosperous, we didn’t have many products to buy. Now, in our modern capitalist economy, there are costly products in every category from cars to bikes to a 1 liter bottle of ghee that costs ₹1200! Our mental restraint is the only thing that prevents us from going crazy and shopping till we drop. Or till our bank account drops. Throwing away this mental restraint is dangerous, but that’s what the people we know are doing to us by buying 30 lakh rupee cars.
Second, and insidious, we may tell ourselves, “No, I’m a cautious spender, just because Ananth, Suresh and Ramesh own 30 lakh rupee cars, I won’t buy a 30 lakh car; I’ll buy a 20 lakh one.” We pat ourselves on the back for being prudent, not realising that if we weren’t influenced by friends driving 30 lakh cars, we may have bought a 10 lakh rupee car instead. This is the same effect where if a restaurant has a ₹1000 dish, we may not order it, considering it too costly, but if they had another dish for ₹2000, we’ll consider the ₹1000 dish to be reasonable1 and order it.
By comparison, but we don’t realise it.