How Much of Our Spending Is for "Proving" Ourselves?

Reflections on a new, "atypical" billionaire's interview

Have you ever imagined one day you may become rich (if not yet)? Or even super rich?

If so, what would you do in your daily spending?

Here is what a new billionaire does:

Scale AI’s co-founder, Lucy Guo, still shops at Shein, does BOGO free at Uber Eats, and pulls up at work in an old Honda Civic, after becoming a billionaire.

What she does might be just a personal choice, not necessarily with a broader meaning.

But her explanation in a Fortune interview is interesting in a way.

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In addition to saying she doesn’t want to waste money, she also said (here is what gets interesting) that she no longer needs to prove herself.

“Millionaires need to prove themselves; Billionaires don’t”.

She reflected that when she was a millionaire, she did much of the “proving-herself” kind of spending as well, which she deemed common among millionaires.

• “Who you see typically wasting money on designer clothes, a nice car, et cetera, they’re technically in the millionaire range,” Guo explains. “All their friends are multimillionaires or billionaires, and they feel a little bit insecure, so they feel the need to be flashy to show other people, ‘Look, I’m successful.’ (Fortune, 2024).

Billionaires’, or even millionaires’, lives are quite far away from most of us. So what she said might seem irrelevant to our lives.

But it triggers a thought:

If millionaires are still trying hard to “prove themselves”, how much “proving” many of us have been doing in our spending?

Are you doing it too?

In a recent post, I presented some pretty stunning data on spending in the U.S., among which relevant to today’s discussion are:

• 50% of all purchases are driven by status or trends

• The U.S. has a luxury goods market as large as ~$110 billion, and is projected to grow to over 151 billion by 2029!

• 60% luxury buyers earn less than $125k annually, with more than a quarter luxury buyers earn less than $50k.

• 30–40% of luxury purchases involve using BNPL (Buy Now Pay Later) options, and nearly 60% use credit cards.

• Meanwhile, credit card debt in the U.S. is at a record high ($~1.2 trillions), with average APR as high as 21.91% to 28.15%.

• At the same time, 60% Americans are unable to handle a $400 emergency without borrowing; and the overall household saving’s rate is only 5%.

A pattern emerges from these data:

Middle or even lower middle income Americans are doing most of the luxury buying, by borrowing heavily, while having little or no savings or emergency funds.

This pattern may describe many developed countries as well.

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But how do all these make any sense?

Why do we borrow heavily to buy luxury goods, while not even having funds for emergencies?

Does the explanation above ring a bell?

Could it be for “proving” ourselves?

Then, until when will we stop doing that?

Since millionaires haven’t stopped, and the vast majority of us may never become a billionaire, are we going to end up spending our whole live “proving’ ourselves to others?

Or shall we stop NOW, and focus on pursuing true happiness and well-being?