The Overspent American – A Key Book for Financial Independence

Juliet Schor’s The Overspent American was one of the five books that put me on a vector towards financial independence.  I read the book in my early twenties, and the material helped unhook me from the unconscious spending patterns of modern society.

Key Ideas From The Overspent American

• People use spending to establish their social position–to send cues about their relative success.
• This behavior has taken place for centuries.
• Due to consumerism and marketing, expectations of how “success” should appear continue to ratchet higher and higher until people are signaling success while actually stretching their finances to the breaking point and beyond.
• Firms marketing brand name luxury goods are basically hypnotizing consumers through sophisticated persuasion techniques.
• Some Americans are breaking free from this cycle and “down shifting.”

These are simple concepts.  Nonetheless, reading The Overspent American early in life gave me a different way of thinking about handling money. Blowing all my cash on “social markers” to make the owners of fancy brands rich struck me as eminently stupid–a direct transfer or wealth from me to them.  So I didn’t play the game they were trying to trick me into playing.  My ideal became conscious spending with an eye towards long-term wealth accumulation.

Mighty Investor’s Tweak To The Overspent American

I don’t argue that you should attempt to completely transcend the reality of social signaling.  This is a deep part of life, probably hardwired into our natures.  I argue that you should just be smart about it.

Here’s how I think about social signaling.  Some of this may seem a little shallow, but it is honest and probably more realistic than just attempting to transcend it.

• Being in shape and bright and joyful sends signals of success.
• Having a car that is clean and undamaged sends a signal of success (more than just having an expensive one).
• High-quality shoes, belts, and ties send a signal of prosperity much more efficiently than a $1000 suit.
• Having a slightly “alternative” identity (wearing old Patagonia fleeces, slightly beat up cargo pants, etc) combined with being in shape sends an upper-middle-class signal without being expensive.
• Knowing you have crazy amounts of assets (a high net worth) boosts your sense of self and prosperity more than buying status symbols that fake wealth. People can sense that confidence.

Match Your Money To Your Values

So that’s The Overspent American.  Yes, some people simply love style and the ephemeral world of fashion.  I respect this.  More power to them.  For the rest of us, the goal should be to match the financial flows in our lives with our deepest values and long-term interests.