The Myth of Luxury Shame: Having More Wealth than Family and Friends Has Had Little Affect on the Spending of the Affluent

In November 2008, Newsweek published an article stating that the American affluent population was “experiencing an unfamiliar emotion:  luxury shame”.  The article, as well as several others that have appeared in various media since then, explained that across America, the affluent population was straying from conspicuous consumption, and engaging in “stealth wealth” because conspicuous consumption just didn’t feel right in these difficult economic times even though the affluent could still afford the finer things in life.

According to a recent tracking study of the wealthiest 10% of US households, the American Affluence Research Center found that in fact a mere 7% of survey respondents indicated any signs of luxury shame or stealth wealth.  For those who did reduce spending because of their self-consciousness, they did so an average of only 4.5 times during the year.  Vacations, new cars, and dining out were the three biggest categories where this small share of the affluent consumer market reduced its spending due to luxury shame.

Despite the fact that 41% of survey respondents acknowledged feeling self-conscious about being in a better financial situation than those around them, we see that not many felt badly enough to change their spending habits because of appearances.  Rather, respondents were more likely to have indicated a change in spending habits due to uncertainty when the economy will recover, decline in value of investments/savings, and a desire to spend less and save more.

It seems the media has it wrong.  Although luxury retailers have seen declines of 10-25% during this recession, those declines are most attributable to “aspirational” consumers who were living beyond their means but can no longer afford to do so.  The change in spending habits of aspirational consumers has given the biggest blow to luxury retailers.  The true affluent have reduced only some spending due to declining net worth, but the truth for the affluent market seems to be that old habits die hard.  Especially spending habits.

The national survey included 684 affluent men and women with an average of $300,000 household income, $3.1 million average household net worth, and $1.2 million average value of their primary home.