You can buy a handbag for $500. I’ve been told that people really do pay this for an item that holds your crap. You can buy a watch for $5000. It tells time. You can buy a $90,000 SUV instead of a $40,000 minivan which generally will tow around the same amount of kids and crap. Why would you pay this? What the makers of these products will tell you is it’s quality. If you want a really good bag, or watch or shirt or any other high end item going for many times more than it’s competition, that’s just what it costs, but rest assured you’re getting the best. I’d certainly hope that you are getting high quality items, but FYI it’s not always the case. Look at these dependability ratings from JD Power for cars.  Some high end luxury cars score well, but for the money they charge, wouldn’t you expect them to all be very reliable?  Why do Hyundai and Kia beat Acura, Audi, Jaguar, Mercedes, Volvo, Cadillac, and Land Rover?   I know this is only one measure of the quality of the product, but if I were paying double or triple the price, I’d want some assurance that this thing wasn’t going to be in the shop all the time.

What manufacturers of clothes, bags, jewelry, and tons of other things have figured out is we not only want the functional utility of the item and of course, we’d like it to be nice, but we also need a subtle or not so subtle symbol of our wealth or success we can display to the world. It’s similar as the bird that builds a display to impress a mate (for you super nerds like me, check out the bowerbird). You are buying status. Perversely to the laws of supply and demand, the higher price increases demand. You need the manufacturers to get the word out that their stuff is expensive, and need some label or other marking on the outside so we all recognize that expensive thing.

A classic example of purchasing status over quality is relabeling for clothing at discount stores. There is an accepted practice of designer clothing that is not selling well at high end stores to be shipped off to discount stores to be sold at a much lower price. This famously came to light with Ivanka Trump’s clothing being rebranded to be sold at Stein Mart.  Think about this. They are putting MORE labor into the item, and LOWERING the price. For. The. Exact. Same. Item. The reason for this is that if your favorite designer is all of a sudden showing up in Target, that item is no longer a display of wealth and status, it loses value!

Same goes for people living in dumpy apartments driving high end cars. Many more people see you in your car even though you spend more time in your apartment. You are making the conscious decision that is not quality or luxury in your life you value, it’s status, or even just the appearance of status.

This isn’t to say buying status isn’t worthwhile for you.  There may be times when the appearance of success is important or you genuinely find the increase in quality reasonable.  The main thing to recognize is don’t let someone lie to you—or lie to yourself—that you are buying that $500 handbag solely for its quality. You are mostly buying the status symbol that comes with it. Like everything else, if you are budgeting and choose status as something you’d like to purchase, then go ahead, but do it for you, not for the impression on others.