Conspicuous consumption: The trend that will destroy your finances

"I spend money on my projects. I'm spending money fast… I'm just from the bank!" This is what popular singer Willy Paul said as he splashed bundles of cash on his Facebook wall on Monday this week. 

In July 2021, comedian Eric Omondi showed off a wad of notes totaling Sh3 million spread on the bed and the surface of a room. "This is genuine sweat and blood, genuine God-given talent," he said. Earlier that July, fellow comedian Mulamwah had also publicly displayed nearly Sh1 million as the fruits of his hard work. "Today I am going to buy my first ka shamba," he said. 

The display of cash by the three artistes mirrors the everyday life of many people who are caught up in a trend known as conspicuous consumption. The theory was first discussed by American economist and sociologist Thorstein Veblen in his book, The Theory of the Leisure Class.

He claimed that there was a direct relationship between a person's material possessions and their status in society. The "pecuniary strength" of an individual portrayed honour and esteem in a community. It involved the lavish consumption of luxury goods such as jewelry.

Moreover, Veblen claimed the goods consumed by such individuals were wasteful and did not hold any practical useful value to the buyer. He termed consumption of the goods as a conspicuous waste.

Social media revolution

Previously, materialism was mainly manifested around neighbourhoods where residents tried to keep up with the Joneses. However, social media has triggered an explosion of conspicuous statuses on personal consumption. "A few years ago, you would only spend your money to look like or keep up with the Kimanis next door. This pressure has now been taken to social media," says psychologist Raphael Odaya. 

Odaya says people on social media desperately want to show that they are doing well in life. "If you go on holiday in Dubai, you will be dying to post photos of yourself during the desert safari," says Odaya. He explains that social media platforms provide an adequate disguise for people to boost their sense of self-worth.

Dirty money

Ironically, conspicuous consumption tends to go hand in hand with dirty money. There was Hushpuppi, the Nigerian Instagram celebrity who is now facing criminal charges in the United States, who flossed with designer labels and high-end cars online. Then is the Sudanese, Young Tycoon' Lawrence Lual Malong who was sentenced to six years in a Ugandan jail over a $1m gold scam. He also lived large on social media. Recently in Kenya an expose' cast many bling-bling influencers on social media as making money from Wash-Wash scams. 

"Common sense would require a person who has acquired their money through dubious means to stay behind the camera. But human beings are wired to seek and attain legitimacy. They grab every moment to be close to respectable members of society to gain this legitimacy. What better way than to display their material life," says social Odaya.

National consequences

According to financial and investment advisor Geoffrey Njiraini, when conspicuous consumption is the trend nationally, individual and collective finances will suffer. "This trend makes for poor saving habits, debt, and poor financial decisions both on a national and individual level," he says. 

For instance, according to a survey by EFG Hermes, Kenyans save the least in East Africa, and the saving rate locally is below the continent's average. Kenya's saving rate is at 12 percent, way below Africa's average of 17 percent. However, consumption and cash flow rates are the highest in Kenya compared to Uganda and Tanzania. In addition, Njiraini says that the tendency to spend to impress could result in bad government financial decisions, which either trigger higher costs of living or enlarge public debt. "Because people want to associate with luxury, bad public policies could get implemented," he says.

Living the YOLO lifestyle also promotes corruption as government officials demand kickbacks and tenderpreneurship gains legitimacy. 

Psychological and personal consequences

Your self-esteem will suffer the most from conspicuous consumption. In groups like Home Beautiful on Facebook, members show off their homes and interior décor. "Recently, members in this group showed off their vehicles. One member showed off her plane. If you are a member and have nothing to show, you could subconsciously start altering your lifestyle to fit in," he says. His sentiments are echoed by Njiraini, who says that there will always be someone richer, and with a flashier car on the highway. "The pressure could make you feel like a loser in life. You may take a loan to maintain a perceived lifestyle," says Njiraini. According to Nancy Amunga, an entrepreneur and the founder of Dana Communications, conspicuous consumption will also lead to impulse spending. Amunga says that she struggled with impulse buying on things she didn't need. "I would buy a top dollar dress and only wear it once. I realised that I was spending money on things I did not need in the long run to boost my prestige," she says.

Business consequences

Status consumption is also widely used by people to show off their aspirational social standing in the business. According to Njiraini, this has led to business investment decisions aimed at making businesses look as desirable as the competition. 

"In business, conspicuous consumption inevitably ends in losses. This is because spending is not informed by the business needs or the provision of solutions, but rather to project a certain image," he says. This is what Victoria Musyoki, the founder and chief executive officer of Kiddie World, an adventurous company that targets children and young adults, found out. "When I was starting my business, I spent Sh1,180,000 (which was my entire savings plus a loan) on play equipment just because my competition seemed to be making a lot of money," she says. "I did not have my own space and had no idea how costly it would be to set up and maintain the equipment. I was focused on projecting that I was as big as the competition," she says.

Signs you are addicted to conspicuous consumption

According to Odaya and Njiraini, you may be suffering from conspicuous consumption if you answer yes to any of these questions:

· Pressure to post: Do you feel pressured to post your luxurious acquisitions, achievements, and holidays on social media?

· Consumer stalking: Do you subconsciously find yourself stalking people who live the life you want on social media?

· Negative personal perception: Do you feel that you (or you and your spouse) are stuck in life because you have nothing to show off to people in the neighborhood or on social media groups?

· The bargain: Do you constantly find yourself hunting for bargains and shopping for items you don't really need? 

· YOLO lifestyle: Do you find yourself spending everything that you earn on material possessions, which you mostly spotted on social media?

· Your finances: Do you know the latest iPhone price but don't know your debt to income ratio or even your credit score?

· Earning vs spending: Would you prefer to own a Range Rover even if you can't afford rent? Would you prefer to live in a Sh40,000 bed sitter in Kileleshwa than a Sh8,000 spacious two-bedroom in Kinoo? Is your savings or investment account empty but your wardrobe is full of high-end clothes, shoes, and jewelry? 

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