Amid rising living costs and economic uncertainty, luxury items may be further out of reach for many people. While the rich and famous aren’t about to hit pause on their luxury lifestyle, they might be turning the volume down just a little.
They call it “quiet luxury,” but the fashion world is anything but hushed about it.
Vogue magazine has identified a string of celebs sporting muted outfits in recent months, while hit Netflix dramas have popularized the style.
As a fashion and interior design trend, quiet luxury emphasizes high-quality, understated pieces over flashy logos and trends. Although these outfits may be less eye-catching, the price tags are just as eye-popping. One cashmere baseball cap from Loro Piana – a label pioneering/ forefront of the trend – can be all yours just for a cool $600.
This article will examine what is amplifying quiet luxury and consider advice from Wealthtender financial advisors on how to account for luxury items in a personal budget.
What’s Up with the Down Low?
Some of it may come down to economics.
Thomaï Serdari, an academic who studies luxury at NYU’s Stern School of Business, recently told CNBC that the pandemic’s “K-shaped recovery” that widened the gap between the haves and the have-nots is likely a key factor.
Rich Americans are now even better off than before, yet rather than flaunt their wealth ostentatiously, the well-heeled returning to the more subdued “stealth-wealth style” they had adopted in the aftermath of the 2008 financial crisis.
Financially, this year American households are under severe pressure. In April, a clear majority (61%) of Americans reported living paycheck to paycheck, while 70% said they felt stressed about their money situation.
Even well-paid professionals are spending all they earn. Almost half (49%) of all workers enjoying six-figure salaries are living from one paycheck to the next, according to a LendingClub survey.
“So-called ‘Quiet luxury’ resonating during times of wealth inequality makes sense; it’s wealth whispering rather than shouting,” says Jason Siperstein, CFP®, CFA, and President at Eliot Rose Wealth Management. “But another factor could be the rise of ‘conscious consumerism.’ Wealthy individuals may prefer brands that are less about flash and more about sustainable, ethical practices.”
Indeed, a 2021 academic study in the Journal of Business Ethics found that luxury consumers who engage in ethical and sustainable consumption tend to opt for understated, enduring pieces over flashy, trendy items.
Make Dollars and Sense?
For most people, budgeting for luxury items requires careful planning compared to other forms of discretionary spending, such as dining out or entertainment. Unlike these more immediate indulgences, the cost of luxury purchases may require strategy and discipline to acquire. So does luxury belong in the ‘disposable income’ category, or do they need to be planned for differently?
“In a client’s plan, I place luxury items in the ‘wishes’ section, less important than ‘wants’ and even less important than ‘needs’,” says Tim Uihlein, CFP, MBA and head of Partner and Managing Director of Vincere Wealth Management.
“Luxury items usually fall into the discretionary spending category of a client’s financial plan,” says Doug Greenberg, President of Pacific Northwest Advisory. “Comprehensive financial planning involves guiding clients in prioritizing their expenditures to align with their financial objectives… This might include discussing the value and satisfaction they derive from luxury purchases versus other potential uses of their disposable income.”
Fake It Until You Make It?
With planning, high earners may have luxury within reach. Yet it is a different matter for lower-paid workers who cannot afford to spend anything on big-ticket items.
I think this trend is just taking advantage of those willing to step out of their comfort zone to buy these items,” says Uihlein. “Many of these individuals financially shouldn’t be purchasing them, though.”
“Whether luxury is loud or quiet, I’m always coaching clients and their behaviors on living within their means,” says Nathan Mueller, MBA, financial advisor and founder of BlackBird Finance.
Mueller, who has analyzed the academic literature on luxury consumption’s links to imposter syndrome, casts doubt on whether high-end items can satisfy.
“Most research says that even though you think you will feel better buying that luxury good, it is not the case,” he says. “Also, people already in debt are more likely to get drawn further into debt for luxury items than others who aren’t.”
Keeping things understated may help alleviate anxiety by the have-nots.
“I feel that ‘quiet luxury’ will be a good thing for the average consumer,” adds Mueller. Without clothing labels, the consumer will be less aware of the luxury brand being worn by high society and will have less desire to have it for themselves. Which means more people will live within their means.”
“These trends can influence broader societal norms and expectations around consumption and status; they should not dictate an individual’s financial decisions, which should be based primarily on their personal financial situation and goals,” says Greenberg.
While some appreciate quiet luxury’s focus on comfort and quality over trendiness, others may see it perpetuating elitism and exclusivity. Whether or not it can deliver greater value remains will depend on a consumer’s preference.
Yet, the fact the trend has become the talk of the fashion world raises questions over whether it has achieved its intended effect. The great irony may be that, in eschewing the most conspicuous of luxury items, celebrities and influencers are generating even more media buzz for their ‘quiet’ style. Or perhaps that was the intention all along.
This post was produced by Wealthtender and syndicated by Wealth of Geeks.
