3 Luxury Items You Don’t Need to Buy
Dear Rich Lifer,
Can you really taste the difference between a $5 bottle of wine and a $40 bottle?
In 2011, psychologist Richard Wiseman tried to find out. He invited 578 people to taste a variety of red and white wines, ranging in price from $4.60 a bottle to $40.
What Wiseman found was that testers could only tell the difference between the expensive and inexpensive wine about half the time.
Other studies arrived at similar conclusions — even when the testers were wine sommeliers — so why do people insist on buying high-priced wine?
The reason why people choose to buy expensive wine is the same reason we insist on paying top dollar for diamond engagement rings, designer sunglasses, sports cars, and beauty products…pride.
A study out of the University of British Columbia found the feeling that motivates luxury purchases the most is pride — and there are two types of pride that motivate you.
The first, is accomplishment aka “authentic pride” — which usually motivates the purchase in the first place.
The second, is snobbery aka “hubristic pride” — which is the feeling you get when you show off your new luxury item.
These two motivators create a paradox in which someone buys a luxury item — maybe after completing a big project at work or retiring after a long career — but the purchase signals arrogance to those around you (rather than accomplishment).
Hence why luxury goods can be polarizing. What’s interesting is this effect is generally more pronounced in people low in narcissism.
So, don’t feel bad about wanting luxury goods, especially if you just accomplished something meaningful. But, not all luxury goods are worth your money.
In fact, there are some luxury items you should avoid altogether, simply because their ROI is so low.
For example, expensive wine…
The Harsh Truth About Expensive Wine
Before the wine experts turn their noses up, let me start by saying there is research that supports the expensive-wine-is-better narrative.
In 2008, food writer Robin Goldstein analyzed data from 17 blind wine tastings. The data covered more than 6,000 observations from more than 500 people, including both amateurs and wine professionals.
It also covered all types of wine across a wide price spectrum. His findings, published in Research in Agricultural & Applied Economics, were that the average person was slightly less likely to enjoy an expensive wine than a cheap one.
Only people with wine training liked the expensive wines better. Goldstein concluded that recommendations from wine experts are actually “poor guides for non-expert wine consumers.”
So what’s a casual wine drinker to do?
First, learn what makes an expensive wine.
There are three major traits to expensive wine and they are oak, time and terroir.
The most coveted wines in the world age their wines in oak barrels because it adds flavor to the wine and exposes the wine to oxygen, which smooths out the taste.
Oak barrels are expensive because only two barrels can be made from an 80 year old oak tree. French barrels are in demand so they cost about twice as much as American barrels.
Older wines are more expensive because they take up space. But a well aged wine usually tastes rounder and smoother because the acidity and tannins have time to reduce.
By far the most expensive trait is where the grapes are grown. As the terroir becomes more specific and more scarce, the price usually jumps.
For instance, if you buy a generic ‘California’ wine it might cost $12 compared to a ‘Sonoma’ wine at $17 compared to a ‘Russian River Valley’ (a sub-appellation in Sonoma) at $22.
How to Drink Expensive Tasting Wine for Less
Look for these traits in wines that come from developing wine countries. In other words, avoid buying wines from countries known for their wine.
So long as the wine you’re buying has these three traits, your chances of discovering good tasting inexpensive wine are high.
Stop Getting Ripped Off On Eyewear
Another luxury purchase you can avoid is designer eyewear. The reason why eyeglasses cost so much is because one company basically controls the entire market.
EssilorLuxottica, makes dozens of brands of designer frames, including Burberry, DKNY, Giorgio Armani, Oakley, Ray-Ban, and Versace.
The company also owns several major chains that make and sell eyewear – including LensCrafters, Pearle Vision, Sears Optical, Target Optical, and Sunglass Hut – as well as EyeMed Vision Care, the second-largest vision insurance company in the country.
In 2019, the LA Times, published an interview with two eyewear executives that claimed EssilorLuxottica effectively controls the entire eyewear industry, resulting in widespread “price gouging.”
One executive claimed you can buy a set of designer-quality frames in China, where many eyeglasses for the U.S. market are made, for around $15. You can also get a set of “first-quality lenses” for $1.25. Yet, those same frames and lenses in the U.S. will cost you $800.
How to Save on Glasses
The best way to save is to buy your glasses online. Buying online takes a little extra work, but it allows you to get quality frames and lenses without the high markup.
Here’s how you do it:
First, get a prescription. Go to an optometrist and get a new prescription. When you’re getting your prescription, ask for your pupillary distance (PD). This measurement is necessary to place the lenses correctly in your glasses.
Next, try on frames. A lot of online retailers will let you try on frames “virtually” by uploading a picture of yourself and superimposing the glasses on your face.
The only drawback is you won’t be able to tell how comfortable the frames feel. But there are some vendors that will mail you frames to try on at home.
Third, research the seller. Check their rating at the Better Business Bureau and look at reviews and customer complaints.
Fourth, read the return policy. Make sure you can return your glasses if there’s a problem. Also check to see if there’s any warranty offered.
Fifth, enter your prescription carefully. Take your time when you type in your prescription. Some online retailers will allow you to scan the written prescription to avoid any errors.
Six, test your new glasses out and/or return them or visit a local retail store to get any adjustments made.
Where Should You Look Online?
Three retailers we recommend:
Quit Paying Top Dollar for Diamonds
Another luxury market that is dominated by one player is the diamond market. For most of the twentieth century, the diamond market was entirely controlled by De Beers.
De Beers manipulated supply, signed agreements with global suppliers to control distribution, and set prices. In addition to having total control over the price and supply of diamonds, De Beers also found a way to manipulate market demand through it’s clever ads, like “A Diamond Is Forever.”
More recently, De Beers has come under attack by lab-grown diamond companies. If you think about it, a diamond is just crystallized carbon, and scientists have known for years how to create diamonds using cheaper forms of carbon, like charcoal.
Lab-grown diamonds are not imitations, they’re physically and chemically the same as diamonds mined out of the earth.
So why then are people turned off by lab-grown diamonds?
The main reason lab-grown diamonds aren’t as popular is because there’s been a massive PR campaign against them by De Beers.
De Beers has gone out of its way to distinguish between “synthetic” diamonds made in a lab and “real” ones that come out of mines.
But, in 2018, the U.S. Federal Trade Commission made this kind of advertising harder for De Beers. The FTC revised its jewelry guidelines to remove the word “natural” from the legal definition of a diamond, recognizing that lab-grown diamonds are genuine gemstones.
It also ruled that it’s deceptive to use the terms “synthetic” for lab-grown stones, or words like “real” and “genuine” for mined ones, in any way that implies that lab-created diamonds are fake.
In response to this, De Beers has taken a surprising approach and started making and selling its own lab-grown diamonds.
Reuters says De Beers is trying to “create a clear distinction between lab-grown diamonds and natural gems” by marketing its lab-grown stones as low-end fashion jewelry.
De Beers has driven down the price of lab-grown diamonds by more than 40 percent compared to natural stones. The strategy is to make lab-grown diamonds less profitable and allow De Beers to control both sides of the diamond market.
The Good News For Consumers
While De Beers fights to maintain its position in the market, diamond lovers can rejoice in cheap lab-grown stones.
Think of it this way, you can buy a diamond ring made in a lab for 40 percent less than you’d pay for a mined stone the same size – or get a stone that’s 40 percent bigger for the same price.
Not a bad deal. Plus you can guarantee you’re buying conflict-free diamonds and putting less burden on the environment.
Finding cheaper alternatives to luxury goods is not about cutting corners on quality, it’s about guaranteeing you get the most bang for your buck.
To a richer life,
The Rich Life Roadmap Team