What does $410,000 buy you these days? A house, a couple Lamborghinis, a doctoral degree from Harvard or…one Delaware license plate. Yeah, you read that right. A few weeks back, a Delaware resident purchased a license plate at auction for $410,000. At that price you may be wondering if it adorned JFK’s car that fateful day in Dealey Plaza, or if it came from the Batmobile or a Bond car. Nope. It was just Delaware license plate number 20, which in our first state makes it an extremely valuable commodity. Let me explain.
In 1905, Delaware became the first state to require residents to register cars. Residents would assign themselves a 1 to 3-digit number and register it with the state. At that time, most people didn’t have the money to buy a car. It wasn’t until late 1908 that the Model T was introduced, so if you were seen driving with a low-digit license plate, it was a sign you were wealthy enough to buy the expensive cars of the day. Just like that a status symbol was born. Today the plates symbolize generational wealth or political connection, as you typically need one or the other to get your hands on one. One resident noted that it’s more important in Delaware to have a low-digit plate than it is to drive a Rolls Royce.
I must admit when I read about this ‘road hierarchy’, I found it ridiculous. “How can people be so shallow when there are starving kids in the world?” I pompously thought. Then it occurred to me, is this really any different than wanting a $750 pair of Christian Louboutin heels with their coveted red soles? Or a multi-thousand-dollar Rolex watch? Or a million-dollar Bugatti? Isn’t there something that all of us are willing to pay more for because it carries with it a symbol of status? Let’s be honest – a purse at Wal-Mart will do just as good a job carrying my stuff as a Birkin bag, but I only dream about one of them.
Sure, the argument can be made that certain brand-name items are better quality, but I’ve been covering my feet, telling time and getting from A to B just fine without any of those luxury products. The reality is that these purchases are rarely about additional utility; it’s about the status they hold. It’s about what someone will think of you when they see you have those shoes or that watch. It’s about how that positive regard from others makes us feel.
Despite my earlier comment, seeking positive regard from others doesn’t make us shallow. It makes us human. In Abraham Maslow’s well-known hierarchy of needs, he ranks belonging and esteem as critical needs, right after things like food, water, oxygen and physical safety. You don’t have to think beyond the school playground to remember a time when you wished you had the Starter jacket, the L.L. Bean monogrammed backpack or the Air Jordan’s so you would fit in with your peers. We want to belong in a group.
We also want to have some measure of importance, respect or status within a group. We need to have a sense of value. When nature and nurture cooperate, we might easily come by this esteem ourselves. We might be able to feel valued without relying as heavily on external recognition. Other times, we look for esteem from outside sources and one way to gain that favor is to buy things that are desirable, exclusive or special. We use what we own to demonstrate our worth.
Of course, people do all kinds of things to stand out and feel special. We might take up hobbies or focus on our careers or go on reality TV shows. The consequences can be detrimental, though, when we subsidize our esteem with money. When we lose the delineation between our self-worth and our net-worth, it can cause higher levels of debt, lower income, lower net worth and a higher likelihood of lying to a spouse about money. Why?
If you feel you need a Rolex to fit in with the other members at the club, that emotional need for belonging and esteem is likely to overrule your rational awareness that you can’t afford it. If you feel you need to give expensive gifts or donations so people think you’re generous or well-off, the pressure to satisfy that need directly competes for dollars that might be better used elsewhere. If being viewed as successful or wealthy is part of your identity, your focus shifts to maintaining the appearance of wealth rather than actually creating it.
Does this mean we are hopelessly doomed to a future of grossly overpaying for license plates? No. There are definitely ways we can work to lessen our susceptibility to status symbols.
- Build awareness around your motivations. Do certain people, environments or circumstances drive you to keep up appearances more than others? Can you identify how you feel in those moments? Even if you can’t stop yourself from doing it at first, just noticing what you’re doing and when is a great first step.
- Avoid traps. If you know going shopping with that friend never ends well, pick a different activity for the two of you. If you always wind up giving more than you intend at charity events, skip them and send a check or only bring a certain amount with you.
- Focus on personal development. Building mastery in something makes us feel good and lessens our need for external praise. Explore something you’re curious about or set a goal that has significant meaning to you.
- Pick your luxuries. It’s not wrong to buy a status symbol but the ones we buy should give us joy that endures beyond the ooh’s and aah’s of our friends. Splurge when it counts, skip when it doesn’t.
It’s one thing to pay a premium for something special, but it shouldn’t come at the cost of our financial security. There are less costly ways to come by belonging and esteem – unless you live in Delaware.
Mind Over Money, Brad Klontz and Ted Klontz