You Can’t Live in Those Gucci Shoes

There was an old woman who lived in a shoe…

It’s likely that there are going to be more than a few Gen X women living in their Gucci shoes.  Because the way that they are spending, they won’t have much savings left for their retirement.

Studies conclude that over the span of her life, a woman typically spends $25k on shoes.  The average woman owns 19 pairs of shoes, buying seven new pairs per year.  Apparently a quarter of survey respondents confess to hiding their new shoes purchases from their boyfriends.[1]

It may seem humorous but if you do the math, the effects of this spending are very serious.  Let’s visit Lisa, age 35, a Gen X female who works as an attorney, and her coworker Sean, also age 35.[2] Let’s suppose that after a conversation about how they are broke (while sipping $25 martinis at a bar on Madison Avenue), Lisa and Sean decide to start saving at the end of this year.  If each person contributes $5.5k and earns an average rate of return of 5% over the next 35 years, Sean will have a little bit more than half a million dollars by 2048.  Lisa will have accumulated about $100k less than Sean.[3] Assuming some inflation, neither Sean nor Lisa’s savings are enough to comfortably support them for longer than a few years if they retire at age 70.  This is only a simulation, but the numbers show the serious potential effect of Lisa’s shoe habit.  Over time, the effect of spending that extra $1k on Gucci shoes over 25 years could amount to a loss of $100k of wealth by the time Lisa retires.

In these Gen Xers’ defense, this subpopulation was acutely knocked off its grind by the crisis.  Many Gen Xers were in the primes of their careers when the layoffs started in 2007. Up until then, they had been beneficiaries of the bull market which pumped their paychecks and inflated expenses.   When hard times hit, the lifestyle adjustment couldn’t happen quickly enough to save them from drawing down on their 401k’s.  It’s thrown many off of their high earning career trajectories.  Gen X is now chronically undersaved; but now with the worst part of the crisis over, the time is ripe to step up to the plate and start saving.

The United States Gen Xers are not the only ones succumbing to the evolutionary need to feel foxy in those Christian Louboutin red high heels.   Let’s turn our gaze to the world’s largest consumers of luxury brands. Data shows that the world’s most successful women are transforming into luxury brand addicts in China, from which over half of self-made female billionaires hail.  Apparently the psychology of the X chromosome is not country specific.  The percentage of income saved by Chinese women dropped from 55% to 24% in the three years before 2009.  While Chinese men historically bought big-ticket items to bribe the government, it is now women who buy half of all luxury goods.  This has more than doubled from a decade ago.[4] Even the world’s best savers fall victim to the luxury brand drug dealers.  No wonder the Kardashians are printing more money than the US Treasury Department.

The Census says that the average duration of a first marriage in the United States in 8 years.[5] The average age of a microwave oven is 9 years.[6] As discussed in my blog post entitled “You Can’t Eat the Prada Bag,” a big portion of Gen X is going to be growing old alone (and apparently broke) with social security as extinct as the Tyrannosaurus Rex.

Here’s the critical principle that many people overlook.  It’s not how much you earn; it is how much you save that determines your overall wealth.  That is true in whatever currency or country or language you measure it, and for folks of all genders. The secret to growing wealthy is slow accumulation of small amounts of money over a long period of time.  Spending $300 on a pair of shoes is not bad in isolation, but a lush lifestyle catches up slowly over the decades.  Maybe instead of pouncing on the Gucci we should “Drop It Like It’s Hot” to quote Snoop Dog.


This is neither an offer to sell nor the solicitation of an offer to purchase any interest in GIM or any other investments discussed.   This publication is for informational purposes only; it is not intended to be a solicitation, offering, or recommendation by Grillo Investment Management, LLC of any product, security, transaction, or service.  It should not in any way be interpreted as investment, financial, tax, or legal advice.

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[1] Donnelly, Erin.  “Women Spend Nearly $25,000 On Shoes Over A Lifetime, Study Finds.”  StyleList, June 28th, 2010.  January 18, 2013.

[2] These are fictitious characters used for illustration purposes. Any likeness to real people is entirely coincidental.

[3] Our compounding method was quarterly compounding. We assumed a base value of $5,500 in Year 1, and that shares were held for 35 years. Data contained in this graph is an estimated projection which serves as an illustration only. In no way is performance guaranteed historically or in the future. This is a simulation and does not depict historical returns of any GIM vehicle which we are holding out as existent over this time period.  Hypothetical simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated or hypothetical results do not represent actual trading.  They are designed with the benefit of hindsight.  This does not serve as a representation that any GIM account will or is likely to achieve performance similar to that which is shown. This analysis may not relate, or relates only partially, to the services offered by GIM at the present time. The results are not actual trading results and they may not take into account the effect that relevant factors might have on GIM’s decision-making if GIM were actually managing clients’ money over this time period. Dividend rates are not guaranteed payments, nor can they guarantee a rate of return. This illustration does not take management fees, taxes, or any other fees of any sort into account.

[4] Ni, Vivian.  “Consumption Trends and Targeting China’s Female Consumer”, March 8, 2012.

[5] Kreider, Rose M., and Ellis, Renee.  “Number, Timing, and Duration of Marriages and Divorces: 2009”.  United States Census Bureau.  Current Population Reports. Issued May 2011.

[6] Bradford, Stacey.  “Kitchen Appliances: How Long Do They Last?” CBS Moneywatch.  October 12, 2010.  Sourced from a study by National Association of Home Builders.