Chapter 11 – Clothing Expenses

Clothing Expenses

Chapter 11 – Clothing Expenses

The Master said, ‘A true gentleman is one who has set his heart upon the Way.  A fellow who is ashamed merely of shabby clothing or modest meals is not even worth conversing with.”  ~Confucius [Analects 4.9][1]

Just like the previous chapter, please make sure you’re well aware of how much you’re spending on clothing expenses.  If you don’t know, you should start a 30-day Spend Plan challenge, so you can see how much you’re spending on clothing expenses in a typical month.

Most vanilla certified financial planning budgets recommend spending no more than 5% of your monthly budget on clothing.[2]  I’d caution considering clothing a recurring monthly expense requiring 5% of your monthly paycheck.  Clothing is essential and requires replacement, so some months may require more than 5% and some less.  In 2016, the Bureau of Labor and Statistics shows that we spent about 3.4% of our annual income on apparel.[3]  Keeping track of your spending using apps will help you stay at or below 5% for clothing expenses.

Clothing is a necessary expense and a controllable luxury.  Keeping your clothing expenses at or below 5% should allow you to live within your means.  However, you can quickly exceed your means by chasing brand names.  The cost of clothing is rarely dependent on the cost of materials.  The cost is often associated with the brand name and the demand.  One pair of Air Jordan shoes sold for $104K.[4]  Though there’s no available data, after nearly two decades of helping people with their finances, I’ve noticed that reducing clothing expenses is one of the best way to save money—second only to reducing dining out expenses.

I believe one of the reasons Americans are spending less than 5% on clothing expenses is due to the changing ways that we shop.  People are buying more and more off the internet, chasing deep discounts to the prices of stores.  Amazon (AMZN) may become the biggest apparel retailer in 2017 with sales climbing 30% to $28B.[5]  Shopping usually required going to department store at a mall and paying the store price, but Amazon and Ebay have changed that paradigm.  Since 2002, 25% of malls have declined.[6]   This may not be as gloomy for stores as it may sound.  Many stores populated too fast and are just correcting based off the demand.  For example, in 2017, 60% of Macy’s stores planned to close are within 10 miles of another Macy’s.[7]

Fashion is fickle and consumer habits change frequently.  In 2017, H&M saw its first quarterly loss due to changing consumer spending habits—specifically, independent entrepreneurs selling clothing lines on Instagram and Pinterest.[8]  Celebrities, athletes, body builders, and models create their own clothing lines and are successfully putting pressure on major companies.  When you spend a dollar in the Financial Genome, it multiplies as it travels up from you, to a vendor, to shareholders, then gets invested, etc.  In economics, we measure this as the economic multiplier.[9]  Spending money through small businesses has a greater multiplier than when shopping with major corporations.

Choosing to purchase brand names and clothing expenses are personal choices but keeping expenses below 5% is good advice.  It will be interesting to watch the future of clothing and see the changing environment around the industry.  Unlike the food industry, which seems to be consolidating, the clothing industry seems to be becoming more independent.  Using the internet to find discounts on clothing will save you a lot of money.  Additionally, shopping at second-hand stores like Goodwill, Ross, or local second-hand stores can save you money while giving you access to brand name clothing.

Clothing Expenses
Added 5% for Clothing Expenses










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