Bling‘œAppearances are often deceiving.’ ‘“ Aesop

What types of consumer goods symbolize higher income? Items observed by others: such as clothing, cars, and jewelry. Who spends more on these items? Blacks spend more on visible goods than whites.

Stereotype? Yes. But is it true? Yes! These findings are based on new research by Erik Hurst, an economics professor at The University of Chicago Graduate School of Business and Kerwin Charles, a professor in its Harris School of Public Policy. Hurst is white. Charles is black.

But their conclusions are less about bling and more about random, anonymous interactions. Hurst said, ‘œIf you’re high income but belong to a poor income group, all else equal, people are going to think you’re poor. The benefit for you is high to distinguish yourself from the poor group.’

Economist and sociologist Thorstein Veblen coined the phrase ‘œconspicuous consumption‘ at the end of the 19th century to describe the excess of the Gilded Age. The current equivalent is ‘œbling,’ a word created by rap artists who boosted themselves out of the ghetto with a new form of music and showed their improved economic status with flashy jewelry, expensive cars, and designer clothes. If you Google the word ‘œbling’ in a search for images, more than a million come up in less than a second. A word that didn’t even exist ten years ago is now shorthand for conspicuous wealth. The Oxford English Dictionary defines it as ‘œostentatious jewelry. Hence: wealth; conspicuous consumption.’

According to Charles, the word has caught on because it captures a real phenomenon. ‘œIn the black community, this particular kind of consumption is important in some way, especially for young people, because random, anonymous interactions are the ones that most concern them.’ Young black men are the most economically disenfranchised social group; they also have higher incarceration and unemployment rates than any other group, he pointed out. Charles quoted a popular rap song. ‘œIn it, the guy says, ‘˜I’ve got a job.’ He’s 25 years old. Why would you say you’ve got a job? Who doesn’t?

‘œHere’s who doesn’t: people he knows. And so he says, ‘˜Unlike these guys, I have a job. You don’t believe me? Look at this gold chain I bought.’ If everybody around him had a job, he wouldn’t have to say it, and he wouldn’t have to signal it. It wouldn’t be a big deal.’

Why does it matter? Click over to the article. The bottom line: money spent on bling means fewer dollars put toward assets, set aside in savings or ear marked for things that will improve one’s life like health care or education.

Young adults in particular’”those in their 20s and 30s’”are more likely to spend money than those in their 40s and 50s on high-status clothing, cars, and jewelry because they’re more likely to be concerned with attracting a partner. ‘œThey borrow against the future because it’s important when you’re 25,’ Charles said. ‘œBy the time people are 55, the signaling effect is gone.’

This actually seems more like a generational trend vs. a black and white thing. The status-seeking motive seems to be alive and kicking amongst most young people, regardless of income level.

Susan Berfield at Business Week wrote about the Debt Generation a few years ago in an article called Thirty & Broke. This is ‘œthe first generation that came of age with the Internet, grew up marketed to at every turn’¦ and they could be the most indebted generation in modern history.’

Two new economic realities are at work. Many had to borrow serious money to attend colleges that are ever more costly. And as soon as they entered school, they were offered credit cards; by 30 many have accumulated thousands of dollars of that very expensive debt, too.

When these students start out in the working world, many use their credit cards to fund a richer lifestyle than they can afford, get by between jobs, or cover emergency expenses. The average credit-card debt among 25-34-year-olds was $5,200 in 2004, 98% higher than in 1992.

They exemplify ‘œa generation with an unusual sense of entitlement. They were brought up as consumers, comfortable with prosperity, certain of their eventual success. For many 30-year-olds, establishing themselves takes longer and is more complicated than they thought it would be.’

Suze Orman advises that young adults need to understand the difference between necessities and indulgences:

If you rely on your credit cards to make ends meet, you must limit the plastic spending to true necessities, not indulgences. Buying groceries is a necessity. Buying dinner for you and your pals at a swank restaurant is an indulgence you can’t afford if it will become part of your unpaid credit card balance.

The first step is getting out of debt and living within your means. Is there a quick fix? John answered this in his Almost Debt Free series last year and provided a tactical approach with his downloadable Expense Tracker. If you missed it before, then you might want to check it out in the archives. The young and cash-strapped will benefit from his money mantra. Color is beside the point.