I think part of this that you have to have a bike that you will actually ride. If you buy the wrong bike (cheaper, whatever) then you won't want to ride it and you will end up throwing your money away. So.... the bike has to be "right enough". As others have said you could probably take the money you would spend on a new bike and get a better used one.

As far as what someone else may think, make it your hobby to irritate them. Ride a cheaper bike and be happy, that would be fun. Put a bell on it... maybe some baseball cards in the spokes and say "WEEE!" a bunch when you go down hills.